Call for government to appoint financial equality minister

Money Wellness is calling for the next government to appoint a minister for financial equality to take responsibility for evaluating all government policies to ensure they don’t disproportionately impact the economic wellbeing of certain sectors of society – such as single-parent families.

The financial wellbeing platform, which provides free debt support to more than 1,000 people a day, believes that whoever forms the next government needs to make tackling inequality a top priority. This is because financial inequality in the UK is worsening. Figures from the World Inequality Lab show that in 2021, the bottom 50% of the population in the UK owned less than 5% of wealth, while the top 10% owned 57%.

Money Wellness would like to see free school meals to be extended for all primary school children. Many families supported by Money Wellness fall just below the qualifying criteria to receive free school meals and struggle to find the money to cover the cost. To support this, Money Wellness is referring increasing numbers of families to food banks for help. In the first five months of 2024, it has made nearly 11,000 food bank referrals – significantly more than last year.

Not providing free school meals perpetuates a cycle of poverty affecting youngsters’ concentration levels in class and preventing those from low-income families fulfilling their potential.

For very similar reasons Money Wellness is also calling for the two-child benefit cap to be abolished. Figures from the Child Poverty Action Group show this would be the most cost-effective way of reducing child poverty in the UK, lifting a quarter of a million youngsters completely out of poverty and improving life for another 850,000 kids. Without reform, the Institute for Fiscal Studies has warned a further 670,000 children will be affected by the end of the next parliament.

Better financial education in schools would help to improve prospects for all children by helping them avoid future issues with problem debt. An ongoing survey of people who seek debt support conducted by Money Wellness in conjunction with the Centre for Financial Capability found 94% didn’t receive any financial education and 83% felt, having done so, would have made a significant difference to their current situation.

Another measure currently trapping people in poverty and debt is benefit deductions by the Department for Work and Pensions. Figures from the New Economics Foundation (NEF) show cuts to the benefits system made over the last 14 years have left income support at its lowest level in 40 years forcing nearly four million households into destitution. People trying to survive on inadequate income inevitably increase their reliance on debt. And the government plays a significant role in creating and chasing this debt. NEF found in 2023 half of households on universal credit had an average debt deduction of £63 a month automatically taken from their standard allowance. While Money Wellness figures show that 30% of benefit claimants seeking debt support from the organisation do so as a direct result of being unable to repay a benefit overpayment.

The social security system is already unable to prevent people from being forced into poverty. Debt deductions undermine it further, worsening the hardship people face. By recovering arrears so aggressively, the government is perpetuating a cycle of debt and poverty. Money Wellness is backing NEF’s calls to reduce maximum deductions from 25% to 15%.

Similarly, sky-high energy arrears are trapping people in a cycle of debt. Over half of people who ring Money Wellness for debt advice (53%) are behind with their energy bills. The organisation is calling for the government to work with Ofgem to introduce a framework for suppliers so that all struggling customers are referred for free debt advice and a range of repayment options are introduced, including debt forgiveness in certain cases.

Money Wellness is also calling for the Individual Insolvency Register to be replaced with a private alternative. Publishing the personal details of people with insolvency solutions in a publicly available register (and the Gazette) only serves to increase the stigma of debt. Introducing a private register, accessible only to lenders and others with a legitimate interest, would remove an unnecessary obstacle currently putting people off getting the help they so desperately need. It would also have the added advantage of removing the need for victims of domestic violence, and others whose safety is at risk, from having to apply to court at a cost of £308 for a person at risk of violence order to prevent their address being made public.

Ian Somerset, Chief Executive Officer at Money Wellness, said “The new government has the chance to turn the page on financial inequality in the UK. We appreciate there isn’t a bottomless pot of cash to address the UK’s problems. But measures to reduce the inherent unfairness in society don’t have to cost the earth, for instance introducing better financial education in schools and scrapping the outdated and stigmatising Individual Insolvency Register. And where there is a cost, we believe it’s time to shift the burden from those most likely to be crushed by it to those with broader shoulders.”