‘Whole-society’ approach needed to tackle financial exclusion

The Money Advice Trust has called for a ‘whole-society’ approach to tackling financial exclusion with a stronger leadership role from Government, in evidence to the House of Lords Financial Exclusion Committee. The Committee, chaired by Baroness Tyler of Enfield, is examining financial exclusion and access to mainstream financial services.

The charity has pointed to fundamental issues around poverty, low levels of financial capability, products and services that do not always meet the needs of low-income consumers, barriers arising from new technology, vulnerable circumstances and problem debt as among the most significant causes of financial exclusion. 

In its written submission to the Committee’s call for evidence, which closes today, the Trust describes financial exclusion as “a significant social problem, the scale of which necessitates a co-ordinated, whole-society strategy in response”, and calls on the Government to a “greater leadership role” in improving financial inclusion in the UK.

 The Trust has called for a renewed focus on financial inclusion from the new Government and interventions including;

•  Implementing the Financial Inclusion Commission’s recommendation for a senior governmental lead on the issue – a ‘Minister for Financial Health’ – and departmental champions, working in conjunction with local, regional and devolved government more co-ordinated financial education in schools and giving the new money guidance body replacing the Money Advice Service from 2018 a statutory co-ordinating role in financial capability

• A focus on behavioural insights from financial services firms in developing and delivering timely interventions to improve financial capability at key life events, and a new fintech innovation fund to encourage new technologies explicitly aimed at supporting financially excluded groups

• Measures to build a more sustainable and modernised credit union sector and drawing lessons from examples of affordable credit initiatives overseas, including Australia’s Good Shepherd scheme and the Irish Government’s ‘It Makes Sense’ programme

• Action to ensure that free debt advice is fully integrated into Universal Support, with a greater role for phone and online channels, in conjunction with local face-to-face agencies for those who need face-to-face advice

The charity welcomed several recent Government interventions including on Basic Bank Accounts, pension auto-enrolment and the new Help To Save Scheme, but pointed out these policies have emerged in a “piecemeal” fashion and “have not been the product of an overarching strategy” since the end of the previous Financial Inclusion Taskforce in 2011.

 Joanna Elson OBE, Chief Executive of the Money Advice Trust said “The scale and complexity of financial exclusion in the UK is so significant that nothing less than a concerted, whole-society strategy to tackle it will do. “We believe the new Government now has an ideal opportunity to take on more of a leadership role on this crucial issue.  We hope that Ministers will carefully consider the recommendations of the Financial Inclusion Commission in its report last year, in addition to the work of the House of Lords Financial Exclusion Committee, which has given this agenda a welcome new focus in Parliament.

 “Crucially, any new strategy must recognise that problem debt is both a cause and consequence of financial exclusion – and reducing the former should be seen as a crucial component of tackling the latter.  This should include ensuring that many more people in financial difficulty receive the free debt advice they need to resolve their debt problems and get back on the road to financial health.”