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Tackling Financial Exclusion: A country that works for everyone? by the financial-exclusion select committee of the House of Lords

April 17, 2017

TFI2THE poorest and most vulnerable people in the UK are “spiralling un­necessarily into debt and financial exclusion” as a result of the Govern­ment’s welfare reforms, and its “de­pressing” lack of financial services, says this report, which concludes that the Govern­ment is failing to offer “fair” access to financial services — such as a bank account, loans, and support and advice concerning savings, bor­rowing, and debt — to a “sizeable” proportion of the UK.

People on low benefits, the un­employed, the young, the elderly, and those with disabilities, or who are mentally unwell, are the most likely to miss out on these services because they are not being offered the facilities, support, or capital to improve their finances, the report says. This creates a “vicious cycle” for those who are forced to rely on “high-cost and suboptimal prod­ucts” such as high-interest loans, pay-as-you-go mobile phones, and pre-pay energy meters.

“Christians Against Poverty (CAP) noted that those experiencing deprivation are not set up to engage well with financial services as they are lacking monetary resources, support, confidence, and import­antly, financial choices,” it says.

Bank branch closures and the rise of internet banking exclude many of the elderly. There are 12 million people in rural areas with poor internet access. Just 38 per cent of over 75-year-olds have used the internet in the past month, the report says, and one third of people over 80 do not trust or use cash machines, much less the internet (93 per cent). Disabled access to banks or building societies is also inadequate, it says. One in eight disabled people report problems.

Homeless people and children in care are vulnerable, as they cannot always provide the identification needed to open a bank account, the committee warned. One in six people who have bank accounts struggle to understand their bills; others do not understand the inter­est charged on loans, or how to save, use credit cards, pay tax, and man­age debt.

The report recommends that all primary-school children in England are taught how to use and benefit from financial services in the UK, as is currently the case in Scotland, Wales, and Northern Ireland. The Money Advice Service, which is due to close later this year, should be replaced by an equally “effective and impartial” tool, it says, and the Government should work with banks to offer courses on online banking, and other life skills. (Having tried to teach this to 16-yer-olds, who found it boring and irrelevant, I can’t see it working. In any case, academies don’t have to teach anything they don’t want to and Government is powerless over them.)

The Bishop of Birmingham, the Rt Revd David Urquhart, who is a member of the select committee, and of the Banking Standards Board, said: “Now is the time to put these practical recommendations into practice so that all members of society can participate and con­tribute to a flourishing UK.”

The report urges the Government to create a Minister for Financial Inclusion to impose its recom­mendations.


In her speech to the Charities Commission in January of this year, the Prime Minister explained how the Government: “Will recalibrate how we approach policy development to ensure that everything we do as government helps to give those who are just getting by a fair chance—while still helping those who are most disadvantaged. Because people who are just managing, just getting by, don’t need a government that will get out of the way, they need a government that will make the system work for them.

“If you are poor, you are paying more for things, because you lack the consumer leverage. For example, if you can make a quick cash outlay you can buy things in bulk; if you are poor you cannot afford to buy things in bulk.”

“Trying to get us from a position where one in five people cannot read a bank statement and 16 million people have less than £100 in savings.

“Personal responsibility is vitally important but people don’t know what they don’t know . . . If financial education wasn’t taught to them at school who is going to teach them in the real world? . . . There needs to be something viable at a young age to equip the next generation to leave school with a much greater sense of personal responsibility. The government can do this by bringing in more meaningful financial education throughout the school ages.”

“As young adults move into their adult life and start to engage with the workplace, taxation and their need to budget their salary and, one hopes, are starting to save, they will be bombarded with offers of credit, so financial education becomes much more salient. That is the point at which you probably need to bring in current product knowledge, using tools to engage with those decisions. That would seem to me an even more important point at which to have financial education.”

“I had a period of mania in 2012–2013 and got into over £10k worth of debt. I ended up being hospitalised and my dad freezing my bank account. It was all a horrendous experience but the aftermath is worse. Although many debtors have written off the debt my credit rating is shot to pieces and I can’t even get a current account in my own name”.

“If you turn on your TV at 3am, pretty much all that you will find is gaming. Ofcom takes the view that hardly anybody is watching between midnight and 6am, so even the public sector broadcasters are allowed to broadcast gaming. But who is watching between midnight and 6am? Of course, there will be some shift workers, but there will also be people suffering from insomnia, people who are drunk, people who are alone—actually, quite a vulnerable consumer group. We need to think carefully, I think, about how we might restrict TV shopping and gaming that is targeted specifically at people who are at their most vulnerable.”

The trend towards a growing number of bank branch closures is contributing towards financial exclusion, particularly for vulnerable customers who experience difficulties accessing alternative services. The Post Office, with its extensive branch network, has the potential to meet the needs of such customers. This potential is currently unrealised, due to low levels of public awareness of the financial services available through Post Offices. It is essential that the Government, and the banking sector, do more to promote and support the role that can be played by the Post Office in providing access to physical banking services.

The Government has made clear that Universal Credit is to be ‘digital by default’, and many aspects of the claimant journey have been specifically designed with this in mind. Claimants are invited to claim online in the first instance, and the helpline is encouraged for use only if a claimant cannot access the required website.

We recommend that the Government should expand the scope of products that credit unions can choose to provide to their members and, where appropriate, should amend the rules under which credit unions operate in order to enable them to take up these opportunities.

“If you look at the way Universal Credit is constructed, there is a week before you are even allowed to claim. Then it is four weeks in arrears, after a two-week processing. From the date of needing that support to the point of first payment, if everything goes absolutely 100% according to plan, it is seven weeks. If you are in an environment where you have struggled to get to the end of the week, waiting for seven weeks before you get anything is a real problem”.

The report is online here

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