Supplementary memorandum by the Financial
Inclusion Task Force
FOLLOW UP TO EVIDENCE SESSION ON 9 MAY 2006
I am writing regarding the points on which you
requested clarification following our meeting on 9 May.[110]
You asked for the following:
1. A copy of the report on the Taskforce
study visit to Chicago and Milwaukee. The report of my study visit
enclosed (Q 475).[111]
2. Proportion of financial excluded people
who are owner-occupiers (Q 527).[112]
The Family Resources Survey, published by the
DWP, includes data on household tenure and bank account holding.[113]
For the purposes of the goal to halve the unbanked, the Treasury
has defined financial exclusion as the absence of a bank account.
Those who only hold a Post Office Card Account are therefore classified
as "unbanked". As you are aware, however, the FRS data
for 2004-05 has been collected in such a way that it does not
allow the number of financially excluded households to be identified
as it is not possible to distinguish between those with a basic
bank account and those with a POCA.
For the purposes of responding to your request,
I am therefore including the 2004-05 data on home ownership amongst
those who have no account of any kind and amongst those who hold
a basic bank account or POCA.
HOUSEHOLDS BY UNBANKED STATUS AND HOUSING
TENURE
| | Rented
from
council
| Rented
from
Housing
Association
| Rented
privately
unfurnished
| Rented
privately
furnished
| Owned
outright | Owned
with
mortgage
| Total |
| No account | No of hholds |
300,000 | 200,000 | 100,000
| 100,000 | 300,000 | 100,000
| 1,100,000 |
| of any kind | % of no account of any kind
| 28 | 14 | 10 |
5 | 30 | 13 |
|
| | |
| | | |
| |
|
|
| POCA or basic | No of hholds
| 200,000 | 100,000 | 100,000
| - | - | - |
500,000 |
| bank account | % of POCA or bba
| 40 | 28 | 12 |
5 | 8 | 8 |
|
| |
| | | |
| | |
For explanations of the data please see footnote below.[114]
This data demonstrates that home ownership is not significant
amongst holders of Post Office Card Accounts or basic bank accounts.
However, it shows some home ownership, in particular outright
ownership, amongst those with no account of any kind. Further
analysis of this group suggests that, of the outright home owners
with no bank account of any kind, 38% have a household income
of less than £10,000 a year, 27% between £10,000 and
£20,000 and 35% over £20,000. Of those with no bank
account of any kind who own with a mortgage, 73% have an annual
household income of over £20,000.[115]
The Taskforce will explore what further information can be
collected about this group from the FRS and other sources to identify
the characteristics of these households. In particular, it will
wish to know the extent to which such households have a need to
borrow and, if they do, whether they make use of their homes as
security to minimise the cost of borrowing.
3. Views on the Taskforce's remit and whether it should
be changed (Q 531)[116]
Taskforce remit
The Terms of Reference of the Taskforce, as defined by the
Treasury, are focused on the three priority areas identified by
the Government in "Promoting financial inclusion".[117]
These are: access to banking, access to affordable credit and
access to money advice.
The primary challenge for those excluded from mainstream
financial services is access to banking. A bank account not only
allows significant savings to be made but also acts as a key to
accessing other products such as insurance, savings vehicles and
affordable sources of credit. The Taskforce understands that it
is for this reason that the Treasury has focused on the unbanked
as the hardcore of the financially excluded, and on access to
affordable credit since this is an essential tool for many in
managing peaks and troughs in expenditure to provide some financial
stability.
Access to savings and insurance are the next steps on the
ladder towards true financial inclusion. The Task force recognises
the value of helping people to accumulate small levels of savings
as part of tackling financial exclusion, in particular as a key
tool to avoiding over-indebtedness. Indeed, credit unions have
consistently shown that encouraging people who were previously
using expensive forms of credit to save small amounts is a very
helpful step in changing behaviour. The Taskforce is aware that
the Government has initiatives underway in respect of savings,
for example the Child Trust Fund and Savings Gateway. The Taskforce
also recognises that insurance products can potentially help those
on low incomes plan for the future and protect against the costs
of unexpected events. I consider savings and insurance to be essential
elements in any strategy to build financial capability.
If the Treasury were to ask the Taskforce to consider issues
in addition to those covered by the terms of reference, I believe
(subject to consulting Taskforce colleagues over the details of
any specific request) that the Taskforce would be willing to do
so. However, we would wish to be sure that this did not prevent
the Taskforce from continuing with the considerable amount of
further work needed to address the core areas of financial exclusion
identified in the current terms of reference.
I hope this letter provides you with the additional information
you need. Should you require anything further, please do not hesitate
to contact me.
May 2006
110
Ev 84-94 Back
111
Not printed. Back
112
Ev 93 Back
113
Full data set can be found at http://www.dwp.gov.uk/asd/frs/2004_05/pdfonly/frs_4_05_report.pdf Back
114
Figures for the number of households are rounded to the nearest
100,000. Estimates are based on sample counts that have been adjusted
for non-response using multi-purpose grossing factors that align
the FRS to Government Office Region populations by age and sex.
Estimates are subject to sampling error and remaining response
bias. Data are not provided for certain cells in the table because
the sample sizes are too small to support reliable estimates of
the statistics in question. The FRS interviews around 25,000 households.
Key: - = negligible. Back
115
It is likely that the apparent anomaly that some have a mortgage
but no bank account of any kind is accounted for by mortgages
taken out some years ago, as it would be extremely difficult to
enter into a new mortgage today without an account of any kind. Back
116
Ev 93 Back
117
Promoting Financial Inclusion: HM Treasury, December 2004. Back
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