THE 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, a House of Lords report has warned.
Tackling Financial Exclusion: A country that works for everyone?, published by the financial-exclusion select committee at the end of last month, 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.
Branch closures and the rise of internet banking are also excluding the elderly, and the 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.
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.