Developing a Fair Finance Strategy for Leicester and

Leicestershire

Draft evidence base, proposed priorities, and work

streams

Damon Gibbons

18th March 2015

2

1. Introduction

1.1. In February 2015, the Diocese of Leicester, which is co-terminus with the local

authorities of Leicester City and Leicestershire County Councils1, commissioned

a Task Group to develop a strategic approach to help meet the needs of its

residents for ‘Fair Finance’. We define this objective as follows:

“Financial systems and service provision are fair when people have

access to affordable credit, reputable financial advice and mainstream

systems to conduct household and other transactions. Fairness implies

not only the absence of disadvantage and barriers, but also the

presence of opportunity, financial, practical and geographical, for all

sections of our diverse society.”

1.2. The establishment of the Task Group has followed mounting concerns at the

numbers of people experiencing financial difficulties, including those turning to

high cost credit, such as payday loans, as a means of simply ‘getting by’.

According to a report from the Money Advice Service, published in November

2013, nearly 9 million people (18 percent of the UK’s adult population), were

‘over-indebted’: having been three months in arrears with their bills in the last six

months or reporting that their debts are a ‘heavy burden’. The report also

indicated that 4 million people were in serious financial difficulty, and had been

struggling to pay their bills for more than a year. Nearly half of this group felt that

their debts prevented them from ‘buying the basics’, with families with children

particularly affected.

1 The county council is an upper-tier authority and includes within it seven local authority districts: Blaby, Charnwood, Harborough, Hinckley & Bosworth, Melton, North West Leicestershire, and Oadby & Wigston.

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1.3. At the national level, the Archbishop of Canterbury, Justin Welby, has been very

vocal about the problems of high cost payday lending and the need for the

Church to respond by helping expand more affordable alternatives, including

credit unions. More recently, this work has developed into helping to build a

‘fairer financial system focused on serving the whole community, where

everyone has access to responsible credit and savings and other essential

financial services’2. This has broadened the agenda to include criticism of banks

and other mainstream financial services providers for failing to play their part in

meeting the needs of lower income households3.

1.4. To support its work in this respect, a Church Credit Champions Network

(‘CCCN’) has been established, together with a dedicated website

(www.toyourcredit.org.uk). These resources are intended to assist local

Churches to raise the profile of the issue and develop their own strategies for

action. The Church is also supporting the development of Savings Clubs in

primary schools. This is being taken forwards by the Children’s Society in order

to raise the aspiration of children to save for the future and promote a healthy

and sustainable attitude to financial management. Although financial education is

now included in the secondary school curriculum, research4 has indicated that

attitudes to money are formed at an early age. Developing savings clubs in

primary schools is also viewed as one way to provide a counter-balance to the

increased exposure of younger children to TV advertising for credit.

2 www.toyourcredit.org.uk 3 See for example, the report by Farrell in The Guardian, 19

th January 2015

4 Money Advice Service (2013). ‘Habit formation and learning in children’, reported that many habits concerning money were formulated by the age of seven.

4

1.5. Within the Diocese of Leicester, financial problems, and the damage that

these cause, were clearly identified in the work of the Bishop’s Commission on

Poverty. The Commission reported earlier this month, and contained compelling

evidence of the negative impact of financial worries on the health and self-

confidence of people in debt and the welfare of their children:

“Fear was one of the most talked about aspects of what it was like to

experience poverty. Sometimes it was the fear of the knock on the door

that signalled a visit from the bailiffs. At other times there was the fear

of the landlord calling for the rent, or the fear that the letter dropping

through the letterbox was another unpayable bill or a further demand

for interest on a loan taken out in desperation5.”

1.6. Evidence provided to the Commission stressed the need to address the

proliferation of high cost lenders, which were seen to be profiting from people’s

financial distress, as well as develop more affordable alternatives – such as

credit union provision - and provide advice and support to those in debt.

“Participants stressed the need for coordinated approaches to credit,

debt management and other issues associated with the concept of

financial inclusion. There is a need for both immediate planning but

also longer-term collaboration across agencies, including the Church,

to create a comprehensive strategy around fairer finance.6”

1.7. As a consequence, the Commission’s report contained the specific

recommendation that:

“...the Diocese, from a position of political and financial neutrality,

should take a strong lead in brokering dialogue across all stakeholders

- councils, voluntary sector organisations, service providers, employers

and the financial sector – to develop joint strategies concerning

5 Page 11, Bishop’s Commission on Poverty, 2015. 6 Page 21, Ibid.

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financial inclusion and fair finance and addressing the deep concerns

expressed in this report.”

1.8. The Fair Finance Task Group has been established to take this

recommendation forwards. The Task Group comprises representatives from the

Diocese, City and County Councils, and the voluntary sector7. Its terms of

reference provide for it to find ways to ‘improve the financial resilience of

residents and communities in Leicester and Leicestershire’ and to identify

funding opportunities to support these.

1.9. The terms of reference also specify that the Task Group should bring forward

recommendations and action plans in respect of four areas of activity:

Reducing the financial pressures on households;

Improving access to fair and affordable finance;

Building financial capability, and

Enhancing support and advice for people in financial difficulty.

1.10. Whilst the Task Group has a limited membership, we recognise the need to

consult with a wide range of stakeholder organisations8. This is necessarily the

case if we are to develop a strategy which accurately reflects the challenges

faced; builds upon the good work that is already taking place, and addresses

gaps in provision in each of the above areas of activity.

7 The members of the Task Group are listed in Appendix 1. 8 These include, but are not limited to welfare rights and debt advice agencies, credit unions, schools and

colleges, faith groups, financial institutions, health and social care agencies, housing providers, employers and trade unions, and welfare to work services.

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1.11. The remainder of this document now sets out our current understanding of the

causes of financial pressure on low income households across the sub-region

and our proposed priorities for action. We invite comments on these from

interested parties through to 30th April 2015.

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2. The causes of financial pressure on households

2.1. This chapter sets out our understanding of the financial pressures on households

within the Leicester and Leicestershire area or ‘sub-region’. It presents the

findings from desk based research conducted by the Centre for Responsible

Credit (‘CfRC’) on behalf of the Task Group to identify the main areas of

concern. The following chapter then looks at existing provision, including good

practice examples from around the country, and presents recommendations for

the Group’s action planning.

2.2. Approximately one million people live in the Leicester and Leicestershire sub-

region in just under 400,000 households. The sub-region is incredibly diverse,

both in terms of its mix of urban and rural communities and in respect of its

population. There are particularly high concentrations of minority ethnic

communities in the City, where approximately one third of the sub-region’s total

population are living9. In its economic assessment for the sub-region the

Leicester and Leicestershire Enterprise Partnership (‘LLEP’), whilst rightly promoting

the area’s many strengths, also points to a number of ‘significant challenges’:

Average earnings in some areas of the sub-region are well below those for

the East Midlands region and England as a whole;

Approximately one in five City residents claim benefits and 23% are without

formal qualifications;

According to the 2010 Index of Multiple Deprivation, Leicester is the 25th most

deprived local authority in the country;

9 Leicester and Leicestershire Local Enterprise Partnership, Economic Assessment

8

Although the County is generally more affluent, five of its neighbourhoods fall

within the 20% most deprived nationally and there are pockets of relatively

high unemployment.

2.3. These challenges are long standing, but it is clear that the financial pressures on

households, particularly those on low to middle incomes, have increased in

recent years due to a combination of low wage growth (or even decline in some

areas), rising living costs, and in the case of those receiving welfare benefits, a

significant reform programme, including changes to the eligibility rules and level

of assistance provided. We now look at these factors in turn.

2.4. Wages have not kept pace with the cost of living. After taking account of

inflation, the average full time worker’s wage in England fell by 8 per cent

between 2010 and 2014. However, real wages in some areas of the sub-region

have declined even further than this (see table 1, below).

Table 1: Median full time wages, by local authority (place of work) 10.

2010 2014 % change adjusted for inflation %

Melton 408 403 -1.2 -12.5

Oadby & Wigston 422 415 -1.7 -13.0

Leicester City 463 473 2.2 -9.1

NW Leicestershire 466 480 3.0 -8.3

Hinckley & Bosworth 475 514 8.2 -3.1

Charnwood 480 504 5.0 -6.3

Harborough 481 498 3.5 -7.8

Blaby 498 485 -2.6 -13.9

England 502 518 3.2 -8.1

10Table derived from ONS data releases for the Annual Survey of Hours and Earnings, 2010 & 2014, and ONS releases on Consumer Price Index 12 month inflation rate. Inflation adjustment calculated by CfRC.

9

2.5. It should be noted that wage levels throughout the sub-region were already lower

than the national average in 2010. For example, average wage levels in Melton

were 18 percent lower than for England in that year. With wages in Melton falling

in real terms by 12.5 percent over the four years to 2014, this ‘wage gap’ has

widened further. However, this has not been a uniform experience across the

sub-region (see figure 1, below).

Figure 1: Leicester and Leicestershire's Growing Wage Gap (2010 - 2014)

2.6. The wage gap has widened in Melton, Oadby & Wigston, Leicester City, and

Blaby; it has stayed the same in NW Leicestershire, but it has narrowed in

Hinckley and Bosworth, Charnwood, and Harborough.

2.7. Whilst looking at average wage levels provides a general context, it is clear that

debt problems are more likely to occur in low income households. Although

lower income households are likely to hold less unsecured debt than households

with higher incomes, the burden of repaying that debt takes up a greater

0

5

10

15

20

25

% lo

wer th

an En

gland

% wage gap 2010

% wage gap 2014

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proportion of their disposable income. Analysis of the Bank of England’s NMG

survey of household debt, reveals that 47 percent of households in the East

Midlands have unsecured credit commitments, averaging just under £6,000

(excluding student loans)11. The cost of debt repayments takes up an average

of 26 percent of household disposable income. However, the repayment burden

is over 40 percent for those households in the bottom half of the income

distribution. The position is particularly difficult for:

People who are in low paid employment or undertaking low paying self

employment;

Those living in rented accommodation;

Households with dependent children (particularly lone parents);

Younger people (aged below 34 years), and especially students; and

Households where no-one is in work (with problems also associated with

long term health problems, including mental health, and disability).

2.8. As a consequence, a strategy to deliver affordable financial services needs to be

particularly focused on these groups.

Low paid employment

2.9. It is notable, that the sub-region contains areas where a large proportion of jobs

are failing to pay the living wage (currently £7.85 per hour), which we take as a

proxy for low pay. Across the UK, just over one fifth of all jobs pay less than the

living wage (21.7 percent) but this rises to nearly one quarter for the East

11 CfRC analysis of NMG survey data.

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Midlands Region (24.7 percent), and in some areas of the Leicester and

Leicestershire sub-region the proportion of low paid jobs rises to as high as 30.5

percent. Figure 2, below, provides details of the proportion of jobs failing to

deliver the living wage, broken down by the ten Parliamentary constituencies in

the sub-region12.

Figure 2: Percentage of employee jobs with hourly pay, excl. overtime, below the living wage by Parliamentary constituency (April 2014)

2.10. Although Parliamentary constituencies do not map perfectly to local authority

boundaries, applying these percentages to the size of local authority labour

markets13 provides a rough estimate of the scale of low pay across the sub-

region. Using this method we estimate that approximately 100,000 people are

working for less than the living wage across Leicester and Leicestershire.

12 Data on jobs paying below the minimum wage is not available at the local authority level. It should be noted that the Parliamentary Constituency for Rutland and Melton spreads across the local authority boundaries of Melton District Council, which is included in the sub-region, and Rutland County Council, which is not. 13 Data from NOMIS: number of employees, October 2013 – September 2014. CfRC calculations.

0

5

10

15

20

25

30

35

12

Overall, this is one quarter of the total number of people in employment. Figure

3, below, provides the local authority breakdown of our estimate.

Figure 3: Estimated numbers of people being paid less than the living wage by local authority area (2014)

2.11. Over half of all low paid employees in the sub-region are working in the City of

Leicester and Charnwood, with the remainder spread fairly evenly throughout the

remaining local authorities. This is unsurprising as these are the two major

urban areas within the sub-region and both have concentrations of minority

ethnic communities, which have traditionally experienced higher levels of low

pay.

2.12. Moving away from a purely geographical analysis, it is notable that low pay

has been particularly identified as a problem within the hotels & restaurants and

retail & wholesale sectors14. Approximately two-thirds of employees in the hotels

& restaurants sector earn less than the living wage, and three-fifths of these are

women. There is also a particular concentration of younger workers in this

14 http://www.poverty.org.uk/52/index.shtml

29,000

24,000 9,000

9,000

8,700

7,600

7,500

5,600

Leicester

Charnwood

Harborough

Hinckley & Bosworth

NW Leicestershire

Blaby

Oadby & wigston

Melton

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sector. Half of all employees in the retail & wholesale sector earn less than the

living wage, again three-fifths of them women.

2.13. Due to its size, the public sector is also a large employer of workers earning

less than the living wage, accounting for a quarter of all such employees. Just

about all of these are women and just about all of them work in either education

or health (this includes social care and childcare services, where low pay is

particularly concentrated).

2.14. In total, 43 percent of the sub-region’s employees work in these sectors, with

21 percent working in education, health and social care, and 17 percent in the

retail and wholesale sector.

2.15. The actual level of pay is, however, only one of the ways in which

employment links to credit use and debt problems. Other terms of employment

can be just as critical. In particular, problems of financial insecurity can arise if

employment is temporary and people are moving in and out of work on a regular

basis, or if earnings fluctuate (for example, because of the use of ‘zero hours’

contracts)15. There have been specific concerns raised that the use of zero

hours contracts has grown particularly in the food and drink manufacturing

industry in recent years16. The industry accounts for 12,000 jobs in the sub-

region (2.7% of its total employment) and is particularly concentrated in Melton

and Oadby & Wigston, where it accounts for over one in ten of all jobs17.

Despite forming part of the supply chain for major supermarkets, pay for

15

See, for example, Pickavance (2012). 16 http://www.foodmanufacture.co.uk/People/Union-slams-food-industry-zero-hours-contracts 17 Economic Growth Plan 2012 – 2020, Leicester & Leicestershire Enterprise Partnership

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operatives is often set at minimum wage rates, with workers increasingly Eastern

European migrants18 recruited through employment agencies.

2.16. In 2010, the Employment Agency Standards Inspectorate was involved in

investigations into 26 employment agencies in Leicester, which revealed over

135 breaches of the regulations. After sending warning letters to the agencies

concerned, no further action was taken19. However, continued vigilance is

necessary, and there may be a need to promote awareness of agency worker’s

rights, and of the work of Employment Agency Standards Inspectorate,

particularly amongst recent migrant groups.

Minimum Wage Enforcement

2.17. There have been recent reports of problems of Minimum Wage Enforcement

in the City of Leicester. A February 2015 report from the University of

Leicester’s Centre for Sustainable Work and Employment Futures20 into

conditions of work in the city’s textile industry revealed that there are significant

problems in this sector. These include non payment of the minimum wage, lack

of employment contracts, breaches of health and safety regulations, and poor

enforcement of labour standards. Non payment of the National Minimum Wage

in the industry was reported as ‘endemic’ with an estimated 75-90% of jobs paid

at an average of just £3 per hour (less than half the legal minimum for workers

aged 21 or above).

18 It is estimated that non UK nationals account for 22% of all workers in the industry and that of these some 61% come from Accession 8 countries (‘The Food and Drink Manufacturing and Processing Industry: Leicester and Leicestershire Specific Labour Market Intelligence: LLP, May 2011) 19 https://www.whatdotheyknow.com/cy/request/eas_joint_working 20 http://www.ethicaltrade.org/news-and-events/news/ETI-launches-programme-in-Leicester-garment-sector

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2.18. Between 2001 and 2005, the City Council ran a local enforcement project in

the Highfields area of the city in partnership with HMRC and the then

Department of Trade and Industry. This project was successful in building the

confidence of workers, predominantly Asian Women, to make complaints to

enforcement agencies and recover unpaid wages. During this period, the project

identified 39 employers in the city that were not paying the minimum wage and

recovered in excess of £118,000 in wages for nearly 500 workers21.

Unfortunately, Government funding for this project ended in 2005 and it has

since ceased to operate.

Low paying self employment

2.19. There has been a significant national growth in self employment since 2008.

Figures from the ONS22 indicate that self employment levels across the UK hit an

all-time high, accounting for 15% of the total workforce, in 2014. However, there

have been concerns that much of this is low paid, with average earnings for the

self-employed roughly half those of full-time employees at £207 per week. In

addition, people in self employment often work longer hours than employees,

and receive no holiday entitlement or sickness pay.

2.20. There are 57,700 self employed individuals in the sub-region23 – roughly 11%

of all those who are economically active. There are below average levels of self

employment in Leicester City and generally across the county, although self

employment is higher than average in North West Leicestershire, Melton and

21 Minimum Wage Update, 15/12/2004, Strategic Planning and Regeneration Scrutiny Committee, Leicester City Council 22 http://www.theguardian.com/uk-news/2014/aug/20/self-employment-uk-highest-level 23 Data from Nomis, October 2014

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Harborough24. Specific concerns have been raised in the past that much self

employment, particularly amongst minority ethnic communities, is low paying and

that encouraging further expansion into low quality self employment in already

crowded sectors is counter-productive25. There is also evidence that the New

Enterprise Allowance scheme, which has led to 60,000 new business start-ups

nationally, does not provide sufficient support to people who have left

Jobseekers Allowance to establish their business successfully26. However, a

more comprehensive assessment of the ‘shift’ to self employment in the sub-

region and its impact on the financial position of affected households is needed.

The cost of living

2.21. Although the calculation of average real wages (para 2.4, above) takes into

account the rising cost of living that has generally taken place over the past four

years, it should be noted that households of different types experience the

impact of inflation in different ways.

2.22. In particular, lower income households spend a greater proportion of their

money on food and fuel. Because food and fuel prices have increased faster

than the cost of many other goods and services used to calculate inflation, those

on the lowest incomes have experienced a greater reduction in their spending

power. A recent study by the Office for National Statistics (‘ONS’) reported that

the products purchased by households in the bottom 10 percent of the

disposable income distribution increased by 2.9 percent on average in each year

24 Leicester & Leicestershire Economic Assessment, chapter 3, para 3.68. Leicester & Leicestershire LEP 25 See, for example, research conducted by the Centre for Research into Ethnic Minority Entrepreneurship (‘CREME’) at the University of Birmingham: http://www.birmingham.ac.uk/research/activity/business/creme/news/2015/february/Supporting-ethnic-minority-and-female-entrepeneurs.aspx 26 See http://www.cesi.org.uk/social-inclusion-news/2013/apr/new-enterprise-allowance-qualitative-evaluation

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over the 2003-2013 period. This compares to an annual growth rate of 2.4

percent for the goods and services purchased by higher income households.

Over the entire 10 year period this has made a significant difference, with prices

for those on the lowest incomes rising by just under 40 percent compared with a

31 percent increase in the cost of living for higher income households.

2.23. The squeeze on living standards for lower income households has also been

particularly contributed to by rising housing, childcare and transport costs.

2.24. Housing costs have been rising in the private rented sector nationally,

although there is evidence that much of this remains affordable across the sub-

region. The most recent strategic housing market needs assessment for the

sub-region indicates27 that within Leicester City there is a ‘considerable supply of

housing available to rent within the current Local Housing Allowance rates’,

although there are greater pressures in some areas of the County, including in

Oadby, and in Lutterworth where demand for housing from low paid workers at

Magna Park was high.

2.25. In addition, the affordability of housing varies according to the specific needs

of households, with larger family accommodation affected by the cap on Local

Housing Allowance for homes with more than four bedrooms. There is also a

general shortage of family homes in some areas (notably Leicester City) which

can drive up market rents for these.

2.26. A number of local authorities in the sub-region have experienced an increase

in the demand for help because people are either at risk of homelessness or

27 Para 4.62, Strategic Housing Market Assessment, 2014 available http://www.charnwood.gov.uk/pages/strategichousingmarketassessment

18

have actually become so. The demand from households needing help because

they are at risk of homelessness is highest in Leicester. On the reported

measure of the number of applications per 1,000 households, Leicester scored

12.35 in 2013/14. This was above the average for England (9.28). Leicester

also experienced greater than average demand for assistance due to actual

homelessness, with applications received at a rate of 1.16 per 1,000 households

compared to 0.82 for England as a whole. However, both Blaby (2.45) and

Hinckley & Bosworth (1.38) reported higher rates of actual homeless assistance

being required than Leicester, although given their smaller populations the

numbers involved were lower. In Blaby, 97 applications for help were made on

the basis of actual homelessness compared to 144 in Leicester.

2.27. The strategic housing market needs assessment reports that Local authorities

consider the private rented sector to be an important source of housing for

people presenting as homeless. To facilitate people accessing this, Councils

across the sub-region operate ‘Homefinder’ services to help match people to

potential landlords. Housing Options Teams also operate schemes to help

people pay for rent in advance and raise the money for a deposit – either in the

form of interest free loans (e.g. Melton) or ‘cashless bond’ or guarantee schemes

(e.g. Leicester, Hinckley & Bosworth). However, the eligibility criteria for these

schemes vary between local authorities, with some only open to people who

would otherwise face homelessness and others apparently open to people on

low incomes, and in receipt of qualifying benefits, more generally.

2.28. Access to social housing remains restricted, with demand outstripping supply.

For example, there were over 10,000 people on the Leicester City Housing

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Register in 2013, whilst only 1,500 lettings were made that year. Pressure is

increasing as a result of the ‘Right to Buy’ scheme, under which the Council

expects to sell in the region of 175 homes per year. It also has a shortage of two

bedroom properties, which is creating difficulties for smaller households who

have been affected by the Removal of Spare Room Subsidy (or ‘bedroom tax’).

In Leicester, over 2,700 Housing Association and Council Tax tenants have been

identified as affected by the bedroom tax as at 30th September 2014.

Approximately three quarters of these have one ‘spare’ room, and will face a

restriction on their eligible Housing Benefit of between £11 and £13 per week.

The remaining 25 percent have more than one spare room and will face Housing

Benefit restrictions of between £20 and £23 per week28.

2.29. Moving forwards, there are likely to be greater problems of affordability as

Government is requiring that social housing providers convert existing social

rents, which average 50 to 60 percent of the market rent, to ‘affordable rents’

which will be up to 80 percent of the market level. This requirement is in place if

social housing providers wish to take advantage of Government support to build

new properties.

2.30. Councils have been administering Discretionary Housing Payments to assist

with a number of affordability problems in both the private and social housing

sectors (including by mitigating the impact of the bedroom tax, pending the

transfer of people to smaller properties). However, the national budget allocation

has been reduced by 25 percent for 2015/16 compared to last year, which will

affect their ability to help people moving forwards. Councils are also providing a

28 Leicester City Council (Jan 2015). Executive Report to Neighbourhood Services and Community Involvement Scrutiny Commission ‘Welfare Reform Update’.

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number of tenancy support services, for example the Supporting Tenants and

Residents (‘STAR’) service in the city and The Bridge project in Charnwood.

These services are able to work with people in the private rented sector as well

as social housing tenants, and there are a range of other services which focus

on specific vulnerable client groups (e.g. A NACRO based service to support ex-

offenders).

2.31. Childcare costs have also increased. According to the Family and

Childcare Trust, the cost of a part-time nursery place for a child under two has

risen by nearly one third over the course of the last Parliament. Although the

cost of childcare within the sub-region is generally in line with regional

averages29, the Trust notes that there are particular problems with the cost of

after-school clubs, which have been found to be 10 and 20 percent more

expensive. The possible reasons for this are not commented on by the Trust.

2.32. The Trust also expresses concerns that the take up of free early education for

two year olds is significantly lower in the sub-region than for the region as a

whole. This appears to be due to a low take up of provision in the City, and

among some minority ethnic communities. Take up across the sub-region is 47

percent compared to 60 percent regionally.

2.33. In the county, the childcare sufficiency report for 2011 identified that 41

percent of parents felt that the affordability of childcare needed to be improved,

whilst the city assessment of 2012 also identified that there were significant

geographic gaps in provision, with a shortage of free places in disadvantaged

29

According to the Family and Childcare Trust’s 2015 survey, the regional averages are: £118.82 per week for a part-time nursery place for a child under two years of age; childminder costs of £3.70 per hour; after school clubs of £48.20 per week; and a holiday club place at £128.44 per week.

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areas and a surplus in others. This has meant that it has been difficult to find

enough places for two year old children who qualify for free early education.

Both assessments also pointed to the need to ensure that provision was

available to meet the needs of disabled children.

2.34. Transport costs have also increased in recent years, with this particularly the

case for bus and rail services compared to motoring costs. Over the past five

years the average annual growth rate for bus fares was 5 percent, which was

only slightly slower than for rail fares (at 5.8 percent per year). By comparison,

over the past year to June 2014, the price of purchasing a motor vehicle was

unchanged and the price of petrol and oil dropped by 3.1 percent30.

2.35. However, efforts have been made to ensure that people are able to get to and

from work using public transport at reasonable cost. In 2013, bus operators

within the city launched the Leicester Flexi ticket, which offers unlimited travel on

all services for £5 per day or £19 per week. There is also a travel aid scheme for

city residents claiming Jobseekers Allowance, which provides them with a 4

weekly pass at a cost of just £1. This enables them to travel at half the normal

fare on all local bus services in Leicester and Leicestershire. No similar scheme

is available to Jobseekers living in the County, although a ‘Wheels to Work’

scheme is available to county residents who need to get to work and have no

direct public transport link to do so (or need to travel out of normal hours of

service). The scheme provides for the hire of an electric bicycle or scooter for up

to six months, after which time people are encouraged to purchase their own

transport.

30 Department of Transport, Quarterly Bus Statistics, September 2014

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2.36. The economic assessment for Leicester and Leicestershire is generally

positive about the high frequency bus services in Leicester; the comprehensive

county town bus services, and the inter-urban services which link county towns,

Leicester and East Midlands Airport. However, it also notes that there is often

limited access by bus to employment centres outside the principal urban areas,

such as business parks, and that evening and weekend bus services are less

frequent than at other times which can be particularly problematic for employees

working shifts. There also remain problems for lower income households in the

County’s more rural communities, which may struggle to access labour markets

without incurring the significant cost of running a car.

The impact of welfare reform

2.37. The past four years have seen Government embark on a wide-ranging

programme of welfare reforms. This has the stated aims of making the benefit

system fairer and more affordable; reducing poverty, worklessness and welfare

dependency; and reducing levels of fraud and error31. However, a clear

objective has also been to make savings to the welfare budget, as part of the

Government’s overarching strategy to reduce the national debt. Key reforms

include the roll out of Universal Credit, the replacement of incapacity benefits

and Disability Living Allowance with Employment Support Allowance and the

Personal Independence Payment, a cap on benefits for working age claimants

and changes to the benefit up-rating rules.

31 https://www.gov.uk/government/policies/simplifying-the-welfare-system-and-making-sure-work-pays

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2.38. The cumulative impact of welfare reforms in progress was assessed in

August 2013 by the Centre for Economic and Social Inclusion (‘Inclusion’)32.

This indicated that since coming to power in 2010, the Government has

introduced measures that are intended to make savings of £11.8 billion from the

welfare budget by the end of the next financial year of 2015/16. The Inclusion

analysis indicates that the income of households claiming benefit will be on

average lower by £1,615 a year – or £31 a week – in real terms in 2015/16 as a

result of welfare reforms33. This is equivalent to around one seventh of total

income for affected households. Whilst this figure excludes the impact of

Universal Credit, Inclusion expects that this will only offset the losses by a very

modest amount: equivalent to just £190 per year on average (£4 per week).

2.39. It is important to note that these impacts will be felt by people who are

working, as well as those who are not. Indeed, an estimated 60 percent of

people affected by the changes will live in households where someone is in

employment. The Inclusion analysis was commissioned by the LGA and

considered the impact of welfare reforms at a local authority level for England.

Whilst it found that the impacts would be relatively evenly spread across the

country, it also reported that some areas of the Leicester and Leicestershire sub-

region would be particularly affected. Specifically, Melton, Blaby, Harborough

and Oadby & Wigston were identified as being in the top 10 percent of local

32 Wilson, T., Morgan, G., Rahman, A., & Vaid, L. (2013). The local impacts of welfare reform: an assessment of the cumulative impacts and mitigations. Centre for Economic and Social Inclusion. 33 It is important to note that this does not represent an average cash loss of £1,615 a year – as in some cases

households will move on and off benefit, and about one fifth of savings are a result of increasing benefits by

less than inflation in the future (meaning spending will not fall in cash terms, but will fall in its real value).

Rather, the average impact represents the loss in income compared with what benefits would have been in

the absence of reform.

24

authorities where the greatest burden of the reforms would fall on people in

employment.

2.40. Aside from the direct reductions in income caused by many of the welfare

reforms, there have also been major changes to the eligibility criteria and

claims processes for several benefits; as well as the imposition of greater

conditionality requirements, and a harsher sanctions regime. These have

created significant financial problems for many people and given rise to an

increased demand for advice and support, for example to assist with appeals

and direct people to emergency help. For example:

The introduction of Employment and Support Allowance (‘ESA’) has

required approximately 5,000 people in the sub-region, who were

previously in receipt of incapacity benefits, to undergo a reassessment of

their claim. Of these, approximately 20 percent have been found fit for

work, and a further 35 percent have been required to undertake work

related activity;

Just under 9,000 JSA benefit sanctions34 were imposed by the Jobcentres

in Leicester between October 2012 and December 2013, whilst a further

2,000 sanctions were issued in Loughborough in the same period. Data

concerning ESA sanctions is not available at a Jobcentre Plus Office level

but 535 ESA sanctions were imposed in the period across the Jobcentre

Plus District covering Leicestershire and Northamptonshire.

34 It should be noted that these figures relate to the number of sanctions imposed, and not the number of claimants affected as more than one sanction can be imposed on an individual claimant over the period.

25

2.41. Changes in eligibility rules and the new sanctions regime have been found to

result in significant hardship:

People appealing against decisions to refuse ESA were initially able to

receive the benefit at the ‘assessment rate’. However, in October 2013

DWP introduced a requirement that the claimant request a ‘mandatory

reconsideration’ of adverse decisions prior to proceeding to appeal. ESA

is not payable during this period. According to Citizens Advice, it is taking

DWP between five and twelve weeks to conduct its mandatory

reconsiderations. This is causing “significant emotional and financial

pressure”, and resulting in “referrals to food banks, [and people]

borrowing money from family and friends and selling possessions to raise

money” as well as a decline in mental health;

According to Church Action on Poverty35, sanctions are disproportionately

affecting people with mental health conditions, and are also hurting the

children of families subject to a sanction. It estimates that 100,000

children were impacted by a benefit sanction last year. The impacts in

many of these cases include prolonged hunger and cold living conditions,

but also “the personal costs of shame, demoralisation and destruction of

self worth”.

2.42. Alongside these changes there has also been a major reduction in emergency

support, which followed the abolition of the Social Fund’s Community Care Grant

and Crisis Loans schemes, and the devolution of the budget in respect of these

to upper tier local authorities. This required both Leicester and Leicestershire to

35 Church Action on Poverty (2015), ‘Time to rethink benefit sanctions’.

26

put in place new local welfare schemes in April 2013 to support people needing

help in a financial crisis or to purchase essential items for the home in order to

reduce exceptional pressures or assist them to live independently.

2.43. The schemes in Leicester and Leicestershire both provided a combination of

emergency financial assistance (for example, with small awards made to provide

people with food and fuel supplies) and awards to meet ‘community care type’

needs, including the purchase of furniture and essential white goods. In

Leicestershire, the scheme has received approximately 4,000 applications and

made 1,600 awards. The bulk of spend has been on meeting ‘community care

type’ awards, with this accounting for £400,000, but £17,000 was also spent on

providing emergency assistance in respect of an estimated 250 awards. In

Leicester City, approximately 3,500 applications had been received by the end of

September 2014, resulting in 2,000 awards. Although the City and County

schemes vary in some respects, there appears to be a higher demand for crisis

support in the city, with over 1,000 awards made in response. Estimated spend

on crisis support for the current financial year is £52,000, and estimated spend

on goods and furniture is £350,000.

2.44. However, funding cuts announced by Government for 2015/16 have required

these schemes to be reviewed. In Leicestershire, there will no longer be a

single, identifiable, scheme for people to apply to, and no specific eligibility

criteria that people must meet. Instead, the council is intending to use an under-

spend from previous years to support a better resourced signposting and triage

service (Health and Wellbeing Hub), which will link to support and advice

delivered through the voluntary sector and district councils. This is intended to

27

provide access to people needing cheap furniture and white goods, whilst also

maintaining pathways to support for people in severe crisis, such as those who

are homeless or fleeing violent relationships.

2.45. In January of this year, the Centre for Responsible Credit published a detailed

review of local welfare schemes36: highlighting good practice and potential areas

for development. We draw on these in the following chapter to suggest ways in

which Leicester and Leicestershire Council’s could respond to the need for

emergency and community care type support despite the recent announcement

of the reduction in funding.

2.46. It is also important to understand the likely impact of the introduction of

Universal Credit across the sub-region. Universal Credit seeks to simplify the

benefit system by bringing in and out of work benefits together into a single claim

process – replacing income based Jobseekers Allowance; income based

Employment and Support Allowance, Tax Credits and Housing Benefit. It also

seeks to make work pay by reducing the extent to which benefits are withdrawn

when people start work (‘the benefits taper’) and will place social tenants on a

par with those in the private rented sector by paying the housing support element

of their claim directly to the claimant rather than to the landlord as currently.

2.47. Whilst the introduction of Universal Credit should mean that moving in and

out of work (or increasing the number of hours worked) no longer causes major

disruption to household finances, it also poses a number of challenges, because:

Claims for benefit will usually need to be made on-line, requiring people to

have access to the internet and the skills to use this (‘digital inclusion’);

36 http://www.responsible-credit.org.uk/projects/social-fund-localisation

28

There will usually be a single household payment, posing risks of financial

abuse and making it more difficult for people to flee abusive relationships;

Universal Credit will normally be paid monthly, and in arrears, which will

require people to manage their money effectively over that period. There

are concerns that some social housing tenants and vulnerable groups of

claimants may not be able to do this, and that rent arrears could rise.

2.48. To address these challenges, DWP has indicated that it will provide a system

of ‘Personal Budgeting Support’ comprising of money advice and alternative

payment arrangements for people who are experiencing difficulties. The need

for money advice will be discussed with all claimants at their ‘Initial Work

Focused Interview’ at the Jobcentre or when they are migrated onto Universal

Credit. This will be used to identify those people who are able to ‘self-serve’ and

signpost these to advice services such as Citizens Advice, and those who need

more intensive support who will either be offered telephone or face to face

sessions. Where people are clearly having problems managing their finances –

for example, where they are in rent arrears or have mental health or addiction

problems – then they will be considered for an ‘alternative payment

arrangement’, which could include more frequent payments than monthly and

the direct payment of the housing support element of their entitlement to the

landlord. In cases where there is financial abuse within the household then the

payment can also be split between the adults in the home.

2.49. Whilst the commitment to provide Personal Budgeting Support is welcome,

there remain concerns about the delivery of this in practice and how vulnerable

groups of people will be supported to obtain money advice or an alternative

29

payment arrangement. The roll out of Universal Credit has now started in the

sub-region. From 23rd February this affects new single claimants in Harborough

and Melton, and Hinckley and Bosworth will be brought on stream on 25th March.

Charnwood is in the following tranche of the roll out on 1st June, but no dates

have yet been set for claimants in the other local authority areas. There are no

dates yet set for Universal Credit’s roll out to couples or families in the sub-

region.

2.50. As Universal Credit is introduced in each local authority area, Local Delivery

Partnership agreements are expected to be drawn up between the DWP and

local authorities. These are intended to ensure that there is sufficient support for

people but there are, as yet, no details available concerning the proposals

Leicestershire and Leicester.

2.51. The sub-region can, however, draw on the experience of Melton District

Council’s involvement in a local authority led pilot to test out some of the main

features of Universal Credit’s delivery. This pilot ran between October 2012 and

December 2013, and was focused on gaining a better understanding of the

barriers that working age claimants faced in accessing and using digital services

and how those that were furthest from the labour market could be better

supported to become financially and socially independent. The pilot was

focused on helping people who claimed Council Tax Benefit to manage their

claims on-line, and identify and provide additional support to those who were

furthest from the labour market. The project involved:

The use of a customer profiling tool, surveys and focus groups to design on-

line claim processes; and

30

The provision of intensive support from an Employment Support Officer,

funded by the Jobcentre Plus Flexible Support Fund, for those families with

complex needs including debt problems.

2.52. The key findings from the evaluation of the pilot37 were:

The main barriers to using on-line services were poor connectivity (20% of

respondents, rising to 53% of those living in rural areas); no access to the

internet (19%) and a lack of skills and knowledge (15%). Efforts therefore

needed to be made to identify these sub-groups of claimants and to target

them with appropriate support. Depending on the specific needs of the

claimant this could include providing facilities which offer free internet

access and tuition in community venues or telephone support; and

Intensive support was successful in moving around one third of those

claimants with complex needs into work but this took time and involved a

holistic, and case managed approach. Dealing with threats of eviction and

other collection processes was included as part of the service. The ESO

felt due to the intensity of the support required, and the length of time

needed to work effectively with this client group, the numbers that can be

worked with by one individual needed to remain manageable

2.53. As well as learning from Melton’s pilot, there has been a DWP evaluation of

the other local authority led pilots which stresses the importance of close

partnership working with a wide range of support services and the use of triaging

to ensure that people needing more intensive help are directed swiftly and

effectively to sources of assistance. Other areas where lessons can be learnt 37 http://www.melton.gov.uk/downloads/file/1856/download_evaluation_report

31

relate particularly to the engagement strategies used, including the recruitment

of Community Champions or ‘Money Mentors’. We return to these issues in the

following chapter, where we suggest that Local Delivery Partnership agreements

to support the roll out of Universal Credit identify resources to support these

types of intervention.

The combined impacts: what do we need to focus on?

2.54. The national literature38 indicates that the combined effects of low wages,

higher living costs, and welfare reform are manifesting themselves in:

More people using credit to ‘make ends meet’ and to purchase essential

household items;

An increase in the numbers of people turning to food banks;

Higher levels of debt problems including defaults on rent, Council Tax and

utility bills; and

Some of the poorest households cutting back on the amount they spend

on food and fuel.

2.55. The increased demand for credit to ‘make ends meet’ has been especially

apparent as the driver behind the expansion of high cost payday lending. The

number of people borrowing from payday lenders is estimated to have increased

more than five-fold in the past seven years (from approximately 0.3 million in

2006 to 1.6 million in 201339). According to the Competition and Markets

38

39 The estimate for 2006 comes from Burton, M. (2010) ‘Keeping the plates spinning’. Consumer Focus. The estimate for 2013 is from the Financial Conduct Authority.

32

Authority (‘CMA’), just over half (53 percent) of payday borrowers use their loans

to meet essential requirements (such as paying for food and to cover the cost of

utilities); 10 percent use the money to meet the cost of running a car or other

vehicle, and 7 percent use it to fund the purchase of clothes or household items.

When asked why they needed to take out a payday loan, 52 percent of

customers said that the loan was linked to an unexpected increase in expenses

or outgoings and 19 percent said the need was due to an unexpected decrease

in income. These needs arise on a repeated basis. Over 10 million payday

loans were issued in 2013, and the CMA has found that, on average, each

borrower takes out around six loans per year.

2.56. Payday loans have been the subject of a great deal of media attention, and

regulatory action to address both their high cost and the danger that people will

fall into a ‘debt spiral’ by continually borrowing to pay off previous loans.

However, other forms of high cost credit have also expanded in recent years.

For example, the leading Rent to Own (‘RTO’) firm, Brighthouse, which provides

household goods to low income households, has increased its number of stores

by more than 100 since 2006/07, to take its total number to 286. Customer

numbers have more than doubled over the same period and stood at 270,700 in

2013/1440. The RTO sector has recently been criticised by an All Party

Parliamentary Group of MPs for its high prices and lack of customer care41.

2.57. Using credit is not the only means of dealing with immediate financial

pressures and there has also been a dramatic increase in the number of people

turning to food banks for help. The main provider of food banks, the Trussell

40 Brighthouse website 29/07/2014 41 http://www.appgdebt.org/inquiry/

33

Trust, reports that nearly one million people benefitted from their support in

2013/14. This is up from fewer than 150,000 people in 2011/12. According to

the Trust, the main reason for this increase lies with delays in the payment of

benefits (31 per cent of referrals). A further 20 percent of referrals are a result of

low income and 17 percent as a result of benefit changes. Around 8 percent of

referrals arise as a consequence of debt problems42. Information for Leicester

indicates that there has been a growth in food bank use locally. A report to the

Council’s Scrutiny Commission on food banks in the city showed that by January

2014, 850 food bags were being distributed per week. This number had been

rising since May 2012, throughout implementation of different welfare reform

changes, with a sharper rise in the six months from June 2013. For nineteen of

the food banks, demand was outstripping supply at the time of the report.

2.58. Debt problems are also evident in the sub-region. According to the Indebted

Lives report from the Money Advice Service in 2013, some 36.8 percent of

Leicester’s population is over-indebted (being either three months in arrears with

credit agreements or household bills or self-reporting that their debts are a

‘heavy burden’). The report indicates that Leicester is ranked as the 11th most

over-indebted local authority area in Great Britain. Over-indebtedness was also

found to be a problem for more than 10 percent of the population in all of the

other council areas in the sub-region except for Blaby and Harborough (see

figure 4, below).

42 In some cases, the collection practices of payday lenders are a cause of financial crisis which leaves people with no other alternative. For example, in November 2013 a Citizens Advice Scotland briefing (‘Mayday Payday’) highlighted the case of a client who had previously taken a payday loan to pay for food shopping. The loan repayment was subsequently collected by Continuous Payment Authority from her bank account, leaving her with the choice of either borrowing again to pay for food or seeking help from the local food bank.

34

Figure 4: Percentage of total population that are over-indebted, Money Advice Service (2013)

2.59. Although mortgage repossession actions have fallen significantly in recent

years, the number of repossession actions against social tenants has been

increasing. In Leicester, there were 1,033 such actions in 2014 compared to 811

in 2010, an increase of 27 percent. In Charnwood, the number of has grown by

148 percent from 123 to 306 over the same period. However, the number of

repossessions remains small in the other areas within the sub-region with only

Hinckley and NW Leicestershire reporting more than 100 actions per year (145,

and 118 respectively)43.

2.60. There is also evidence that Council Tax arrears are increasing in most local

authority areas in the sub-region, with Blaby in particular reporting a particularly

high increase in the amount outstanding between 2013 and 2014 (see figure 5,

below).

43 Source: Ministry of Justice, Mortgage and Landlord possession statistical data

0

5

10

15

20

25

30

35

40

35

Figure 5: Change in outstanding Council Tax amounts by local authority (2013 – 2014)

2.61. It is notable that in Charnwood the amount of Council Tax outstanding fell in

the last year but that there has also been a significant increase in social landlord

repossession activity. This appears contradictory and the reasons for this need

further exploration, but it may indicate that increased recovery activity for Council

Tax simply shifts arrears to the rent account. A recent report from the debt

advice charity StepChange44 indicates that ‘tough’ enforcement action on

Council Tax arrears often leads to additional charges which people are ill able to

afford and forces many to agree to repayment plans that they cannot afford.

Many then fall behind with payments with other household bills or take out (often

high cost) credit.

2.62. Nationally, there is evidence that the poorest households have also had to cut

back on food and fuel. For example, A survey of 1,000 private tenants

44 ‘Council tax debt: how to deal with the growing arrears crisis tipping families into problem debt’, StepChange, March 2015

-10

0

10

20

30

40

50

36

commissioned by the campaign group Generation Rent earlier this year found

that two in five had cut back on heating, while a third have ‘skimped on food’ to

cut costs. Similar findings have been reported for other groups affected by

welfare reform by Shelter and the National Housing Federation over the course

of the past three years.

2.63. Whether or not people elect to use credit, default on household bills, or go

without, there are significant social costs. These include rising homelessness45;

physical46 and mental47 health problems; an increase in relationship breakdown48;

greater barriers to job seeking for the unemployed49, and negative impacts on the

welfare of children50. Investment in activities to address the financial pressures

on lower income households should therefore be seen as a critical means of

reducing these costs. More needs to be done to evaluate the social return on

these types of investment moving forwards.

45 Fitzpatrick, S., Pawson, H., Bramley, G., Wilcox, S., & Watts, B (2013). ‘The homelessness monitor: England 2013’. Crisis. 46 Gibbons, D., & Singler, R. (2008). ‘Cold comfort: a review of the coping strategies of households in fuel poverty’. Energywatch 47 Fitch, C., Simpson, A., Collard, S., & Teasdale, A (2007). ‘Mental health and debt: challenges for knowledge, practice and identity’. Journal of Psychiatric and Mental Health Nursing 14 (2), 128 -133. 48 Legal Services Research Centre, Assessing the Impact of Advice for People with Debt Problems, December 2007, p. 3 49 Gibbons, D. (2010). ‘Out of work and out of money’. Centre for Responsible Credit. 50 StepChange & The Children’s Society (2014), ‘The debt trap: exposing the impact of problem debt on children.’

37

3. Responding to the challenges

3.1. The previous chapter has set out the main causes of financial pressure on low

income households and indicated that there is a need to particularly focus on

helping people in low paid work and in receipt of benefits to both cut their cost of

living and reliance on credit, especially high cost credit. Within this broad group

there is also a need to look carefully at how we can best deliver services to

vulnerable groups including young people, people living in rented

accommodation, and families with children.

3.2. This chapter now draws on some of the existing good practice in the sub-region

and nationally. In doing so, we have grouped this information into seven

possible work streams and provided recommendations for the actions that we

consider now need to take place.

Work stream 1: Improving support for low waged workers

3.3. The prevalence of low pay in the sub-region has been a persistent problem, and

greater efforts need to be made to:

Enforce the National Minimum Wage;

Ensure that agency workers are treated fairly,

Improve the take up of the Living Wage by employers, and

Provide employees with greater assistance in managing their finances,

and accessing affordable financial services.

3.4. With respect to the enforcement of the National Minimum Wage, there is a

proven need to particularly focus on the textile industry within Leicester City.

38

However, there has been an absence of research into the possible extent of

problems across the sub-region.

Recommendation: In our view, a new enforcement project is needed. Possible

partners include local authorities, HMRC, the Department for Business,

Innovation and Skills, trades unions and the LEP. Given the problems

uncovered by the Employment Agency Standards Inspectorate in 2010, it may

also be appropriate to extend the remit of the project beyond National Minimum

Wage enforcement and to ensure fair employment standards more generally.

Research into National Minimum Wage non-payment and agency employment

standards is needed beyond Leicester City alone.

3.5. There is also a need to more actively promote the Living Wage amongst

employers. There is some good practice in the sub-region in this respect. For

example, Blaby District Council agreed to become a Living Wage employer with

effect from November 2013. Leicester City and Hinckley & Bosworth Councils

have also both signed up to the ‘principle’ of the Living Wage, paying their direct

employees at least that amount but not, as yet, extending this to the employees

of all its sub-contractors. However, more needs to be done to extend payment of

the Living Wage throughout the sub-region.

Undertake a sub-regional Living Wage campaign

There is a strong business case for employers to adopt the Living Wage. A

recent report from the Living Wage Foundation51 provides case study examples

which demonstrate a range of financial savings such as: reducing staff turnover;

increasing worker morale and loyalty; reducing absenteeism; productivity

51 ‘Living Wage Employers: evidence of UK business cases’. Living Wage Foundation, 2015

39

improvements; strengthening recruitment opportunities and providing

reputational benefits. The report includes a case study from KPMG, which has

offices in Leicester City and which is actively involved in Leicestershire’s

business forums and economic development partnerships. The KPMG case

study is particularly valuable because it provides compelling evidence of the

positive impact of the Living Wage on the performance and efficiency of

contracted services.

Recommendation: A sub-regional campaign, which draws on the experience of

existing, local, Living Wage employers is needed. This needs the leadership of

the LEP and business organisations as well as commitment from the public

sector. Where it has not already been done, local authorities in the sub-region

should set out a clear timescale to implement the Living Wage for both direct

employees and contracted staff as part of the campaign.

3.6. Alongside this campaign, there is a need to discuss with employers how they

can take additional steps to ensure that their employees are provided with

access to affordable financial services. In particular, employers should be

encouraged to implement payroll deduction services to help people save (and

access loans where these are needed) with the local credit union, Clockwise.

Developing Clockwise Credit Union

Clockwise is one of the largest credit unions in the East Midlands Region with

just over 7,000 members. Around 70 percent of these are concentrated in the

City of Leicester, where it has its branch. It offers a wide range of transactional

banking services, affordable loans and savings products. However, support is

40

needed from across the public and private sectors if Clockwise is to realise its

potential to meet the needs of the sub-region.

A development plan is needed which recognises that to be sustainable,

Clockwise needs to serve more than just those households on low incomes. Its

services to lower income households, which include Budgeting Accounts and low

cost loans, need to be developed in tandem with a drive to a sustainable

membership base. This membership drive needs to involve employers in the

sub-region, together with trade unions and the sub-region’s civic leadership in

the marketing of the credit union to employees. There is also evidence from

around the country which indicates that the financial services sector may be

willing to assist credit unions to conduct this type of work. For example, Legal

and General has supported West Sussex Credit Union to develop marketing

materials to promote its services to 8,000 NHS Trust workers and to offer a

payroll deduction scheme. Clockwise already has the capacity to offer both

payroll savings and to have loan repayments deducted from payroll, but a

detailed development plan is needed if growth of the level required is to be

forthcoming.

Recommendation: That the local authorities across the sub-region identify

resources to support the development of Clockwise Credit Union into a

significantly larger credit union with a sustainable membership base drawn from

across the sub-region, and that specific services and products designed to help

those on lower incomes are rolled out as it grows.

3.7. The business case for employers to get involved in the fair finance agenda also

needs to be made clearly to them. There is evidence that debt problems and

41

financial pressures affect the performance of people at work and contribute to

absenteeism52. In some cases, financial problems lead to people being unable

to continue in employment. A rolling campaign, led by employer agencies

including the Chamber of Commerce, to persuade employers of the need to

enter into partnership with the credit union, financial education and advice

agencies that can offer support to their employees on an impartial and

confidential basis is needed. This could also involve ‘action research’ with larger

employers to develop case studies of how providing these services affected the

performance of their organisation.

Encouraging the delivery of workplace financial education

The CIPD has published a report setting out how nine case study employers

promoted workplace financial education and the impact that this has had.

Participating employers included Marks and Spencers and Severn Trent Water,

and the report contains a large number of lessons concerning how to engage

with employees and the benefits of using external financial education specialists

to help design and introduce financial education programmes.

There is evidence that workplace financial education benefits employees and

helps them deal with changes in tax and benefits as well as plan ahead and save

for the future. It has been particularly helpful to people who needed advice on

pension planning, and the impact of auto-enrolment, but it has also been used in

the past to provide information sessions to people affected by redundancy.

52 See, for example, Pleasance et al. ‘A helping hand: the impact of debt advice on people’s lives’, Legal Services Research Centre

42

Trade unions and learning and skills providers also have a role to play. For

example, NIACE have reported on a pilot project in Cornwall53 which delivered

portable, accredited training in the workplace, to provide individuals with skills

that are attractive to prospective employers and potentially facilitate greater

mobility within the local job market. This secured employer engagement and

commitment by responding to their needs and highlighting the potential

productivity benefits and cost-savings linked to increased levels of key skills in

the workforce and used financial capability sessions as a means of addressing

basic skills needs and drawing people into other adult learning opportunities.

Recommendation: That an action plan be developed to increase the number of

employers in sub-region providing financial education into the workplace. This

plan should draw on the lessons learnt to date and actively involve trade unions

and prioritise low paying sectors of the economy. It should also seek to address

basic skills needs and promote financial capability alongside other learning

opportunities.

3.8. Finally, there is also a need to consider the extent to which self-employment

constitutes a genuine, and financially sustainable, choice of work for many

people in the sub-region. Further research is required to determine how the sub-

region’s self employment levels have been affected by the economic downturn

and whether or not there is a need to improve the information, advice and

support on offer to people thinking about moving into self employment. This

should include an evaluation of the New Enterprise Allowance and how this has

been implemented locally.

53 http://shop.niace.org.uk/financial-literacy-unions-download.html

43

Recommendation: That the LEP commission research into the impact of the

economic downturn on self employment in the sub-region, and that this include

an evaluation of the increase in self employment arising as a result of the New

Enterprise Allowance and what more can be done to support people moving

from unemployment to self employment.

Work stream 2: Meeting the needs of people in rented accommodation

3.9. The prevalence of debt problems is much greater in the rented sector -

particularly amongst younger tenants who are often reliant on the private sector

to meet their accommodation needs. There has been some provision targeted at

this group in the sub-region – for example the cashless bond and ‘Homefinder’

service in Leicester – but the Advice Leicester Partnership has identified that

more needs to be done to make sure that private tenants are aware of their

housing rights. Work with landlords is also needed to address reported

problems of damp and cold properties and to reduce the cost of heating homes,

as well as to ensure that landlords take a sympathetic approach to people

experiencing financial difficulties.

3.10. Importantly, from April 2016, tenants will have the right to request consent for

improvements to make their homes more comfortable, and easier and cheaper

to keep warm, and the landlord cannot unreasonably refuse. Looking further

ahead, from April 2018, landlords will be required by the law to get their

properties to an energy efficiency rating of at least Band "E". In advance of

these new requirements coming into force, there is a need to ensure that

landlords are acting to help tenants take up any grants to which they may be

44

entitled and are working with them to make sure that energy efficiency measures

are carried out.

A co-ordinated campaign to improve support to private tenants

A co-ordinated campaign is needed to raise awareness of housing rights for

private sector tenants and work with landlords to improve housing conditions,

particularly in respect of the energy efficiency of homes, and ensure that tenants

in financial difficulty are directed to sources of advice and support.

Recommendation: That local authorities work together to develop a Leicester

and Leicestershire ‘private sector landlord charter’. This should set out clear

commitments from landlords to ensure that homes are of a decent standard and

that their treatment of low income tenants in financial difficulties will be

supportive. This should include providing information on where to get help with

the cost of raising deposits, furnishing and insulating homes, advice on financial

problems, and the promotion of Clockwise Credit Union.

3.11. It is positive that some support to help improve the financial capability of

tenants and provide more intensive assistance for vulnerable tenants is also

available in the sub-region, although this appears to be primarily City based. For

example, ASRA Housing Association is delivering the Moneywise project, which

is funded by the Big Lottery’s Improving Financial Confidence (‘IFC’) programme.

Moneywise has been running since June 2013 and was initially targeted to first

time tenants, those aged under 25, or tenants moving in and out of employment.

However, its scope has since been expanded to allow it to work with all social

housing tenants and it also has a limited flexibility to work with some private

sector tenants. It works with people both in a group environment and on a one

45

to one basis to raise financial capability and has also been trialling the furnishing

of new homes to reduce the need for people to use high cost credit for this

purpose.

3.12. Similarly, it is positive that the STAR project in the city and the Bridge project

in Charnwood are able to provide support to tenants in the private sector as well

as social housing tenants. However, with further pressure on housing costs

likely, and with the introduction of Universal Credit, it is likely that more capacity

will be needed to provide these types of services across the sub-region.

Housing services are, however, well placed to deliver on both the digital and

financial inclusion agendas, if sufficiently resourced to do so. In this respect, the

negotiations with DWP concerning the funding available to Local Delivery

Partnerships will be important.

Hyde Housing’s Money House project

There is much that can be learnt from other projects running across the country

as part of the IFC programme. For example, Hyde Housing is operating the

Money House project in partnership with the Royal Borough of Greenwich,

Greenwich CAB, Meridian Money Advice, and MyBnk, to help young residents in

Greenwich manage their finances more effectively and live independently. The

project requires people under 25 who have been proposed for tenancies to

participate in an AQA accredited 5 day Money House training course. The

training takes place in a real life flat and the space is used to give young people

a realistic impression of what living independently is really like, with weekly

shopping, real utility bills, real rent letters and tenancy agreements, and real

electric meters. A one day Independent Living Money House training course is

46

also provided which takes place in the flat, and is aimed at young people who

have some experience of managing their own tenancy, but are experiencing

some issues and would benefit from additional support. Since introducing the

courses Hyde report that the level of rent arrears amongst younger tenants has

fallen dramatically and the evaluation is likely to show that there is a strong case

for funding ongoing provision from mainstream funds.

Recommendation: That the scope for significantly expanding financial capability

approaches to both social and private housing tenants throughout the sub-region

be further explored and that a detailed action plan be drawn up in this respect.

This should include new projects targeted at specific groups such as young

social housing tenants and also look to integrate financial capability and digital

inclusion initiatives into existing support services. A plan to expand financial

capability, including digital access and skills, amongst tenants should form part

of all local authority responses to Universal Credit and resources should be

identified to support this on an ‘invest to save’ basis, as well as from DWP as

part of their commitment to the forthcoming Local Delivery Partnerships.

Investment in the provision of Budgeting Accounts54 provided by Clockwise

Credit Union should be explored as a potential banking and money management

solution for some Universal Credit claimants.

Work stream 3: Reducing the cost of living for low income households

3.13. Helping low income households to reduce their cost of living is critical if we

are to reduce the underlying financial pressures that they are facing. This report

54 The Budgeting Account allows people to divide their income into agreed ‘pots’ for bill payment purposes. The remainder is then placed onto a card account either in a lump sum or in weekly amounts. The intention is to ensure that bills are always paid and that people know exactly how much money they have available for discretionary spending.

47

has particularly identified issues in relation to the cost of food and fuel; childcare,

and transport costs.

3.14. Positive examples of current practice in the sub-region include:

The promotion of collective switching deals for energy customers (for

example, the recent Ready to Switch initiative in Leicester);

Commitments in local child poverty strategies to provide affordable

holiday play schemes for children and provide help for families who

qualify for free school meals over the holiday period55

The promotion of cheaper transport options: including the City’s Flexi

ticket and travel aid scheme, and the Wheels to Work project in the

County. The County Council also secured funding for Access to Work

Grants in the latest round of bidding to the Local Sustainable Transport

Fund. This provides for subsidised bus fares for people in Charnwood

and North West Leicestershire to attend job interviews, training, or in the

first few weeks of employment. The scheme is promoted by Jobcentre

Plus and will be accessed through libraries. However, the scale of this

package is limited to just over 200 people through to 2021, and does not

provide help with ongoing travel costs for low paid commuters or to

residents in other areas of the county.

The use of local welfare funds to provide access to cheap furniture and

white goods as well as to emergency support for food and fuel – although

these schemes now face significant budget challenges;

55 Although it should be noted that in Leicester school holiday provision is now only available during the Summer break as a result of funding cuts.

48

3.15. However, further work is required to evaluate the impact of these initiatives,

and to scale up and roll out best practice.

Providing help with the up-front costs of childcare

A Citizens Advice report from July 2014 found that using childcare involved large

upfront costs with 90 per cent of providers requiring payment in advance and 40 per

cent requiring a deposit of up to £150, and prior research by the Daycare Trust in

indicates that these costs form a significant barrier to work for low income

families. However, childcare providers maintain that the payment of fees in

advance is essential for the sustainability of their businesses. The research

project recommended that ‘Childcare Advance’ schemes be developed to help

parents meet the costs of upfront childcare which provide low or no interest

loans for this purpose.

Recommendation: That the childcare sufficiency assessments for both the

county and the city are reviewed and that these formulate specific proposals to

help lower income households access affordable childcare, including by

examining how loan schemes could be implemented to help them meet up-front

costs.

3.16. There also appears to be a need to provide a consistent, and scaled up, offer

of support with transport costs for jobseekers and low income commuters

throughout the sub-region. This should also look at ways of linking people who

are struggling with transport costs to affordable financial products. For example,

all members of Oldham’s Credit Union are entitled to a 30 percent reduction in

the cost of a weekly ticket on First Bus services across Greater Manchester.

49

3.17. In the Strategic Economic Plan for Leicester and Leicestershire, there is

reference to the need to ensure that employees can access employment sites

and that further work is ongoing to address need.

Recommendation: Transport plans across the sub-region should ensure that

assistance with travel costs is provided for jobseekers and low income

commuters on an ongoing basis and a consistent, scaled up, and well promoted,

offer of support should be developed in all areas. Following the example of

Oldham, assistance with travel costs could also be used as an incentive for

people to join the credit union.

3.18. Other initiatives, focused on reducing the cost of food and other basic items,

household furniture and white goods, are also needed.

The Parkwood Bulk Buy project

The Parkwood estate in Maidstone provides an example of how to develop a

community based bulk purchasing scheme for low income residents. The

development of the scheme was supported by Kent County Council. The

scheme was started in 2009 due to residents identifying problems with the cost of

bus fares to the supermarket a few miles away; getting bulky items home on the

bus; difficulties storing shopping at home; lack of access to computers, and the

charge made for delivery by most supermarkets. Local shops could be more

expensive than the supermarket and didn't have as large a range of goods.

Following development work the community established its own shop and

established an ordering process, including through Facebook. Residents now have

access to cheaper prices for essentials, but have also developed skills and gained in

confidence.

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This model could be potentially be built upon by linking communities to

organisations that have already negotiated bulk purchasing deals with retailers.

These include local schools and hospitals. Whilst a number of schools across the

country provide the opportunity for pupils and parents to join a food co-operative for

the purchase of organic vegetables as part of their Health Eating campaigns, they

do not normally provide access to their directly negotiated bulk purchase schemes

for other food or basic items. Similarly, hospitals are major procurers of food in

their local areas, and could potentially provide access to cheaper prices for this and

a wide range of other basic items including toiletries and cleaning products.

Recommendation: That a pilot project is developed to create community bulk

purchase schemes for food and basic items which are linked to the procurement

practices of local schools and/or hospitals. These pilots should also encourage

ordering through the use of digital technology, and provide opportunities for

participants to improve their skills as well as make financial savings.

3.19. A similar approach to reducing the cost of essential household items such as

furniture and white goods is also possible. The experience of delivering local

welfare schemes has indicated that council’s entering into direct purchasing

arrangements with suppliers of household items can reduce the headline cost of

these by as much as 27 percent in some cases. This saving arises because

authorities are able to reclaim VAT and negotiate further reductions in the price

because of the volume of purchases that they are making.

3.20. Whilst the local welfare budget is being reduced, and ‘grant awards’ to cover

the purchase of items will become harder to obtain, there is no reason why local

authorities could not continue to provide access to discounted furniture and white

51

goods for people on low incomes, as long as this is in pursuit of their wider

statutory duties. For example, it should be possible to make discounted furniture

and white goods packages available to social housing tenants in order to reduce

the risk of people entering into high cost credit agreements when obtaining a

tenancy or when faced with the need to replace items. This should reduce voids

and also ensure that people are better able to pay their rent. The tenant would

be responsible for paying for the items, albeit at a discounted cost, and this could

be assisted with a loan from the credit union if required.

Recommendation: Local authorities in the sub-region should explore how they

can reduce the cost of furniture and essential goods for lower income

households by using their procurement mechanisms to provide for VAT free

purchases and to negotiate discounts with retailers. They should also consider

underwriting an element of the risk for credit union loans to enable low income

households who cannot afford the cost of essential items to purchase these, and

should monitor the impact on voids, and on rent and Council Tax arrears.

Work stream 4: Working with the financial services industry

3.21. The financial services industry has a clear role to play in supporting local

financial inclusion strategies. Nationally, the Financial Inclusion Commission has

called for Government to lead a ‘collective effort with retail banks and others’ to

promote wider data disclosure of lending patterns’ and to fill the gap for

affordable credit56. This is intended to build on the voluntary agreement with

members of the Council of Mortgage Lenders and British Bankers Association

which currently results in the release of quarterly information on the stock of

56 http://www.financialinclusioncommission.org.uk/

52

outstanding lending, for households and small businesses, at a postcode sector

basis.

3.22. The Community Investment Coalition has been working with Government and

the financial services industry to broaden out this data release to help inform

local authority strategic housing market needs assessments and debt advice

strategies, as well as to pinpoint which banks are lending, or failing to lend, to

low income households within local area.

3.23. Analysis of the current data set should therefore be undertaken to identify

which retail banks are active in providing services to lower income households

and small businesses across the sub-region, and to help initiate a dialogue with

the banks about their contribution to the Fair Finance strategy. Engagement with

the banks needs to take place around their contribution to financial education

programmes and how these are being delivered locally, support for the local

credit union (and its proposed development plan) and the delivery of branches

and other services, including free ATMs and basic bank accounts in deprived

areas.

3.24. It is important that local authorities and the wider public sector consider what

levers are available to encourage the active support of banks for a sub-regional

Fair Finance strategy. The public sector is itself a user of financial services,

which conduct a range of ‘treasury management’ activities. These are defined

by CIPFA as ‘the management of the organisation’s cash flows, its banking, money

market and capital market transactions; the effective control of the risks associated

with these activities; and the pursuit of optimum performance consistent with these

risks’.

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3.25. The process of selecting financial services providers could present opportunities

to secure support for the Fair Finance strategy. For example, ESPO has

established a framework agreement for the provision of banking services to public

sector organisations. This was let in June 2014 and is scheduled to end in May

2017, although there is an option to extend this for a further two years. The selected

suppliers on this framework are RBS, Lloyds Banking Group and Barclays Plc.

Public sector agencies seeking banking services can tender for contracts

through the framework in the knowledge that the selected suppliers have been

‘pre-qualified’ in accordance with EU legislation. However, public sector

organisations are still free to add their own contract specific requirements into

their Invitations to Tender. These could, therefore, include ‘social clauses’57,

which require the suppliers on the framework to evidence how they are

supporting the ambitions of the Fair Finance Strategy locally as part of the

criteria to be used when awarding the contract.

3.26. In addition, public sector investment strategies could include the creation of,

or contribution, to specific loan funds within social enterprises including credit

unions or new ‘social banks’ which are intended to provide a competitive

financial return. For example, the Cambridge and Cambridgeshire Counties

Bank was established in 2012 by Cambridgeshire County Council’s Local

Government Pension Scheme and Trinity College, University of Cambridge. It

directs investment from the Pension Fund into lending to local SME’s, and the

Pension Fund holds a 50 percent stake in the bank. The bank, which is

57 To date the majority of clauses inserted into public procurement to deliver social and community benefits have related to construction projects, and have focused on the delivery of apprenticeships and employment opportunities for the unemployed. However, there is no reason why this approach could not be extended to the procurement of financial services, and the Public Services (Social Value) Act 2012 makes it a duty of all public bodies in England to consider what wider social value they could achieve when procuring services contracts.

54

headquartered in Leicester, has seen three years of continuous growth and has

recently passed the milestone of providing £250 million worth of loans.

Lambeth’s Banking ‘Summit’

In July 2013, Lambeth Council held a banking ‘summit’ to discuss the problem of

financial exclusion with the main banks and local credit union. This was

attended by RBS and HSBC, London Mutual Credit Union and the Co-op Bank.

The ‘summit’ was successful in identifying existing good practice and securing

further commitments to make it easier for people to open a basic bank account,

lend responsibly, and work with schools to provide financial education.

Recommendation: That the Fair Finance Task Group take forward a

programme of engagement with the banks to assess the contribution they are

making to financial inclusion in the sub-region. This should include the analysis

of lending patterns and the holding of a local ‘banking summit’ with the intention

of securing commitment to the Fair Finance Strategy. The Task Group should

also work with public sector bodies to explore opportunities to leverage

additional support through the procurement of financial services. Finally, it

should also examine how public sector investment strategies could better

contribute to the development of affordable credit and banking services for low

income households and SMEs.

Work stream 5: Improving support for people in financial difficulty

3.27. Ensuring people in financial difficulties are able to access advice and support

is critical if the human and social costs of over-indebtedness are to be reduced.

Unfortunately, many people wait for up to a year before seeking advice, during

55

which time their problems escalate. Recent research58 indicates that there is a

need for debt and welfare rights advice services to be linked into other provision:

with front-line workers in health, housing, social care, and welfare to work

services screening for debt problems and able to refer people effectively.

Integrating Advice within Social Housing Lettings Procedures

Rhondda Housing Association (RHA) is identified as a good practice case study

in the provision of financial inclusion services by the Chartered Institute of

Housing due to its incorporation of welfare rights and debt advice into its signup

process for all new tenants. Tenants are assisted to complete a budget sheet to

show income against estimated outgoings for the property; provided with a

benefit check and provided with help with existing debt problems. Originally the

service was provided for tenants in arrears who had received a notice seeking

possession, and for tenants who asked for help (usually with existing debt

problems or rent arrears). However, RHA identified that a high level of rent

arrears were occurring within the first four weeks of the tenancy start date. New

tenants are therefore now referred to the officer as part of an early intervention

initiative to try to solve problems before they become unmanageable.

4. An audit of potential mechanisms to screen people using key services and rolling

out best practice across the sub-region is needed. However, this needs to be

accompanied with a programme of training for front-line staff to provide them with

support to identify debt and benefit problems at an early stage and make effective

referrals.

The Financial Capability Training Project 2008

58 http://www.cesi.org.uk/publications/advice-support-and-poverty-evidence-review

56

In 2008, Citizens Advice was funded by Government to run a pilot project

delivering group training for front line workers supporting service users who may

be excluded from mainstream financial services. The project ran for 12 months

and involved ten Citizens Advice Bureaux in the Northeast and Yorkshire and

Humberside. The pilot trained over 1,400 front-line staff, with information

cascaded to an estimated 20,000 service users. The evaluation for the project

indicates that Intermediaries who were very/ fairly confident to support service

users on financial issues increased from 48% to 94% following training. The

training courses brought together a range of organisations working in an area

providing an opportunity to share experiences and build links. This contributed to

improved referral arrangements and strengthened links with specialist money

advice services. It also strengthened the ability of front line workers to offer a

timely first response to people who need debt advice or financial capability

support.

4.1. Group work sessions with service users and the development of peer to peer

support may also be an effective means of improving people’s skills and

developing capacity in local communities.

Money Mentors in Tower Hamlets

The Money Mentors initiative was launched in Tower Hamlets in 2012 by

Toynbee Hall in partnership with the Limehouse Project, the Bromley by Bow

Centre and Quaker Social Action. It is a grass roots project, providing

communities across the Borough with a knowledgeable and trusted local person

to help them gain control of their finances.

57

Research conducted by Toynbee Hall found that 47.3% of people in Tower

Hamlets owe money, and of them 27.3% are behind in their repayments. Many

have to borrow money to make ends meet, and 56% run out of money before

pay day. Worrying about money and feeling out of control can cause massive

stress and anxiety.

Money Mentor courses are designed for local residents to build their confidence

in managing money, as well as leading to a nationally recognised qualification.

Over 300 Money Mentors have since graduated with the latest 65 having been

recruited by local Housing Associations with the specific purpose of training

these up to act as peer support for other tenants.

4.2. In addition, it is also necessary to ensure that sufficient capacity exists within

debt and welfare rights agencies to take on the referrals that are likely to be

generated from improved screening procedures. A recent report for the Joseph

Rowntree Foundation59 suggested that public sector commissioners of health,

housing, social care and welfare to work services should conduct joint

assessments of the need for advice provision and explore how this could help

them to both meet the needs of service users and help them reduce costs. The

report also recommended that such an assessment should include an analysis of

the Social Return on Investment (‘SROI’).

Recommendation: That an action plan be developed to improve screening

processes for financial problems amongst front-line services and provide support

for front-line staff across the sub-region to conduct this. The plan should also

consider the need to expand the provision of debt and welfare rights advice,

59 Ibid

58

including through peer to peer mentoring schemes, and promote the co-

commissioning of debt and benefits services. This activity should include the

calculation of the SROI and present a business case for further investment.

4.3. Finally, it is important that local authorities ensure that their own debt recovery

procedures provide people in financial difficulties with the opportunity to seek

help and to enter into sustainable debt repayment plans. The recent

StepChange report has, for example, been highly critical of some local authority

procedures for the recovery of Council Tax which can add on significant costs for

court summonses and bailiff action against people in arrears. In some cases

‘tough enforcement’ action for Council Tax arrears may be counter-productive as

it results in increased use of high cost credit and other household arrears,

including in respect of rent. The report calls for Councils to ensure that they

respond in responsible and proportionate ways to people in financial difficulty.

4.4. There is some evidence of good practice across the sub-region in this respect,

with Leicester City Council, for example, having had a ‘Fair Debt Collection

Policy’ in place since 1995. This stresses the need for debt recovery staff to

focus their concern on the ability of people to pay rather than the type of debt

owed to the Council, and requires officers to “work with debtors and their

representatives to set realistic repayment amounts for payment over a

reasonable period of time”.

Recommendation: That the Task Group commissions an audit of local

authority debt recovery policies across the sub-region and promotes best

practice.

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Work stream 6: Identifying and supporting the most vulnerable

4.5. Some groups of people are particularly likely to experience financial problems

and require intensive support to help them with these. For example, research

has indicated that there is a clear correlation between poor mental health and

the prevalence of debt problems. In considering the local support arrangements

needed to implement Universal Credit, DWP identified that people with the

following problems were ‘highly likely’ to need alternative payment

arrangements:

Drug/alcohol and/or other addiction problems e.g. gambling

Learning difficulties including problems with literacy and/or numeracy

Severe/multiple debt problems

In temporary and/or supported accommodation

Homeless

Domestic violence/abuse

Mental health condition

Currently in rent arrears/threat of eviction/repossession

Claimant is young: a 16/17 year old and/or a care leaver

Families with multiple and complex needs

4.6. Identifying people in these groups (and potentially some others including ex-

offenders) and targeting them with an appropriately tailored package of support

is required. In some instances, a case management approach, which brings

together services to address the wide range of problems that people experience,

is necessary. This approach is currently being used in respect of local ‘Troubled

Families’ initiatives.

60

Mother has mental health problems

No parent in the family is working

Family lives in poor-quality

or overcrowded housing

No parent has any qualifications

At least one parent has a long-standing

limiting illness, disability or infirmity

Family cannot afford a number

of food and clothing items

Family has low income

(below 60% of the median)

Poor parenting

Truancy, exclusion or low

educational attainment

Family in debt

Drugs or alcohol misuse

Marriage, relationship

or family breakdown

Domestic violence

Child protection issues

Risk factors attributed to families with 5 or more disadvantages (from) Families At Risk: Background

on families with multiple disadvantages, Social Exclusion Taskforce Research Report, 2007

Additional risk factors from families supported through family intervention (NatCen, Mar 2010).

Child Behavioural Problems

Child Substance abuse problems

Teenage Parent(s)

NEET

Child is a carer

Limited support network

Adult with learning difficulties Communications problems

Involvement in crime/ASB

Troubled Family Risk Factors

15

Recommendation: That organisations working with disadvantaged groups

identify those people who most likely to need intensive support to manage their

Universal Credit claim; allocate them to a ‘key worker’, and ensure that these

receive:

1. Advice and assistance to obtain any alternative payment arrangements that

may be required;

2. Debt and welfare rights advice, including help to access local welfare

schemes to meet the need for essential household items and possible

discretionary payments to aid with housing costs or Council Tax payments;

3. Help to get on-line and develop financial and digital skills, including support

through mentoring programmes;

61

4. Help to access affordable financial services, including the credit union’s bank

accounts, savings, and loans products; and

5. Advice on employment and housing rights, including any available help to

reduce heating, transport, and childcare costs;

This offer needs to be pro-actively marketed, and consideration should be given

to providing people with incentives to take up the support available to them. This

could include, for example, the making of an initial deposit and ongoing financial

incentives into a credit union account or providing people with IT equipment.

Work stream 7: Mitigating the impact of financial problems on children

4.7. There has been increasing concern about the negative welfare implications of

financial problems for children. A recent report published by the Children’s

Society and StepChange indicates that almost 1.4 million families with

dependent children facing problem debt, and a further 2.9 million who have

struggled to pay their bills over the last 12 months.

4.8. The Children’s Society report was informed by an earlier piece of work by the

Centre for Responsible Credit, which identified that financial problems affect

children in three ways:

Direct, negative financial impacts;

‘Disruption’ impacts; and

Emotional and psychological impacts.

4.9. The direct financial impacts include going to school hungry, living in

overcrowded conditions, (which affects the ability of children to find quiet space

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to undertake homework), missing out on holidays, school trips, and other social

events; and having fewer new material possessions, including clothing, than

other children.

4.10. ‘Disruption’ impacts, include having to cope with more frequent moves in

housing (for example, as a result of a repossession and their placement in

temporary accommodation). Re-housing disrupts education as well as family and

friendship networks. Even where families attempt to maintain their children in

their existing schools following a move to temporary accommodation they can

face considerable challenges, especially if the accommodation provided is

outside the local area, with the time spent travelling longer distances to school

and cost of transport often resulting in late attendance or absenteeism.

Disruption to children’s lives also occurs where financial difficulties contribute to

relationship breakdown and there is a reduction in contact with the absent

parent. Even where contact is not completely lost the child may have to cope

with frequent moves between parental homes.

4.11. The lower living standards and disruption to children’s lives caused by debt

problems can affect their emotional and psychological well-being. The degree

to which this occurs and how to best mitigate against this requires further

research. Much appears to depend on the specific attitude of children

themselves, and the way that financial problems are managed, or not, within the

household. The financial skills and confidence of parents to talk about money

problems and engage practically with their children in managing the budget has

been found to be important in shaping their future behaviours.

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4.12. However, it is clear that many parents struggle to deal effectively with their

financial problems. Whilst the link between debt and mental health problems in

adults has been the subject of a great deal of recent research, the way in which

children are affected by the deterioration in the mental health of their parents has

been largely overlooked. Similarly there is a need to consider how children are

affected by parental conflict over money and debt issues.

4.13. Debt problems can also have a direct emotional impact on children, which is

sometimes hidden from their parents. Although children in debtor households

often feel upset at missing out on things that their peers may enjoy, some try to

help reduce stress for their parents by limiting what they request from parents.

4.14. The disruption effects noted above are also likely to have significant

secondary psychological impacts on some children. For example, moving home

and the loss of important friendships can affect confidence and educational

performance, and being a new child in school has also been associated with an

increased likelihood of becoming a victim of bullying.

4.15. The long-term impacts of debt problems for children include lower levels of

educational achievement, greater social exclusion, and limited aspirations.

These present a significant cost to society, although the extent to which long-

term damage results is dependent on the specific ‘secondary effects’ of debt

problems that children experience and the duration of these. Future research to

quantify the number of children affected by the rise in household financial

difficulties and the social costs that are resulting in the sub-region would

therefore be extremely valuable. However, it is also possible to make some

initial recommendations based on the current evidence base.

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Recommendations: That social landlords across the sub-region be asked to

review their repossession policies to ensure that child welfare implications are

fully considered prior to instigating proceedings, and that procedures are put in

place to minimise the potential disruption to the child’s education. In addition,

that the impact of financial problems on children are considered within

Safeguarding Children strategies, and that schools in deprived areas of the sub-

region are engaged to develop a programme of support for children affected by

financial problems. Finally, that work be done with ‘Troubled Families’ to build

the financial skills of parents so that they are engage practically with their

children about the pressures they face in managing the budget.

4.16. There is also a need to promote good financial habits, including savings,

amongst children in order that they are better equipped to meet challenges in

later life. Financial education is now included within the national curriculum for

secondary school pupils and a number of local authorities have put in place

schemes designed to boost the take-up of ‘young saver’ accounts with credit

unions.

Promoting savings and credit unions in Glasgow and Calderdale

Glasgow City Council now promotes credit union accounts to all first year high

school students. The ‘Your Starter for Ten’, scheme provides first year pupils

opening one of the accounts with £10 from Glasgow City Council in the

expectation that students will add to that balance with regular savings throughout

their time at high school.

In Calderdale, the ‘Junior Savers Scheme’ provides all children in Year 7 with

£15 in their own credit union account. The money will remain as the minimum

65

balance for five years – through to Year 11. If accounts are not used by the time

the child leaves Year 11 the money will be reclaimed to fund future years of the

project. The scheme therefore incentivises children to add to their account over

the course of the five years.

Recommendation: That a schools and credit union partnership programme be

established across the sub-region to promote and incentivise young people to

save with the credit union.

4.17. Whilst it is noted that the above schemes are targeted at secondary school

students, and that financial education is now included within the national

curriculum for these, there is also a need to consider how the Children’s Society

proposals to develop Savings Clubs in primary schools can be rolled out. To

date, we are aware of only one primary school Savings Club in the sub-region.

The Berkshire Community Savings and Loans Scheme

This scheme is funded by a grant from the Earley Trust, and has been offered to

32 primary schools in Reading and the surrounding areas. The grant pays for 26

hours a week of a paid member of staff’s time to promote the scheme and assist

primary schools to provide financial education. Six schools are currently signed

up and more have expressed an interest. Schools are offered support and

training to set up a savings club, linked to the credit union, and access to a pack

of online lesson plans developed for Berkshire CSL (which focuses on values, as

well as skills/knowledge eg the difference between ‘needs’ and ‘wants’). Schools

can adopt either or, ideally, both. Emphasis is on rewarding saving, for example

by giving out certificates and prizes and/or the PTA match-funding the children’s

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own savings. Children are also encouraged to think about what they can do with

their savings (e.g. saving for presents).

Recommendation: That the programme of school engagement mentioned

above, include the development of Savings Clubs and provision of financial

education in primary schools throughout the sub-region, with particular emphasis

on those serving deprived communities.

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Appendix 1:

Membership of the Fair Finance Task Group

The members of the Fair Finance Task Group are:

Reverend Canon Alison Adams,

Diocese and Cathedral Social Responsibility Enabler

Danny Myers,

Interim Team Leader, Policy & Partnerships, Leicestershire County Council

Caroline Jackson,

Head of Revenues and Benefits, Leicester City Council

Surj Virk,

Policy and Projects Manager, City Mayor and Deputy City Mayor’s Office,

Leicester City Council

Heather Roythorne-Finch,

Worklessness and Economic Growth Policy Officer, Voluntary Action

Leicestershire

Kathryn Burgess,

Director, Community Advice and Law Service (CALS)

& Vice Chair, Reaching People