Weathering the Financial Winter Ahead in Ireland and the UK
The winter of 2011 lies ahead and if the last two winters are anything to go by then it’s hard to be optimistic this year. If we don’t learn from the past, it is said that we are doomed to repeat it so let us see what we should do this coming winter.
The big freezes during the last two winters in 2009 and 2010 had quite catastrophic effects on people and on their physical and financial health. A number of people and not just the elderly and infirm or those living alone did unfortunately and unnecessarily die in the UK and Ireland. Some of these deaths occurred after people fell to the ground often quite close to their homes. Others succumbed to hypothermia in their own homes and even as the big thaw set in following the big freeze-up there were plenty of further casualties with hospitals being inundated with patients seeking treatment for broken bones following slips and falls.
It’s easy to forget the economic price of those two bad winters as many people missed time at work because of the cold spells due to the inadequacy of transport services and the conditions of roads. Airports were shut down and rail services were regularly suspended. People felt the effects in their pay-slips as employers docked wages for non attendance at work, regardless of the fact that employees were largely blameless in the matter.
For people who were confined to their homes, heating bills soared and many people consciously ran up huge electricity, gas and heating oil bills trying to keep warm, and who could blame them. And so, after the cold spells, there were huge surges in the number of people seeking assistance in managing their finances so adversely affected by the weather and by the extra expenses incurred during the Christmas holiday seasons.
It makes sense therefore to plan for the season ahead and to try to anticipate the weather related problems that will likely occur and to at least have a plan try to cope with them.
However, even with the best will in the world, things will inevitably go wrong for some people who will indeed need professional financial advice. Help is at hand. In Ireland the Money Advice & Budgeting Service known as MABS provides an advisory service for citizens with financial difficulties. MABS is financed by the Irish taxpayer and it negotiates with creditors on behalf of indebted citizens. It seeks to come up with affordable payment plans which are agreeable to creditors and which beleaguered debtors can hopefully sustain. Unfortunately, ongoing management of such payment plans is the responsibility of the individual debtors as MABS does not currently have the resources to provide ongoing debt management services. Whether the Irish government and indeed taxpayer is willing to fund the enhancement of the MABS service remains to be seen
There are a number of professional Debt Management Companies which are not funded by the Irish taxpayer and which provide commercial debt management services on an ongoing basis and not just the initial set-up of such plans. Each plan is tailor made in accordance with the income and expenditure of individual debtor. The debtor makes an affordable monthly contribution which is paid to creditors on a pro-rata basis, after deduction of the management fee. The fee is usually limited to 15% of the ongoing monthly contribution. There may also be an initial one-off set up fee payable.
In the UK there is a much wider variety of financial solutions available to the heavily indebted citizen than there is in Ireland. Debt Management Plans are widely available of course and the service is much more stringently controlled than it is in Ireland, although even in the UK it is acknowledged that further regulatory legislation is required. The UK also boasts one of the most benign Bankruptcy regimes in the world, certainly from the perspective of the insolvent debtor. Their highly successful Individual Voluntary Arrangement scheme, also targeted at the insolvent debtor, celebrates it 25th anniversary this year, having been introduced via the Insolvency Act way back in 1986. It is quite incredible that successive Irish governments have sat on their hands and not introduced a similar scheme in Ireland, given that the longevity of the UK system has at this stage ironed out any snags or pitfalls in the original scheme. One would have thought that given the similarity of the two economies, Ireland could adopt and legislate for a facsimile of the UK system almost verbatim, without feeling the need to reinvent the insolvency wheel.
The UK also has Debt Relief Orders, Administration Orders and Debt Consolidation available to its citizens and to any troubled debtor. A wide variety of commercial firms provide insolvency and financial management services in the UK on a fee charging basis. As well as that a number of non fee paying organizations provide financial services. These include CCCS and Payplan which are funded by creditors and not by the debtor and CAB. Citizens Advice and every Citizens Advice Bureau are independent charities, reliant on the support of a wide range of funders including central and local government, charitable trusts, companies and individuals. Winter in the UK is certainly much less frightening than it is in Ireland from the personal finances perspective at least.