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Our approach
Too many people cannot gain access to appropriate financial products and services at present: they struggle to obtain affordable credit or helpful financial advice and face barriers in opening and operating bank accounts. Financial exclusion blights the lives of many millions of people; it increases the costs they bear for basic services; it makes them vulnerable to illegal or high-costing lending; it reinforces social exclusion. An effective and coherent strategy to promote financial inclusion can make a substantial contribution to the fight against poverty. In this Report and the two Reports that will follow—one on banking services, the other on financial capability and the roles of Government and public bodies in the overall strategy—we identify the main elements of the strategy we wish to see Government develop. In the current Report we focus on three main areas for action.
Affordable credit
The first priority area for action if the Government strategy on financial inclusion is to punch its weight is in improving access to affordable credit. The Government needs to spearhead action to tackle high-cost credit, galvanising enforcement action against illegal lenders, monitoring the effectiveness of measures to ensure increased competition in the home credit market and actively promoting improved data-sharing among and for lenders. The Government must act soon to release the potential of third sector lenders—credit unions and Community Development Finance Institutions—to provide lending. Measures to increase the ability of credit unions to raise capital and to reduce their costs of operation must be enshrined in a new Credit Unions Act. The Government's own Social Fund must become a more effective lender to the poorest members of society which is more fully integrated with other provision of affordable credit for people on low incomes.
Saving for all
The savings industry in the United Kingdom has not served those lower down the income scale at all well. Even a small cushion of savings can make a great deal of difference to the personal finances of those on lower incomes. The Government must do more to promote affordable savings, ensuring that the valuable lessons in the first pilot phase of the Saving Gateway are not overlooked and that the Gateway is promoted nationwide as a framework for support for savers. The Government's measures to promote savings for all must be more effectively integrated with its financial inclusion strategy.
Access to financial advice
Access to good financial advice is too often open only to those looking to purchase particular financial services products or to some of those with serious debt problems. Generic financial advice which is not tied to a sales process for particular products would represent a key building block in an effective financial inclusion strategy. The provision of such advice on a more systematic basis is in the interests of the financial services industry and all consumers. The Government must take the lead in discussions to secure agreement on the wider provision of generic financial advice.
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