Examination of Witnesses (Questions 180-199)
MR MARK
LOVELL, MR
JON TRIGG
AND MR
STEVE HART
14 FEBRUARY 2006
Q180 Lorely Burt: Can I come back
to MoneyHelp as well? There has been a pilot scheme, and you thought
it was encouraging. Do you think it is feasible to extend that
on a nationwide basis?
Mr Hart: Yes. It was always the
intention that if the pilot was successful we would like to extend
it further on a national basis, and what we wanted to do was to
move it out from the home areas where it is sitting now to a much
broader-based programme that encompasses areas of rural financial
exclusion, all the major cities, extension into Wales and so on,
where it is not operating at present. It is resourcing, as is
always the issue. That is supported by Halifax Bank of Scotland
as part of their programme and so on, and of course they have
indicated strongly that they want to support that expansion but
I think we both have an interest in saying, okay, who else can
be brought to the party? It is a very good partnership between
different parts of the private sector to deliver a much needed
programme to this sector, but we are interested in saying who
else can we bring in? We do not want to go alone in that regard
and so on; it is bringing in other partners and leveraging in
other funding so that we get some commonality across the sector.
I hesitate to say, it is not competition—I am all for diversity
of the sector if it is competition, but at the moment it is not,
it is just diverse and I think that detracts from the sector's
impact.
Q181 Lorely Burt: Finally, I wanted
to ask you about financial advice for this sector. How do you
feel we might be able to extend the network of financial advice
assistance to people in this sector?
Mr Hart: I think there has to
be a fundamental proportionality of financial advice. All the
issues around money laundering, fraud, the avoidance of mis-selling
and so on has had the definite inadvertent effect of pricing financial
advice out of a large section of the population—they just
cannot access it. So the intent was absolutely correct to get
away from the mis-selling nightmares that we have had over the
past five, 10 years, and it has had that effect; so the man from
the Pru going around and selling his cheap policies and so on
has gone to a large extent. So we need to look at proportionality
of advice and there needs to be a lot of de-mystification about
what advice is appropriate because again it relates back to the
money laundering regulations and impact that it has on the frontline
bank staff—everyone is scared to death of getting it wrong;
you get it wrong and they are in all sorts of trouble. So that
needs to be de-mystified and I think we need to move to a generic
easy piece of advice that sits firmly for this customer group,
because the fact of the matter is that the needs of financial
advice at the moment do not sit well with this customer base.
That does not mean that they should not be covered and they should
not be protected, of course, but it has to be proportional so
that they can actually be covered because at the moment they are
covered by default in terms that they cannot access it.
Q182 Lorely Burt: We spoke to the
Citizens' Advice Bureau the other week and they were quite keen
to take on this as an additional role to their current portfolio
because they do a lot in the field of debt type of advice already.
Do you have any thoughts on that?
Mr Lovell: I know it is under
discussion and it is a discussion that we have had with CAB that
it is definitely an area to extend their level of intervention.
I think the other thing that is important is that the target mark,
our client group here is going to go to different trusted sources
so the extension of this through CAB will hit a proportion of
people, but there are places where CAB does not operate. So I
think it needs a number of operators making those services available.
And just one quick point, there are three levels to this. There
is one: recognition and acceptance by the individual that they
need financial advice; the second one is a willingness to engage
with it; and the third one is the quality and appropriateness
of it, and there are a lot of people at different stages of that
process.
Q183 Mr Love: We have talked a lot
about joined-up government and about the roles of the voluntary,
private and other sectors. What discussions are going on between
your organisation and others? I am very well aware that Citizens'
Advice are speaking to the Financial and Leasing Association and
are speaking to the Credit Counselling Service and are speaking
to various others, Which? Magazine and others, about setting
up a national network of advice. It just seems to me that everyone
needs to come together here. I know that the fund is putting some
money into this area, but what prospect do we have that all of
your organisations that are working in this area will come up
with a solution that provides a comprehensive programme of advice
across the country?
Mr Lovell: I think that is a very
good analysis characterised by many bilateral discussions. I think
there are two aspects of that. The first is the willingness of
the participants to have this discussion amongst themselves. I
think this applies to private, public and voluntary sector communities.
They tend sometimes to be quite parochial because they see themselves
as coming at the issue from a different direction, so the key
issue for me is to recognise that they have a common agenda item
in the middle and to harness their activities. I think there is
evidence of that. The work the Select Committee is doing is forcing
the pace on that dialogue and discussion. No one has the right
solution. There is no one organisational sector that has that.
The second point is that—and I am hopeful that we will reach
the level of joined-up activity that you are talking about—many
of these things have occurred underneath the radar. What is happening
at the moment in the type of stuff that is going on through the
broader application of the Financial Inclusion/Exclusion agenda
is that it is becoming much more visible and I think provided
there is a willingness of parties to say, "Actually, you
are well-advanced on that, I will focus my attention on this over
here on this area where I have become much more advanced",
you just begin to see evidence of that type of activity beginning
in the market place. We are still, I would say, two or three years
away from being anywhere near the joined-up level you are talking
about. We can improve the pace of that, but it will be tough.
Q184 Mr Love: Could the fund be doing
more? As I understand it, £45 million has been given to the
DTI to increase the provision of face-to-face money advice. Could
that be more effectively used to create this network?
Mr Trigg: I think yes is the answer.
We have a particular issue with it in that obviously we would
like to be involved more in this sector but as a for-profit organisation
we are disqualified from accessing the Fund, which is a huge issue
now. Thankfully, we have a not-for-profit foundation that we have
put into this funding round but we have been excluded from all
of the Financial Inclusion Fund monies apart from the Legal Services
Commission pot, which is the smallest. That is because we are
a for-profit organisation and that is a concern to us. We say
how can we therefore contribute and add value to the sector when
we are excluded?
Mr Lovell: We are probably quite
unique in that whilst we are a for-profit business the majority
of our work is with the public sector. That is very good articulation
of that broader debate that is going to require all the sectors
to join up. Specifically on the Financial Inclusion Fund, there
is an issue about taking the learning from it and joining that
up again because I can see how using different government departments
is an effective element in support but what I do not see at the
moment is how that is going to be drawn back together and how
we will have sustainable services on the back of it. That is not
visible to me. That is where I will certainly be asking the questions.
Chairman: Jim?
Q185 Jim Cousins: A constituent came
to me who was one of your clients, a New Deal person, and he had
with him a pack which you had issued him with. It was a DWP-branded
pack so I am not entirely clear whether it was your pack or the
DWP's, but it was entirely devoted—and it was a fairly substantial
pack—to the issue of getting your benefits paid through
a bank account and its advantages. There was not a word about
the other issues you have been talking about. Why would that be?
Mr Lovell: Good question.
Q186 Jim Cousins: There was nothing
about affordable credit, there was nothing about financial education
or advice, there was nothing about savings, there was nothing
about any of the other issues you were talking about.
Mr Lovell: It was a DWP and A4e-branded
thing or just a DWP-branded thing?
Q187 Jim Cousins: Frankly, I am not
clear about that. The perception of the constituent was that it
was coming from Action for Employment but that perception may
not have been correct. Are you routinely handing out these packs?
Mr Lovell: No, I do not think
we will be. Without the specifics if I can give a high-level overview.
I think one of the challenges that we face is that we have got
a responsibility that we deliver a wide range of different types
of services, and it comes back to the point about joined-up that
we were talking about. In some areas we are only contracted to
deliver certain services and certain information sources. One
of our challenges has been trying to make sure that in every location
we are making available the full spectrum of all the issues that
we are talking about. That is one of the issues that comes back
to Jon's point about resourcing and how we work with different
departments or agencies.
Q188 Jim Cousins: Do forgive me for
saying so but that suggests that you are not very joined-up yourselves.
Can I just be clear about this. Is the DWP paying you money? Is
there a contractual relationship in some form to push these packs
which are solely devoted to the issue of getting your benefits
paid through a bank account and nothing else?
Mr Lovell: No, there will not
be. The work Steve has described is around helping people who
do not have a bank account make an appropriate and informed choice
as to what financial services and products would support them,
and that includes elements of financial education, it would include
POCA as a suitable vehicle for doing that. I would be curious,
as you are, about why an individual has only one facet of the
information that we are talking about.
Q189 Jim Cousins: Can I put the question
to you another way then. Does the DWP ask you to make sure that
your clients are signed up to bank accounts for the purpose of
paying their benefits?
Mr Trigg: No.
Mr Lovell: No.
Q190 Jim Cousins: It does not?
Mr Hart: Our advisers today working
with our customers are giving the full portfolio, including credit
unions, post office card accounts, bank accounts, basic bank accounts,
current accounts, so they are giving them the full portfolio and
then it is down to the individual to make that choice.
Q191 Jim Cousins: This portfolio
that you are handing out?
Mr Hart: No, we solely deal face-to-face
with customers so we are not handing out a portfolio of information.
We are dealing face-to-face with customers.
Q192 Jim Cousins: Let us keep this
very simple. I am referred to Action for Employment by Jobcentre
Plus, which is how this constituent of mine had his contact with
you. What do you then do just routinely, normally, without extra
funny projects funded by God knows who? What do you routinely
and normally do for that person in terms of financial advice and
financial education?
Mr Lovell: If it were through
the New Deal, which is the way your constituent was referred,
then we are not funded to provide any support on financial literacy
education on inclusion. It is does not form a part of the core
offering of New Deal so our main focus is helping the individual
back into work. What we do as an organisation is have a range
of additional services that help people deal with whatever barriers
they face in getting back into work. In some areas of the country
it will be around financial inclusion, in some areas it will be
drug rehab and homelessness.
Q193 Jim Cousins: Yes, so as part
of the New Deal service that you were contracted to provide by
DWP there is no financial advice or education component?
Mr Lovell: There is not a mandated
element of financial advice and information as part of the delivery
of New Deal. Most providers will incorporate that in a non-joined
up way.
Jim Cousins: Thank you.
Chairman: On the work that you do with
the DWP, maybe on a confidential basis, you could send us information
on the contracts you have with them and what they are worth. I
think that would be helpful for us.[1]
15 Brooks?
Q194 Mr Newmark: I am focusing a
bit more on savings. What are the main barriers to savings for
people on below average incomes? In particular, is there any evidence
that means testing of benefits or pensions deters people on below
average earnings from saving adequately?
Mr Lovell: Good question.
Mr Trigg: I think the evidence
we have is anecdotal and Steve can probably give you more. One
of the major issues that our customers have is available products.
Where can they put money in because the amounts that they are
looking at it are small? They are not going to be able to deposit
£1,000, £2,000 or £5,000 and leave that for five
years. We find it is more around availability of products for
this set of customers. They just do not have access to it.
Q195 Mr Newmark: That is coming from
the supply side. On the demand side my question is more focused
on the mechanisms from government which seem to be influencing
people's decisions on whether to save or not. For example, the
process of means testing seems in some cases to be a disincentive
for people to save.
Mr Trigg: From a practical perspective
it is not something that we come up against a lot. Our customers
do not refer that to us. That does not mean necessarily that issue
is not there but in our interactions with them they are not referring
to mean testing as an issue.
Mr Lovell: I think there is a
broader issue on that as well and it was something that the Chief
Executive of one of the South African banks commented on in his
very powerful statement. It is around changing the behaviours
of the client group that you are working with. That was the longer
term aspiration of their bank. The tag line he tends to use is
"Save for crises; borrow to invest". That is the type
of behavioural change, whereas what we tend to do is borrow for
crises. I think the whole savings agenda is probably clouded by
some of the mechanisms and incentives that are trying to be put
in place whereas we probably need a clearer discussion and debate
for people in poverty on low income who do not have access to
financial services how we encourage appropriate and good and prudent
behaviour in management of finances.
Q196 Mr Newmark: It tends to be at
that fulcrum where people feel that they are making an attempt
to save and as soon as they have a little bit of capital built
up the Government then says, "Sorry, we are either reducing
or stopping your benefits", and that seems to be a concern
and hurdle. I am not sure how we get over that but that seems
to be an issue. If we can just turn to the Savings Gateway. This
seems to have helped introduce the principle of savings to many
who have little or no knowledge of longer term savings. Given
that the Savings Gateway is still in its pilot phase, do you have
any concerns at this stage?
Mr Trigg: I think we have had
quite a lot of interaction with the Savings Gateway and we very
much support the principle of a variety of different models to
incentivise the savings culture. The issue that concerns us is
targeting. My own postcode is one of the latest pilots and I was
sent a pack and I would love to open an account, it is free money,
that is great, but why am I receiving a pack, and in terms of
individuals who are seeking to access the Savings Gateway I would
perhaps question and like to see the data when it comes out about
what is the profile of individuals who actually use it and so
on. There is a broader point here that goes out to products such
as the Child Trust Fund and so on, and all of these very positive
initiatives to generate savings and allow individuals to accumulate
assets, about who is actually setting these accounts up. Perhaps
it is not going to those it is targeted most at. Again, I would
be interested to see what HMRC comes out with on the data set
as to who the profiles are of who is opening accounts and those
for whom the HMRC has to open accounts for the Child Trust Fund,
what is their profile. I would not be surprised in the least if
they are concentrated in the most deprived wards.
Mr Lovell: Our concern is that
we are perhaps not getting to the hardest to reach and the most
disadvantaged. It is a good initiative but we still need to focus
on that area.
Q197 Mr Newmark: In order to tackle
low levels of saving amongst those on low incomes, how appropriate
is the credit union model whereby a pound saves is worth three
pounds' credit in future?
Mr Trigg: I think it is a very
good model and credit unions do a tremendous amount with their
customer sectors. I perhaps have an issue in terms of setting
the model in terms of banks that have that model. You do not have
to put in a pound of savings to be allowed to borrow, so is there
an issue with this section of the population being treated differently?
I think there is and so we need to look at that. I do not gainsay
the credit union model, I think it has a definite place but I
think there is room for other models within that.
Mr Lovell: It probably goes back
to the point I mentioned earlier about changing the behaviours
and making sure that what it is doing is encouraging the appropriate
behaviour. If you then use that to create more debt that is obviously
not helpful. I think the credit unions are usually very strong
in having that local focus and mandate for supporting and encouraging
the activity within their geographical area in terms of the way
they work. It is making sure the model is applied on a more broader-based
basis. You have got to make sure that you are getting the appropriate
and right behaviours.
Q198 Mr Newmark: If you can indulge
me for one minute, Chairman, I just want to go back to the discussion
on credit and people's ability to borrow. In chapter four of this
document Promoting Financial Inclusion, December 2004,
they were touching on a linkage between those who have genuine
swings in their needs for money and trying to link it with the
benefit system. One issue which you did sort of touch on is the
high cost of borrowing effectively off market, that when you go
to a loan shark or some of the higher ones there are very high
interest rates. However, those on benefits, by definition, have
some level of quality earnings stream that a lender can rely upon
in some way, so is there any way that we can have a much greater
formal linkage between benefits and helping those who genuinely
have ups and downs in their borrowing needs and in their trough
around Christmas time or New Year they can get access to money
but at a very low interest because it is linked to their benefits
and the benefit itself is backed by the Government and therefore
Government interest rates, by definition, are very low and therefore
reducing the amount that borrowers are having to pay at all by
having a more formal link? We have not had any discussions on
that.
Mr Lovell: Our thought is that
is absolutely a strong model. As I mentioned earlier, two weeks
ago was the first indication I saw that the DWP was exploring
ways of actually achieving that. I think that is the right direction
to travel. I think the model you describe would be a very, very
suitable idea.
Chairman: Angela?
Q199 Angela Eagle: I just wanted
to pick up Mr Lovell on an aside he made earlier about his "favourite"
organisations which were debt consolidation companies. Do you
want to share with us some of the experiences of your clients
with these types of organisations? Just give us an insight?
Mr Lovell: It is anecdotal and
you are right to pick me up on it in my being slightly flippant.
The challenge for me is where—and I have been involved in
this for 15 years and Jim Cousin's point is a valid one because
it is a lot for us to try and join up a number of different areas
of government—we are challenged by working in only one area
in how we tend to work on programmes like New Deal. One of the
issues that I come across time and time again is that you help
someone into work, they are delighted, you see them two months
later when they have come back in, and the one that always hangs
in my memory (well, there are two) was talking about how they
had managed to reduce their monthly outgoings through debt consolidation
agencies but the financial product they had signed up to was just
outrageous. As we began to explore that and asked the question
in terms of some of our clients coming back in and the way they
were managing their finances, it became a very significant area.
It is also the gap that Jon talked about with the regulations,
the way they advertise on Sky TV, if you look at the way the products
are portrayed, and to a customer group which I think sometimes
lacks some of the support, education and training that many people
in this room would have been party to to enable them to make good,
strong financial decisions, and they are not equipped to make
strong decisions, I think.
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