Government on Target for Inclusion?
2nd December 2004
The Chancellor's Pre-Budget Review today set out a range of packages designed to boost the provision of affordable credit to low income borrowers. Welcome features of the Treasury's proposals include:
- £120 million over three years to fund social lending and money advice
- Setting up a Financial Inclusion Taskforce to monitor progress
- Increasing the budgets for Social Fund loans by £210 million over three years
- Mapping financial exclusion and social lending provision
However, the Government's insistence that these measures - together with those proposed by the Department of Trade & Industry in the forthcoming Consumer Credit Bill - will be adequate to protect low income borrowers from predatory and extortionate lenders is an historic gamble.
Damon Gibbons, Chair of Debt on our Doorstep commented:
'The Government thinks that by boosting alternatives it can provide choice and increase competition. In theory that's fine, but the amount of investment announced today is small beer in comparison to the size of the market. Yet on that basis, the decision has also been made to rule out an interest rate ceiling. Although there is a promise to keep that decision under review, the reality is that the chance to include it in the legislation will have passed before the outcomes of today's investments are known. The Government needs to reserve the power to introduce a cap as part of a Consumer Credit Bill, and up the amount of investment in affordable credit. Fun ding that investment might mean forcing the banks to re-engage with low income customers not just by providing bank accounts but by offering cheap credit either themselves or by funding credit unions and other types of social lending'
Debt on our Doorstep called for the Government to take the following additional steps:
- Reserve a power to introduce a cap as part of the Consumer Credit Bill
- Require banks to report:
- (a) the amount of their lending going to low income groups
- (b) the amount that they fund money advice and social lending services
- Require local strategic partnerships to audit exclusion and act at a local authority level
- Set specific targets for financial inclusion and the availabilty of affordable credit
