Facing Debt: Economic Resilience in Newham Kieran Read & Janaki Mahadevan London Borough of Newham

Why does this matter? Newham is an aspirational borough and a place of opportunity. But many residents still face significant challenges Economic resilience – helping people secure work, improving educational attainment, attracting investment Changing role of the Council /11 and 2018/19 Newham will face a cut of £151m

Economic Resilience in action Universal primary FSM – equivalent to earning up to an £1,400 per year Workplace – 22,000 residents into jobs since 2007 Red Door Ventures – building over 3000 homes, one third affordable

Life on a low income Commissioned the LSE to undertake interviews with residents on incomes of up to £30,000. Three main drivers of debt:  Temporary, part-time and casual jobs without formal contracts - fluctuating incomes  The cost of living – rent, energy, food  Juggling competing demands on shrinking resources - almost all say their finances are getting worse because costs are rising and incomes are falling

Half of residents earn less than the LLW Almost one fifth earn less than the NMW The relative poverty rate in Newham is 41 per cent, more than double the national One in five households in the borough is in arrears with at least one bill

MoneyWorks: strengthening economic resilience –Affordable and ethical alternative to a payday loan –Access to more sustainable financial products –Quality advice offer –Interest free loans for one-off life changes –Newham Community and Crisis Support –Hire purchase offer –Energy switching –Debt consolidation A place where residents can come and get the support they need

Alternative payday loan Develop a short term loan product that is more affordable for residents who need it Help to access to more sustainable financial products and encourage residents to build their credit rating Amount and period Interest (APR)Weekly payment Total Company 1£400 3 months 42.6%£32.63£ Company 2£400 6 months 96%£17.76 £487 Company 3£ days 2,909.4%£122.59£531.21

Newham Community and Crisis Support Local Social Fund consists of:  Crisis Support, offering cash loans for living expenses in an emergency; and  Community Support, which gives in-kind loans for furniture and white goods to help people moving home or those under exceptional pressure. This will not be funded by a central government grant from 2015/16. But Newham has committed to continue to meet this need.

Life Changing Fund Zero interest loans made to residents who want to make a sustainable one-off life change Pilot ran across 6 wards in 2013 Approved loans helped with: –Training and qualifications to help people get back into employment or improve employment prospect –Driving lessons for employment or to improve circumstances –Equipment for work or for education

Debt and benefit advice Important that alongside affordable financial products residents should have access to high quality advice Where residents can get help to both build their economic resilience and end reliance on exploitative finance Help residents address the immediate problems they face and work to deal with underlying issues including developing financial plans

What will MoneyWorks look like? I actually use online banking – I find it really helpful because it’s hard for me to get to a bank during working hours “I consider myself reasonably intelligent but yet when faced with APRs I feel bamboozled!” Building the relationship with people right from the beginning and helping them solve their problems and not just giving them more money next month. You should be able to talk to someone face-to-face and work it out “I am in that situation at the moment and I don’t know who to approach… who will help me?”

Exploring options for delivery In house provision - regulatory burdens and cost of lending are a barrier Published a Prior Information Notice to gauge interest and seek views on options for delivery Interest received from credit unions, Community Development Finance Institutions, and a major banking group

Key issues What is the best process for efficient and joined up referrals between Council staff and loan provider? What are the costs of providing the products, what are the sources of capital, what is the eligibility criteria? What are the most appropriate outcomes and payment models? How can customers be supported towards more sustainable forms of finance? What is the best approach to debt management and loan collection? How should we balance phone, online and face-to-face service?