Financial Inclusion Karen Rowlingson Professor of Social Policy November 5 th 2015

Financial Inclusion: Talk Outline Defining financial inclusion Broader context of labour market and austerity Access to bank accounts, saving for short and long term, credit and debt Causes and consequences of financial exclusion What can be done?

Defining financial inclusion Most definitions focus on access to appropriate and affordable financial products Some focus more on the ends rather than the means; and thereby highlight broader picture Academics debate whether financial inclusion is a progressive response to financialistion or seeks to advance it

Unemployment fell in 2014 and is nearly down to pre-crash levels

Underemployment dropped very slightly in 2014 but remains high, LFS

Levels of real pay (adjusted by CPI)

Means-tested, out-of-work benefits (IS/PC) as a percentage of Minimum Income Standards

Number of people given 3-days emergency food and support by the Trussell Trust

How are households managing?

Numbers (millions) without bank accounts

Savings The proportion of households with different kinds of savings accounts fell from 68 to 58% from 2008/10 to 2010/12 The amount held in these accounts has increased Amounts held in ISAs has increased from £7k to £9k, UK shares from £17k to £20k

Private pensions

Credit Fewer people are using unsecured credit (60% in 2014, down from 63% in 2012 and 2013) and mortgage lending fell Payday lending increased from but has now declined after reforms/cap More people are using credit unions Support from local welfare assistance has reduced

Problem debt 10% of those with unsecured credit found it a ‘heavy burden’ in 2014 (13% in 2013) Mortgage repossessions fell from 33,00 in 2009 to 11,000 in 2014 Evictions from rented properties (especially social landlords) has increased to 42,000 in 2014 (from 28,000 in 2009)

Causes of financial exclusion Low and insecure incomes Policy and practice of Mainstream banks High-cost financial services providers Regulator Local authorities, utility providers

Consequences of financial exclusion The poor pay more Pre-payment meter fuel costs 10% more Equivalent loans can cost 50%-150% more Poverty and debt cycle Impact on physical and mental health

What can be done? Tackle the root causes Further reform of mainstream banking and alternative providers Action from local authorities, housing associations, money advice agencies Improve incentives and support for savers See Financial Inclusion Commission report