Vikki Brownridge reflects on first six months and what lies ahead
Half a year into her new role, StepChange CEO Vikki Brownridge provides an update on the charity’s recent activity, priorities and strategic direction
Although I’ve only been in post as CEO of StepChange for six months, I’ve worked for the charity for many years and seen more changes than I could ever have envisaged. However, I’m certain that even more fundamental change lies ahead. So I wanted to give an update on our recent activity and current strategy, in advance of a more fundamental five-year plan that we will develop and publish during 2024.
Our operating environment
Our operating environment is more challenging than the one we were expecting when we published our 2022–2025 organisational strategy. While that strategy broadly still stands, we can’t ignore the changes that have occurred since.
Both inflation and interest rates have risen sharply and remained elevated, with many knock-on impacts to people’s resilience to debt and to our experience of how effective current debt solutions are in resolving people’s problems for the long term.
Negative budgets are widespread, and the debt solutions to them elusive.
The funding of the debt advice sector has changed, and our own funding is currently derived primarily from private sector sources, with only very modest Government support from the devolved nations.
Political uncertainty, and slow progress on implementing public policy reform to improve the debt landscape, are exacerbating the difficult legacy felt by many households in the wake first of Covid, and then the spike in energy costs and the wider cost-of-living pressures.
Our progress
Despite these headwinds, for both our clients and also the charity itself, we have much positive progress to report.
We’re proud of the adaptability and resilience we have been able to demonstrate in delivering against our original strategy, and in evolving it in light of the changing conditions.
Challenging times can bring out the best in people. This is what we’ve seen through the outstanding commitment of all those who work at StepChange, the strong and decisive support from our Board, and the significant step up in transitional support — both financial and operational — from our key creditor partners.
Thanks to these strong foundations, we’re now successfully delivering debt advice more effectively and more efficiently than ever before. As we’ve invested and harnessed new technology, we’re able to help more people with fewer colleagues. In 2021 we advised 45 clients per full time employee (FTE). Today that number is 62 clients advised per FTE. That hasn’t been at the expense of quality. We’ve consistently improved the number of clients we identify as achieving a good outcome from advice. And we’ve worked tirelessly to improve client journeys, the clarity and simplicity of our written correspondence and implemented changes to go above and beyond the expectations of the new Consumer Duty.
Crucially, we’ve significantly improved our clients’ experience and their overall outcomes, with greater choice in how they access our services, embedded a new inclusive design framework and increased accessibility, reviewed all client communications, and delivered a 33% reduction to the required reading age to improve comprehension, better use of behavioural insight to help keep them on track, and more pro-active reviews to ensure that debt solutions continue to meet their needs. This has also stood us in good stead in implementing the first stage of our FCA Consumer Duty programme of enhancements.
Equally importantly, we secured our immediate funding situation, following the disruption caused by the withdrawal of direct Government grant allocation to us via the Money and Pensions Service. Through a combination of cost reduction, efficiency improvement and temporary increased donations from the credit sector, we have maintained reserves well in excess of our minimum level of £10 million, while also delivering important investment into improving client outcomes and providing better management information and insight to our funders and creditor partners.
The main adaptations to our strategy
While we were never complacent about Government funding, not being directly included in the MaPS funding allocation for 2023–26 did mean that we needed to seek millions of pounds worth of funding from additional sources to cover the shortfall.
The adaptations that we put in place by cutting costs, increasing efficiencies and raising significant additional donations from both existing and new creditor partners, have been highly successful. However, they’re not a substitute for a sustainable, equitable and solution-neutral mixed funding platform for the future. Without predictable funding, we will face an ongoing shortfall between the high level of demand for debt advice and our ability to supply it. We expect to end 2023 having taken around 190,000 people through full debt advice, with our original strategy having projected demand at around 260,000. The scale of demand and our ability to meet these needs is a complicated picture. Funding and resource constraints — limiting the number of people we are able to take through a full debt advice session — remain a restraining factor for us, and the sector as a whole. But it is also true that the volumes of new clients — or at least people’s willingness to seek help at the point they need it — continue to need further interrogation so we can understand how far the number of people who actually need help correlates with the number who seek advice, and how we can better overcome their barriers.
We’re now in the throes of working collaboratively with creditors and the debt advice sector towards a new fit-for-purpose, longer-term funding model, one which focuses on streamlining referrals to debt advice and delivering good outcomes. Two thirds of our current revenue comes from the FairShare contribution (FSC) from creditors, that we derive from administering managed solutions. The provision of debt advice itself remains largely unfunded and therefore requires us to cross-subsidise it and other elements of our service with our FSC income. This overreliance has been exacerbated further by the fact that fewer of our clients are now best served by managed solutions, and therefore has resulted in real terms decline in FSC income. A new solution to the funding conundrum is necessary. We will report further on this when we publish our next five-year strategy.
Being mindful of the need to reduce our cost base, we made a reduction in the number of colleagues we employ in back-office roles, while maintaining the overall number of colleagues in frontline debt advice. We also made the difficult decision, following the announcement of the new MaPS-funded Debt Relief Order hubs, to cease our in-house arranging of DROs, and instead refer clients for whom DRO is the recommended solution to the MaPS-funded hubs to process their application.
We have not however been afraid to continue to invest where the rationale is irrefutable. For example, we upgraded the prioritisation of investment to replace legacy systems within our back office operations to best-in-class systems and architecture. This vital investment in efficiency reduces our cost to serve further and delivers maximum value for money for our clients and funders.
Against the backdrop of financial pressure, we are acutely aware of our colleagues and the pressures they face. Debt advice can be a stressful job, and none of our colleagues are immune themselves from wider cost of living pressures either. So, while our overall headcount has reduced, we have maintained and prioritised investment in colleague wellbeing, and we will continue to prioritise making advances in equality, diversity and inclusion. Our colleagues are our greatest asset. In line with our organisational values we continue to do our very best in a difficult world of high inflation to ensure they are rewarded and supported appropriately so that they can in turn provide our clients with high quality services.
Influencing the wider debt landscape
Despite a plethora of Government and regulator consultations and proposals, the future direction of debt advice policy remains unclear.
Political uncertainty is acting as a brake on the implementation of previously proposed changes in policy. Developments that were expected when we published our last strategy — such as the implementation of Statutory Debt Repayment Plans in 2024 (along with the widening of the base of the type of creditors expected to help fund them) — are now less likely. Meanwhile, other active consultations, such as the future of the insolvency market, may eventually have a significant impact on our work and potentially even on the range of debt solutions available.
While we are adapting our own operations to prevailing conditions, we are also using our client insight and data to support evidence-based calls for reform in the wider debt landscape. We continue to see this as an integral part of what we do, going hand-in-hand with our frontline service provision. Our unique insight into the characteristics and experiences of people experiencing problem debt is a valuable resource, containing data that can help our partners and policymakers.
One key priority in the short term is for us to ensure that the insight we can provide reaches all the main political parties to help inform their thinking and hopefully influence their manifestos in advance of the next General Election. Another priority in the short and medium term is to improve the accessibility and usefulness of our insight to our creditor partners, at a time when evidence-based decision-making is important if good consumer outcomes are to be achieved, as the FCA’s Consumer Duty requires.
The future
The past few years have required decisive and difficult decisions to be made, sometimes at speed. I’m proud that we have responded to safeguard the charity and, as always, to put our clients first and protect the welfare of our colleagues when we make decisions.
I also firmly believe that the decisions we have made put us in the best possible position to respond to changing demand, changing client need and changing expectations from funders, regulators and government. StepChange, throughout the last 30 years, has been the largest debt advice provider across the UK. This makes us a bedrock for our clients and the wider sector. That is a role we take seriously and one that we intend to maintain.
Through ambitious investment in new systems and ways of working, we can continue to be there for those who need us and to spearhead the sector for years to come.
The lessons we have learned about how to respond and adapt mean that we have become a more creative, more communicative and more responsive organisation. We listen more, we now regularly operate “test and learn” pilots, and our collaborative work with credit sector partners is increasingly measured in terms of consumer outcomes. These are attributes that we will actively develop further, alongside planning for sustainable funding and maintaining our existing strengths of prudent financial management and consistent delivery of high quality, volume debt advice services.
While our vision of a society free from problem debt may be idealistic, it underpins the decisions we make and the work that we do, whatever the changes that may be happening and the adaptations we may need to make.
We are enormously grateful to all our funders, partners, referring organisations, colleagues, supporters and financial sector contacts who together help and enable us to provide the debt advice that so many people in the UK today desperately need.
I’m always keen for StepChange to work with government, regulators, the financial sector, utilities and the wider debt advice sector towards the common goal of making people’s financial lives more resilient and better able to cope with changes in circumstances. I look forward to meeting and working with many more of you as we head into 2024.
