2018 Budget: headway on the poverty premium, and not before time
As Brexit draws nearer, demanding answers to questions on the nation’s finances, it would be easy to forget the day-to-day issues faced by ordinary people on low incomes in the budget — particularly those issues related to poverty and those paying more for their essential products and services. But there were some positives surprises in the speech on Monday.
As ever, the autumn budget statement delivered by Philip Hammond on Monday provided much excitement and anxiety for policy wonks in and around Westminster. But as ever the devil was in the detail, and the detail was published as a policy paper that begins: “This is a Budget that shows the British people that the hard work is paying off.”
Skip to section 6:11 and you will find information that relates very directly to our work on the poverty premium, making us at Fair by Design very optimistic.
When it comes to the issue of affordable credit we know what the problems are:
· For the most part credit is being used as a sticking plaster for an income/cost-of-living problem,
· Fewer opportunities to borrow affordably, on a short-term basis, from a bank are available for the people this is most likely to affect,
· A crop of high-cost providers enters and thrives in the market — particularly with customers described as ALICE in the US (asset-limited, income-constrained, employed), and
· The provision of more affordable lending struggles to make headway.
For that provision of affordable lending, there has been some serious issues to tackle, including;
· Support from the Government to help them to stand on their own two-feet,
· Being able to utilise innovation for reaching and keeping customers — particularly for those small credit providers with no marketing budget,
· Working with partners in the charity sector or among housing providers to receive leads and client signposting,
· Having something or somewhere to signpost to when someone seeks credit but whom interest-bearing credit would make their financial situation even worse.
In answer to these questions, the budget policy paper details the following very key solutions, which Fair by Design fully supports:
· The launch of a pilot for a new prize-linked savings scheme for credit unions, which is very popular among Britons and simultaneously boosts the awareness of the ethical alternative provision of credit
· The Affordable Credit Challenge Fund which will provide £2 million to launch a challenge fund promoting innovative solutions harnessing FinTech for the benefit of social and community lenders
· The creation of a new independent organisation to address the problem of unaffordable credit, emerging from the Dormant Assets fund (of £55m)
· A consultation around the breathing space for people in debt which following the Financial Guidance and Claims Act 2018 introduces a 60-day period of protection from creditor action
· The simplification of regulation that now allows Regulated Social Landlords (RSLs) to refer to sources of affordable credit, where they previously were not allowed, and
· The launch of a feasibility study on a No-interest loans scheme pilot — for those people whom even borrowing from social and community lenders would be unaffordable.
In relation to the broader context of these welcome announcements not everything is quite so positive. Recently the Centre on Household Assets and Savings Management (CHASM) found that poverty has increased since 2010. In 2016/17, 30 per cent of all children and 16 per cent of all pensioners were living in poverty, while 1.5 million people, including 365,000 children, were destitute at some point during 2017. This in turn has created the expansion of high cost credit providers, and household debt figures, that the solutions above seek to address.
That’s even before we touch on Universal Credit, or the need to widen the regulation and price capping of other forms of high cost credit, including overdrafts and the rent-to-own sector (e.g. Brighthouse).
But credit where credit’s due, with this focus on access to affordable credit this Government is actively engaging on a big issue related to the poverty premium — and that’s a good start.
Fair by Design will be actively engaging in work to make sure these announcements aren’t just warm words, working with Government and businesses small and large, to tackle the extra costs of poverty.