Examination of Witnesses (Questions 200-219)
MR MARK
LOVELL, MR
JON TRIGG
AND MR
STEVE HART
14 FEBRUARY 2006
Q200 Angela Eagle: Do you remember
the circumstance? What was the interest rate? What was the amount
of money they were going to have to pay out on a debt?
Mr Lovell: The focus was on the
outgoings. If I remember correctly, they had reduced their outgoings
from over £400 a month to below £250, I think. So for
them they were absolutely delighted. It was only when we began
to explore how that repayment worked and how much more it would
cost—
Mr Trigg: —For the rest
of their life.
Mr Lovell: For them and their
sons and daughters.
Q201 Angela Eagle: It was really
that bad?
Mr Lovell: It was that bad. It
has moved on because the regulation process has become tighter,
but it is such an attractive proposition for many of our clients.
It is still on the radio and TV adverts and they are still very,
very appealing.
Q202 Angela Eagle: Do you think there
is a role for some kind of stronger regulation on that kind of
contract or do you think the answer is all about education?
Mr Lovell: I think it is both.
Angela Eagle: Thank you.
Chairman: Peter?
Q203 Peter Viggers: In your submission
you describe the Government's approach to tackling financial inclusion
as being "disturbingly fragmented". How do you see the
role of the Financial Inclusion Taskforce? Do you feel it is effective
in its role having been launched a year ago?
Mr Lovell: I think, as I referenced
on join up, what it has done is bring a number of constituent
parties who are working in this area into one another's radar
and visibility, so I think that is very helpful. I think it is
stimulating debate on creating solutions. I do not think we have
yet got an offer or an approach which will tackle the levels of
financial exclusion. So I think it is early days but my broad
response is yes, I think it is helpful and I think it is a helpful
move forward.
Mr Trigg: I would be interested
to see how it evolves over the next year or so, how broad will
it become or will it evolve so that it becomes a forum of the
same old faces, which I think would be my concern. I think there
is a broader point around that fragmentation in where does the
Taskforce sit in relation to Treasury's role, to DWP's role, to
DTI's role, to FSA's role, and so on. I am not clear on where
that all joins and how it works together. I would be fascinated
to see how the Taskforce does within that framework, if they can
put more structure around that.
Q204 Peter Viggers: Its role of course
is advisory on the distribution of the £120 million fund.
It has a specific role to advise on access to banking, access
to affordable credit and access to free face-to-face money advice.
Would it have been sensible to include access to savings or promotion
of savings, do you think? Have you any comment on its role?
Mr Trigg: I think that can be
effectively covered over access to banking and so on. It would
always be a political decision whether it would want to be given
that emphasis. I think whatever the terminology within that, access
to savings is a huge part of it and it is definitely not one to
be left on the side. How you roll it out in terms of those three
needs, I think it covers all three to that extent.
Q205 Chairman: There has been a view
given to us that perhaps the DTI is not the best body to distribute
this money.
Mr Trigg: For the debt advice
side and so on?
Q206 Chairman: Yes.
Mr Trigg: I would say that again
from a broad perspective our concern is perhaps not specifically
with the DTI but the fragmentation of the Fund as a whole. Whether
the DTI is the right body I think is not a comment; it is where
it sits.
Chairman: Sally?
Q207 Ms Keeble: I just wanted to
ask a bit about the asset base for the most financially excluded.
There was discussion some years ago, arising out of our 2001 Election
Manifesto, about the possibility of providing people with an equity
stake in their council properties and talk about structuring housing
benefit so that an element of it could be transferred into a stake
in the property. Do you think that there is merit in looking at
providing an asset base for the financially excluded as a way
of engaging them in the mainstream?
Mr Lovell: From my personal perspective
I would say yes. One of the driving forces to the work that we
do—and my interest in some of this is over the past few
years we have seen a rise in the mean or average level of wealth
for individuals in the UK but what we have not seen is a closing
of the gap between that and the most disadvantaged. If anything,
I get the sense that is widening and if we begin to look at that
in the context of the asset base I think that is something that
needs to be addressed. I think it is very difficult to address.
It relates also to the point about financial education, whether
people believe that that is for them.
Q208 Ms Keeble: Do you think it would
be worth re-visiting that whole debate? It is a very difficult
one because you are talking about the transfer largely of public
assets for people who do not have earned income.
Mr Lovell: I had a discussion
on this with someone the other day. I quite often hear in different
places in the UK and outside about generational unemployment.
What I do not tend to hear about is generational poverty. It is
a necessary and difficult debate. It is like the point if we look
back 100 years at some of the disadvantaged areas to see whether
that has changed significantly. I think that is the only way to
tackle that.
Q209 Ms Keeble: A lot of our discussion
and a lot of the submissions we have had in talking about financial
inclusion look at the different products, frankly, basic bank
accounts et cetera, whereas in retail banking people talk quite
a lot about the people who are financially excluded and will talk
about the whys and will talk about the different problems which
put them where they are. I wondered what your observations were
on that. You have talked about pensioners and you have talked
about people with long-term illnesses. Is this an undifferentiated
mass or are there particular issues that affect particular people
within that?
Mr Lovell: I think there are particular
issues that affect people in very different ways. There is also
the example in which people deselect to use bank accounts for
personal budgetary. What would your experience be, Steve?
Mr Hart: I think certainly a lot
of people shy away from bank accounts because of the debt they
are in. They are worried about their income going into the bank
and being sucked up. We come across a lot of people who would
just prefer to deal in cash. That is what they have always done,
again going back to the problem with the education and the way
of doing things. We have come across pensioners, for example,
who have had £10,000 in cash sat in their houses because
they have not put it anywhere. I think going back to an earlier
discussion, it is around education, it is around visiting people.
Our work on direct payment has been an example of this where originally
we were looking at going into libraries, community centres, even
bingo halls where pensioners were and going along there to talk
to them about products that we can offer. That is not where we
actually integrate with these people. The bulk of the people are
sat in their home marginalised, they do not speak to people week-on-week.
An excellent example is an individual we spoke to last week in
Birmingham, a 56-year-old guy who lives in a sixth-floor flat
who did not set foot outside the front of his door.
Q210 Ms Keeble: If I can just come
back on that though. Do we not need to look at, bearing in mind
that these are often hard-to-reach communities, different strategies
to tackle the financial exclusion that they experience? For example,
Lloyd's TSB in my area had to deal with a lot of people coming
in from Poland and quite often people in that situation are amongst
the financially excluded so they had the very, I suppose, obvious
strategy (but perhaps one other people had not thought of) of
employing someone who spoke Polish to provide advice in the bank
on a Saturday morning. Do we not have to look at who the financially
excluded are and then work it out how you are going to tackle
the exclusion?
Mr Lovell: Absolutely.
Mr Trigg: The general point is
there is definitely a profile trace which the financially excluded
have, whether it is pensioners on the minimum income guarantee,
individuals who are long-term unemployed, lone parents, people
in the most economically deprived wards, individuals from the
black and minority ethnic communities and so on. There tends to
be a profile but the grouping itself is actually quite dynamic.
I notice this was referenced in your last hearing and so it is
absolutely true. People do move in and out. There is, if you like,
a hard core of those financially excluded (a lot of whom are self
excluded) at the margins, and they are big margins. They are people
moving in and out over a lifetime. They may be excluded for a
variety of reasons when they are younger and so on and then they
go through a specific programme, they are into employment, they
get a bank account, use it, appreciate it, they then take on simple
financial products and then they are into the financial mainstream.
Then a life event further down the line knocks them off course
and they will have to start again. So I very much see the point
in terms of different strategies for different groups. This is
a role in terms of where competition can play a part in comparability
because if you can put in a model that is profitable to the section
of the market place it tends to make people really think about
how they are going to market to each group and in that sense to
see what strategy to employ to get them as customers.
Mr Lovell: This is one of the
strengths of the community finance organisations and it is the
way we tend to talk about it. We are also interested in the approach
of the Bank of South Africa which is recruiting from the demographic
clients it serves. You are right, some of the commercial organisations
do not tend to do that. It comes back also to the principle of
the way that you deliver the technology and processes is by simplifying
it. You go out into a group demographically and say there is a
bank clerk in a high street bank. I think you are absolutely right.
It is a critical issue on two counts. It is vitally important
for the individual to engage with someone that they feel they
can trust and has experience of them. Our other experience of
it is that many people feel alone and isolated and that the services
and products really do not suit their individual circumstances.
There is a core of issues where it is similar to other people
on the periphery and to try and challenge the way you describe
it is the way to go, but it is very difficult to deliver in practice.
Mr Hart: Our direct payment advisers
in the West Midlands, for example, were recruited solely from
within the community and so they are able to speak nine, ten,
12 different languages and it proved very successful in the early
days. In addition to that in the Welsh Valleys we have Welsh speakers
doing some work with the Legal Services Commission, providing
debt advice and benefit welfare advice in the Valleys where they
speak Welsh, so we employ people who can work with those communities,
and it works very well.
Q211 Mr Todd: You have already commented
on the fact that the Financial Inclusion Fund only marginally
is available to for-profit organisations like yourselves. Could
you expand a little on your thinking about the gap that that may
provide in its usefulness?
Mr Lovell: I think it comes back
to the broad point that I am still firmly of the personal belief
that what is required is a better working relationship between
public and private and voluntary sector community organisations
in this sector. I think the potential gap is that we lose the
opportunity for learning and experimenting with different ways
of engagement or service delivery, and one of the things that
we see about the Financial Inclusion Fund is a tendency to extend
the number of existing activities, and I think it is good to extend
the breadth and range of those, but perhaps at the moment we are
not really testing new ways of addressing the challenges. That
tends to be an area where there is more scope for improvement.
Q212 Mr Todd: Because the focus is
very firmly on not-for-profit organisations and mutual models
of that kind. Is that something that you have communicated your
feelings about and other for-profit organisations have as well?
Mr Lovell: Yes, we have communicated
those feelings and I think in broad terms they have been listened
to. As with any of these things, the Government needs to make
an investment choice about where it wishes to put some of the
funding in order to improve the level of service. I think in terms
of taking a sustainable model forward I am not yet convinced that
we have got the model right, but not many organisation who are
for profit necessarily have the social approach which we do as
an organisation and nor do some of these organisations operate
in this field who are for profit. It is challenging when you have
spent lots of time trying to engage with banks for example when
we feel we have perhaps not got as far as we need to so we need
to try something different.
Q213 Mr Todd: To a reasonably experienced
eye, one might think that the Financial Inclusion Fund contained
a number of useful initiatives by different government departments
with different timescales which someone had conveniently put into
one document and said, "This is a Financial Inclusion Fund."
It appears somewhat incoherent and there does not seem to be a
very obvious reporting framework for the interactions between
those funding approaches and the various entities that drive them
to produce something which tells us what has been achieved.
Mr Lovell: I would agree with
that. I think it is the point that I was making earlier. I can
see why it has been pushed but I do not see how it is going to
be drawn back together and how that is going to be disseminated
or provide a strategy for the future.
Q214 Mr Todd: Can I just explore
the reporting framework. Has there been any reporting framework
for the Financial Inclusion Fund as a whole, to your knowledge?
Mr Lovell: I think the LSC have
a reporting framework.
Q215 Mr Todd: So in other words,
you have highlighted one bit of it that has said something?
Mr Lovell: My experience of both
the DWP and the DTI has been that there will be a reporting framework
back into the department. If I understand your question correctly,
there is not a reporting framework back up again in order to draw
that together.
Q216 Mr Todd: One would expect the
Financial Inclusion Taskforce to be the body to draw together
the information from all of the various elements of this and report
on their effectiveness. Have you seen anything which indicates
that that is happening?
Mr Lovell: No.
Q217 Mr Todd: Perhaps that is something
we might wish to pursue because clearly although the amount of
money is not huge it is worth finding out whether it is being
spent particularly effectively. Are you also concerned about the
fairly short-term aspect of the Fund?
Mr Lovell: I think that is one
of the points we have discussed internally and with the departments
in relation to this point about long-term sustainability. I have
no sense yet of how we are going to progress after—
Q218 Mr Todd: Again, that needs coherent
reporting because one of the critical issues is if this money
is being spent, what happens after it is finished? Are there now
models to take on the work that has been started?
Mr Trigg: On the detail on debt
advice in particular, I know Citizens Advice and Advice UK and
a host of other organisations have all fed back saying, "We
understand the basis of the fund is to capacity build the sector
and to draw new people into the industry to provide that but what
happens at the end of year two?" and then there is no answer
as yet.
Q219 Mr Todd: One of the classic
experiences one has is the difficulty of mainstreaming activities
that have been pump-primed in that way, and very often various
obvious organisations who might wish to do that have not put their
hands up and said yes, we will take that one on board and do something
about it. Knowing that that gap is emerging is critical to this,
is it not?
Mr Lovell: Yes it is.
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