Examination of witnesses
Joe Lane and Sian Williams.
Q112 The Chairman: Thank you very much for coming to give evidence. I am sorry if we have kept you waiting for a couple of minutes. While you settle down, if I could go through the formalities, first, welcome to this evidence session of the Select Committee on Financial Exclusion. You have in front of you a list of interests that have been declared by members of the Committee. This meeting is being broadcast live via the parliamentary website. A transcript of the meeting will be taken and published on the Committee website, but you will have the opportunity to make any corrections to that transcript where necessary.
I ask you both to start by saying who you are and whom you represent.
Sian Williams: I am Sian Williams. I am head of national services at the charity Toynbee Hall in the East End of London.
Joe Lane: I am Joe Lane. I am senior policy researcher at Citizens Advice, leading on debt and financial services policy.
The Chairman: I will kick off with the first question. The Committee is thinking long and hard about the leadership role that government should be providing in this area of addressing financial exclusion. How effectively do you think the Government are currently providing that leadership role? What more could be done to enhance that role? How far can the market be expected to serve people who are financially excluded?
Sian Williams: I start by apologising: as you can hear, I have the lurgy that is going around. I will try to speak slowly and clearly, but tell me if my voice is going.
The Chairman: I am afraid a number of our witnesses have been so afflicted. I am sorry about that.
Sian Williams: Yes—it is not a good week.
It is an interesting question. Obviously we have seen a change in the way that government leads on financial inclusion. If we go back to the previous Labour Government, we saw a heavy policy agenda around financial inclusion as an end in itself. That had the Financial Inclusion Taskforce, clear goals around achieving greater levels of banking, and very clear guidance from the Treasury to the banks, through the FSA at the time, around how to tackle that. We saw a dramatic movement towards people being banked.
We then moved to the coalition Government, and now to the Conservative Government, and we can see that financial inclusion stopped being an end in its own right and started to become, first, a phrase that people did not really want to talk about. That was partly because, as we lost the Financial Inclusion Taskforce, the role of financial inclusion in each government department became mainstreamed. That meant that no one knew anything. It is quite a specialist subject. When there was a team in the Treasury who were leading on it, they felt quite comfortable directing that work. They had a lot of research, and they could commission research through the task force.
Life moves on. Financial services change; people’s needs change. It is not a static topic. You need to be able to have a body of evidence that constantly looks for the gaps, and why the gaps occur, and does not presume that any one particular sector is deliberately failing to address issues; it is simply that they do not necessarily know that those issues exist.
As you know, as a group of people, the Financial Inclusion Commission was set up primarily to tackle that gap. You have heard from the Financial Inclusion Commission. I am not speaking today on behalf of it but I am a commissioner. We called very strongly for a new government lead. The reason we said that was particularly because we saw in the past how a strong government lead and a strong government centre point for financial inclusion allows everyone to work together, allows people to focus on where the gaps are and to target research, and then to work with the industry, whether through legislation or regulation or through voluntary support and action, to tackle those gaps. We are missing that now.
In the last month we have seen some really interesting moves, which I absolutely applaud and encourage. We will come on to it, but the decision to re-look at the Money Advice Service successors and the pensions guidance, and particularly the statement that was put out by the Treasury saying that government Ministers are listening to the sector, is a fantastic statement. It is not just the fact that we are moving towards the idea of having a single body, but why. The sector was uniformly saying, “This particular solution is not going to work. We need to look at that again”. The fact that that has been reopened shows that people in government are listening.
I would like to go further. We would still like to have a Minister for financial health.
The Chairman: Thank you very much.
Joe Lane: l echo some of those points. It is absolutely right that the challenge of financial inclusion is dynamic and constantly moving. You need specialists trying to address it at all times. That speaks to part of the question whether the market can address financial inclusion. Almost inherently, the answer is no. I think that the shape of the market will change, and it might be prodded in the right direction by various regulations, but the people who are financially excluded are those who are excluded from the market. In an ideal world, that group would be as small as possible, if not non-existent. We can keep working towards that, but it is important to acknowledge that the market will not address most people’s financial exclusion situation.
As for where the Government are going, I think there are positive messages. The direction of travel looks right. There is an amazing opportunity now to get the new money guidance body right—what the single body does, how it works and how it commissions—and to get the provision of advice and guidance right. That is a big opportunity to close gaps in financial exclusion.
There are also huge steps that have not necessarily been taken, particularly around the idea of not just thinking about the financially excluded and how they can be brought back in, but how financial markets and creditors—other creditors we will come to, but including the Government—do not exclude the already included. We often think that there is an included group and there are those who are excluded, and how we can bring them into the house. The vast majority of people who do not have or do not use a bank account have done at some point and, for some reason, they have been pushed away from that, whether by their treatment by a creditor or by a government creditor. There are huge steps that could be taken in the financial services sector, particularly in the way in which public bodies collect debts and treat people when they are in debt.
The Chairman: We will return to a number of those issues during the session. Thank you very much for that.
Q113 Lord Harrison: Joe, what was good about the Money Advice Service? If a new, phoenix-like organisation appears, what might happen to that to improve it?
Joe Lane: I do not want to rehash the evidence on the Money Advice Service, but I am sure that the Committee will be aware of the well-grounded evidence that the Money Advice Service did lots right, but there were correct concerns about value for money. What it did right was to commission debt advice services and work with the existing debt advice sector. That was not only through funding streams but through providing support services and accreditation services, and the development of its standard financial statement. There are big lessons to be learned from the positives of how it has worked with existing established brands that are already embedded in communities, delivering advice to improve and support those services.
In terms of what that means for the new body, it is clearly a single body and it is not simply going to be a commissioning service. It has an element of delivery. The lesson learnt from the reviews that we have had is that, where possible, it should support existing services and not look to replicate them. It should fill gaps. Where there is not an existing infrastructure or a well-developed free pensions guidance sector, for instance, there will be more of a need for delivery in filling those gaps than there would be in the debt advice or financial instability spaces.
The most important thing to take away from those reviews is that striving for a neat solution to a very complex problem is tempting, but that is the wrong direction to go in. That is partly wrapped up with the sunk costs fallacy. We have already spent hundreds of millions of pounds on creating a single point of entry and trying to create a brand, and now we have got part of the way there, so we should plough that furrow. It is important not to get sucked into that mistake and to recognise that consumers do not interact with those services. They come in looking for a single service and want to be signposted to where they need to go. They might do so through Citizens Advice or perhaps through Toynbee Hall, or through another charitable organisation. When they get to that place and they come to take advice, that advice needs to be supported. The experience that they get needs to be as uniform and as high quality as possible. In short, it should focus on commissioning services and supporting them to deliver high-quality advice where they can, and to look for and fill the gaps where they cannot.
Lord Harrison: Sian, you share Joe’s enthusiasm for this new opportunity. Tell us more.
Sian Williams: I am lucky enough to sit on the financial capability strategy board, run by the Money Advice Service. I see from within the organisation a process of learning. For me, a measure of success would be that someone like Joe or me, who are experts in the field, want to work at the new body. Someone comes to us and says, “Where would be the best place for you to put your passion and expertise?” We would say that it is in the new body, because we believe that it is setting the standard for excellence. To me, it would be a real mark of success to see people queueing for those jobs.
I look at what the Money Advice Service has been doing around building consensus in the sector, and by “consensus” I mean a willingness to sign up together instead of being in competition with each other. For example, we at Citizens Advice and Toynbee Hall are competitors, because we have to compete for funding by saying that my services are better than theirs or their services are better than mine. That does not really get us very far, because we need to be pooling knowledge and understanding what works, and then finding ways to leverage every single pound that we have to spend on this subject in the best possible way. I believe that that can only be through partnership. I see what the Money Advice Service is setting out to do through the third sector, particularly through its current “what works” fund. That is about sharing information and gathering evidence of what works and what does not work, so that we do not go on repeating things.
We are starting that process with the third sector and the delivery agencies. I want to see that expanded, primarily, to begin with, to the funders. That is normally the financial services sector at the moment. Many of the funders are still in competition with each other, because they still see the funding of this work as a brand opportunity. I know that they believe in the work, but the way that we have set up funding and commissioning is all around competition.
The third area that I want to see involves bringing in the wider sector. I am sure that we will go on to talk about this, but local government puts many people into debt recovery processes. So do utility companies. So do many other types of agency. However, we have not engaged those organisations deeply enough yet in thinking, first, about how they prevent people falling into financial difficulty in the first place, and, secondly, about how they can help their own staff, their own communities and their own partner organisations to be part of the solution rather than the problem.
How do we bring all this together so that we are having a national conversation about money that is engaging and empowering? In our own work at Toynbee Hall, we find every single time that, when you try and talk to someone and say, “If you get on top of your money, someone else will benefit”, they switch off. If you say, “If you get control of your money, you will benefit”, they switch on. I do not think that we have quite taken that to heart. We are still talking about money and people’s financial education as something that is for the public good. Of course it is, but we need to craft this conversation and craft the entire industry around the idea that we are trying to help the person, their family, their children and their livelihoods. Once we get that right, every pound we put into this produces results. We can only do that in partnership, not in competition.
Q114 Lord Holmes of Richmond: This builds on the previous question. Given the relationship between welfare and financial exclusion, is there merit in the new money guidance body also giving welfare advice alongside money guidance and debt advice? If so, how should these functions be put on a sound financial footing?
Joe Lane: Undoubtedly, financial exclusion and welfare issues are interrelated. Recipients of welfare are more likely to be excluded from traditional financial services. At a local citizens advice, the first thing that you would hear from an adviser, when people get into financial difficulty or any difficulty, is that it is very rarely an isolated problem. If somebody comes to us and they are having difficulty with their personal independence payment or with council tax, very regularly they will also have a housing, welfare or debt issue. Of the 400,000 or so debt clients we see each year, around half of them have an issue in another area. Around a quarter of them have a welfare issue.
An adviser would tell you that you cannot give effective debt, money or welfare advice without giving other types of advice. It is meaningless. If you contact someone’s credit card provider and their council and sort out their affordable repayments on debts but you are unable to maximise their income by helping them to apply for benefits or to appeal decisions, you are not putting the person first and taking them from their difficult position where they come to you for help and sending them away in an improved position. That is essential, and that should be at the heart of how the new body looks to support services. That will look different in different places, depending on how different bodies, charitable organisations, financial services providers and bill originators such as utility companies can work together to ensure that people get that diverse service that they need.
Crucially, for the person, that needs to be as seamless as possible. It is almost irrelevant what it looks like behind the scenes, who funds it and what it is called. You do not want to be sending the person away saying, “Here is a website”, or, “Here is a phone number”. You want to be saying, “Here is an appointment. It is here tomorrow”, or “It is here this afternoon”, If it is a hand-off process, it needs to be smooth. If it can be, it needs to be delivered as the person interacts with the advice service.
In terms of funding those services, it is crucial that this opportunity we have to improve the provision of advice and guidance is not used as an opportunity to claw back any of the existing funding. The services out there are already overstretched. The people who come for debt and welfare advice are already more likely not to be seen because there is not capacity in the system. The funding needs to be maintained, and those services need to work closely together.
Sian Williams: That is an excellent question, and it is one that the powers that be who are making decisions about how to get government to join up departments will be wrestling with.
Toynbee Hall runs face-to-face debt advice for London and sees around 20,000 clients a year. Of those, 75% of people receive benefits in some form, including pension-related benefits; 15% of them have a welfare benefit issue when they first walk through the door; 15% of those 20,000 people say they have come because something has gone wrong with their benefits; 12% of them are there because they have had a benefit overpayment and they are now struggling with the clawback.
That is a clear link with people presenting for debt advice when what they are presenting for is some kind of problem between them and the welfare state—involving the way that the money has flowed and the lack of information or clarity about what they are entitled to and when—between them and the Government. They have not gone and robbed DWP; they have been given the money by mistake and there has been a problem about how to get it back.
All of Joe’s points are absolutely valid. When we think about people’s money, then we are on the right track. Where it comes from is irrelevant. First, we need to help people to understand what they are entitled to, whether it is from benefit payments or from their employer. Secondly, we need to help people understand how to use that money to secure the things that they and their family need and want. Thirdly, when things go wrong, whether with a creditor, an employer, someone that they have bought a service or a fridge from, say, or with the Government, and they need to seek redress, we need to ensure that they have support, good information and appropriate redress opportunities around that.
For me, that goes through their whole life. It is not just when they are of working age or when they are retired. Those are not separate parts of life, so bringing together the entire journey for someone and their money in a 360-degree, holistic way makes absolute sense. I absolutely believe that the Government’s stated goals around ensuring that welfare provides the right opportunities and support for people to be empowered and to take responsibility for their lives has to be bundled into an understanding that that is just one part of their money. Providing holistic guidance around money reduces the costs for government in every single way—both the cost of delivery and the cost of recovery.
Q115 Lord Haskel: You have spoken about support from the Money Advice Service, and you have been quite enthusiastic about it. The DWP has said that the rollout of universal credit will be accompanied by support for recipients that will be delivered by a variety of local providers. What has been your experience in your organisations? To what extent are people utilising this sort of support? Do you have any early experience to tell us about?
Joe Lane: It is obviously a little bit complicated, because universal credit has been rolled out in different areas to different people at different speeds. What we have seen so far is that, for each new starter in any quarterly period, around 5% of people being moved on to universal credit will come to a citizens advice bureau. That is aggregated across the country, so the relationship is not exact yet, and we will see how that develops as universal credit gets rolled out. We definitely know that people need support as they move on to universal credit. That is not only from the clients we see and the evidence that we have collected from them; it is also in surveys of people as they are told about universal credit. Around two-fifths of the people we surveyed said that they need support with almost every area of financial planning. When they moved into monthly payments, they needed help with how they budgeted, how they banked, how they worked and how they applied and managed their finances online. We know that there is a need for support.
In terms of the universal support that is offered at the moment and delivered locally, as far as I am aware, that is being trialled at the moment. An early evaluation has come back. Our feedback from local offices says that, where they have been involved in that process, they have been able to add to its effectiveness. Because it is done through local authorities, and given the framework on which local authorities do it alongside Jobcentre Plus, it does not necessarily say who they should involve locally—whether it is housing associations or charitable organisations. That means that sometimes organisations that could help are being excluded. In those situations, the local citizens advice bureau will say it has seen someone who has gone for universal support but who, as we were saying previously, has come in with other issues that they have not necessarily had solved. That person has been given a type of support but, because it is not joined up, they are getting their universal support in one area, which helps them to apply for universal credit, but then they are coming in with a debt issue or a housing issue to get solved elsewhere.
There are issues around how that universal support is provided. It is absolutely essential. It is a very dramatic change to welfare. It could be catastrophic for lots of people if they are not supported as individuals and if safeguards are not put in place in the structure of universal credit.
In terms of linking up and helping people to build resilience and improve their financial capability, the model that financial capability provision is going down involves using points of contact to build people’s resilience. They might not come and say, “Could you help me to develop my budgeting skills or to work on my own financial capability?” When you contact them, if they come for debt advice or universal support advice or if they approach a children’s centre for the first time, whatever their point of contact is, those points of contact should be used to provide financial capability services. That should definitely be done through universal credit. That should be seen as one model of engaging people with financial capability work.
Sian Williams: We have had only a few clients, because universal credit has not been rolled out across our area yet. However, there are two points that I wish to make. First, I am encouraged by the DWP team’s openness on the trials that it has had so far. It is engaging more people. We started off with those on the universal credit team being very open; then we lost them for a little while, while they had to put their heads down and get things out there. Now I think they are emerging again and they are asking. I would encourage that and support that. They are being open in saying, “These are the areas of our support that we do not think have worked. What do you think? Why do you think that is happening? How can we improve that?” I encourage that conversation to continue.
Secondly, ideally, if I could design it, what would it look like? When someone is moved on to universal credit, they would have a holistic, full-ranging conversation about their current ways of managing money and how they feel about it. Some of them will be very scared. It is a very scary process, because it implies not just their money but their homes, and homes matter, as we know. It would be a full-ranging, open, all-gloves-off conversation with someone who can be very discreet but trusted. The conversation needs to be one of support and empowerment, recognising that, for some people, “It will not be from this month to next month that I can make the transition, but actually I need some time”. There would be a personalised plan to help people achieve that progress and that transition, with a recognition that, crucially, there will be some people in every generation and every age range now who might struggle with that transition over a longer period.
We may need to say that there are going to be some older residents who probably should not be shifted across to a different style of budgeting, because it is just too late—let us just let people live their lives with dignity, security and safety. That might also apply to a small group of people across all age ranges, depending on skills and capabilities across their life skill set.
Crucially, however, we need to ensure that we do not, in another 10 years, have a young generation coming through who do not know how to use money, financial skills and tools in a way that allows them to make the kinds of decisions that they need to make for their future.
Investing in young residents and the children of residents is incredibly important right now. I say “residents”, because you have just had David Orr talking about the social housing sector. I did not listen to his evidence, but I can imagine what he said.
This cannot be a one-size-fits-all process. However well-intentioned the DWP’s processes have been, the lack of funding available for a personalised transition process is a real issue.
Lord Haskel: Many of the things that you have both said of course apply to both money advice services and universal credit. Is there any risk of duplication, or should the two be working together?
Sian Williams: They should absolutely be working together. It is one of the reasons why I am slightly reassured by what we have seen from the DWP’s universal credit team recently. They hosted a workshop supported by the Money Advice Service, co-hosting and looking at the evidence that they had collected. I want to see that continue. That is why I absolutely support the view that welfare payments, in terms of the payment that the state makes to you when you cannot earn your own living or when you have retired and you should be able to retire in dignity, are just part of your income. The entire conversation around your money—how your money comes in to you today and what you need to achieve with it, now and in the future—should be a 360-degree conversation covering all areas of your life, not just the fact that you are now receiving your benefit payment in a different way.
The Chairman: Lord McKenzie, did you want to come in earlier on?
Q116 Lord McKenzie of Luton: Excuse me, but it is on a slightly different point. Regarding the new services, and indeed the previously planned one, there is reference to money advice, but to guidance as well, particularly in relation to pensions. Is the demarcation between the two areas clear? Is it going to give rise to confusion?
Joe Lane: I think there is confusion for ordinary people. Someone will go to their parent, their friend or a bloke in the pub and they will call it advice. They do not hold that person liable, because they call it advice rather than guidance. There is a regulatory issue, and that needs to be clear. There is a consultation at the moment about how advice and guidance are defined.
The crucial thing is, first, that customers can get the help that they need. Services are both liberated and have clarity, in that they know that they can help people without becoming liable because they have accidentally overstepped the mark. That consultation is very important. For the service, what they would want from it is not necessarily where the line is drawn. There will be views on both sides of that, but the adviser who sits in front of someone has certainty that what they are providing will help the person and will not fall back on them. They are trying to do a good thing, but, as with everything, there might be unintended consequences.
The Chairman: We need to press on.
Q117 Lord Kirkwood of Kirkhope: I was particularly struck by the Toynbee Hall evidence in relation to being more responsive to consumer needs and building the system around that. Reference is made to the concept of smoothing payments and request-to-pay systems, which I think would be helpful. The evidence seems to suggest that this needs government support. Does that mean statutory changes to regulations or laws, or does it mean extra money? Could you say a little bit about that? The Committee would be interested to follow through the meaning behind your written evidence.
Sian Williams: As you know, in the payment strategy forum, in the strategy that was put out for consultation, we proposed a request to pay. I am completely agnostic as to whether that is a feature in any particular kind of payment or a type of payment. I only care that people have an option to flex their payment.
Why does that matter? As we have written about in many different documents, including the strategy, income fluctuates, and it does so increasingly. As we look at patterns of work and the blending of incomes, whether that is caring responsibilities, education, work or welfare benefits, whether working age or in retirement, we are seeing an increasing number of people who cannot predict exactly how much money they will have each month or on which date they might receive it, with increasing numbers of people receiving that money in parcels.
That tells us that income is fluctuating for more and more people, often without any knowledge about how much money they will get. However, most bill payment methods still require people to pay quite statically—ideally monthly and on a fixed date, with very few mechanisms to flex that or to represent anything other than a sense that, if you do not try to do that and pay on a fixed date per month, you are somehow irresponsible. Actually, logic would tell us that responsible people would flex their payments to match their incomes so that they always had enough money to pay their bills and meet their needs.
When we look at payments, we can see that they are not changing in that way. It goes back to the question of how far the market can be expected to meet people’s needs. The market is driven by some key principles. Mostly it is driven by the middle of the market or by the highest return on the market. When we talk to providers and ask why they do not provide this, they say, crucially, that they do not think there is a demand, or it is not in their gift. As we drilled down, we could see that it was because they were not having the conversation. There were ways to solve it, but they were not having the conversation.
We forced the conversation through the payments strategy forum—which was very exciting. Pretty much every member in the industry to whom I have spoken, first, now recognises the need for this kind of payment mechanism and, secondly, would like to see it. The sticking point comes next: who is going to pay? The next question that people tend to raise is, “But will this not mean that people just stop paying their bills?”
I am struck by those two questions. They come up every single time. The second one I find fascinating, because it is about infantilising people. It is about saying, “If you could get away with not paying, you would”. Yet I look at our society, and that is not the evidence. The number of people who are constantly paying things that they could probably get away with—they are not trying to get away with not paying. Of course there is a small group of people for whom that will be true, but that will be true no matter what. The majority of people want to be able to manage their money, pay their bills and meet their responsibilities, and they want to be able to do it with confidence and minimum stress. It is simple. I just push that to one side and think, “That is an interesting question, but it is not one that I want to spend much time on”.
On the point about how we are going to get it through and how we are going to ensure that you and I, and our colleagues and compatriots, can get this mechanism to pay, first, we must be able to build the system. Trying to cost that is incredibly difficult.
Lord Kirkwood of Kirkhope: Who is “we”?
Sian Williams: The industry. Of course, the industry only really puts money into where the regulator makes it put money. That is just a fact of life. I absolutely know, because it comes up in every single meeting—that the banks will say that they do not have the money to build new systems, because the regulator has told them where their money has to go over the next five, 10 or 15 years. Regulation drives all investment. It is as simple as that.
I would like to see the industry—“the industry” being the banks, the schemes and the wider payments industry—voluntarily build the system, but I am not yet seeing any evidence that it will. I am not, at this point, saying, please make it compulsory and legislate, but I want to hold that in reserve.
Lord Kirkwood of Kirkhope: But why not?
Sian Williams: I guess because I am an optimist.
Lord Kirkwood of Kirkhope: Really?
Sian Williams: Yes.
Lord Kirkwood of Kirkhope: I am a Liberal Democrat, so we are in different—
Lord McKenzie of Luton: We have not got time for that.
The Chairman: I call the meeting to order.
Sian Williams: If we have to legislate on everything where there is clear evidence that the country needs it, we are in a sorry state, but if that is what it takes, then please legislate. If it takes legislation to get an industry to deliver something that people obviously need now and will increasingly need in the future, then legislate.
Lord Kirkwood of Kirkhope: So, voluntary would be your first mode of progress.
Sian Williams: Yes, but not for any reason other than that I think you get more when an industry signs up to do something on a voluntary basis, because it is then engaged with it.
Baroness Primarolo: Are you suggesting that legislation would be held over the industry like the sword of Damocles? “You need to get here. Can we nudge you along?” I agree with you: if we had to legislate, we would probably get it wrong.
Sian Williams: The basic bank account situation is a really good example. The Treasury was very clear with the banks: “If you do not do this in a voluntary way that meets our needs, we will legislate. Legislation will be harder for you; voluntary will be easier for you”. It worked.
The Chairman: Is there anything that you wish to add briefly, Joe?
Joe Lane: People will be entitled to ask, “Is there enough competition in the payments industry?” Everyone likes the sound of this flexibility. Why is a payments company or a bank not coming forward and saying, “We have developed this. We are allowing you to be flexible. We paid for it and built it”? The fact that it sounds popular but no one is providing it begs the question whether the providers are competing.
I echo the point that we are seeing more and more people in inflexible work. That is our fastest-growing issue. Two big things that will come out if there is progress in this space are, first, would it stretch to government as a creditor, as we will talk about? You know how the Government behave as a creditor—would you be able to flex your council tax or your income tax? The second question, more broadly, is that it would not have to cause further exclusion. It would not have to be the case that some people can access a request to pay and some people cannot, and we are back here in three years saying that we have created another means of financial exclusion.
Q118 Lord Empey: Beating the drum once again on the issue of debt collection, particularly public sector debt such as council tax and public sector creditors in general, it is getting the balance right between the responsibility to collect debts on behalf of the public and, on the other hand, issues such as flexibility, taking people to court and forcing them to payday lenders and all that. Where do you think the balance should be? What more can creditors do? Have you seen or do you have any sympathy with Kelly Tolhurst’s breathing space Bill? In those sorts of areas we are getting conflicting evidence, and I know that the Committee wants to dig deeper to see whether local authorities and public sector creditors are being more aggressive or more difficult than others.
Joe Lane: Clearly there is a difference between private sector debts and government debts. It would be painful to see someone who had been found liable at an employment tribunal for not paying wages not having to pay the debt to the court because they were treated in the same way as someone who had built up unaffordable credit. Very simply, it is embarrassing and shameful that it is now better to owe credit to HSBC than to HMRC. If our public bodies are creating more problems for people in managing their money than much-maligned and often rightly maligned financial services, it is frankly shameful.
The vast majority of those people have been put in that situation because of unexpected or unintended circumstances that they have got themselves into. Very often it is government errors that have put them into those circumstances, and those people are being pushed into further problems and are being trapped in debt. They are being caused broader life problems by things such as bailiff enforcement.
I do not want to rehash the evidence that we have produced publicly on this—I will be happy to share that with the Committee—but we help far more people now with debts to government than those with debts to creditors, and our advisers would consequently rank consumer creditors far above government and public bodies in terms of how they deal with and communicate with them. It is literally the person on the phone when you ring them and say, “I have got someone in difficulty. What can you do?” It is about the way they treat them, their willingness to accept affordable repayments and their willingness to give them a moratorium if their circumstances change. There is a host of changes and a host of areas where government debt collection is a big problem.
There are some positive moves. A Cabinet Office group is working on how the Government collect debt as a whole. There is an opportunity in the Digital Economy Bill to improve data sharing between departments. At the moment, there is an ability for departments to get data from other departments. I think that should be required. Do not collect the debt if you can find out that the person owes a huge sum of money across lots of different departments, because they are not going to be able to pay.
It is a massive area. For around half of the people we see with government debts—and this is echoed across the sector—it is for the collection of council tax debts. It is very important to separate it. There are welfare change issues. The moves on council tax support and council tax benefit have caused some problems, but that is just one of the problems. Our largest issue among full-time working people is council tax debt. Those are not people who were in receipt of council tax benefit. It is just a collection practice issue. There are steps that can be taken, which involve the policies that councils have.
One area that could have an incredible impact on people’s lives would be to revisit the regulation of enforcement officers. Enforcement officers were regulated in 2014 in a bid to improve their behaviour. Since then, associated with the increasing problems with council tax, we have just seen an explosion in the number of people being poorly treated by enforcement officers.
In Lord Justice Briggs’s review of civil courts, as an aside, he said that, basically, it is a shambles, and it needs to be revisited. He called for a bespoke review, I think he called it, of physical enforcement. We would urge that to happen and for there to be improvements to that regulation. There are lots of areas where the Government can include debt collection, but, at the moment, the way that government collects debt is pushing far too many people into distressing situations that are avoidable.
The Chairman: I think you said that you could provide us with some further information.
Joe Lane: Absolutely I will.
The Chairman: We would be grateful for that. It is an area that we particularly want to delve down into. Thank you very much.
Lord McKenzie of Luton: Chairman, could that note cover the varying consequences of pursuing one form of debt collection rather than another for the future circumstances for the debtor? I am thinking about somebody who gets a county court judgment, which destroys their credit rating for a long time. Avoiding that can help individuals.
Joe Lane: Yes, indeed.
Lord Fellowes: Joe, you used the phrase “getting it right”. Is there a country that is getting it right that we should be looking at?
Joe Lane: That is a good question.
Lord Fellowes: Perhaps you could think about that and send it to us.
The Chairman: That would be extremely helpful. Thank you very much.
Q119 Lord Northbrook: Moving on to the area of financial resilience, how effective is government policy, such as the proposed Help to Save scheme, in building financial resilience, and are further policy interventions required? Do you think that employers, banks and other organisations are doing enough to enable those on the lowest incomes to save and to build their financial resilience? I see from your evidence, Sian, that Toynbee Hall suggested the creation of savings tools, not just savings vehicles, to prompt saving through.
The Chairman: I am going to ask for slightly shorter answers now, please.
Sian Williams: I will be quick. No, we are not doing enough. None of those groups that you mentioned in your question is doing enough, partly because not enough thought is given to it. There is an assumption that people do not save either because they do not have enough money or because they are too lazy to save—or there is enough out there and if only they switched on their brains they could do it. Actually, all the evidence shows us that we just do not understand saving at all. We do not understand how to switch someone’s savings motivation on or to turn it into something that works for them and speaks to them on an ongoing basis. We have got little chinks of light in our evidence, but we need to build that and work on that.
On Help to Save and schemes like it, we know that matched funding works well in savings schemes, because it rewards effort, but it has to be done in a way that is meaningful for people. We need to do a lot of work around the timeframes in rewarding people and allowing people to access that.
Joe used a phrase earlier about not excluding people in the way that we are trying to include. For example, for things such as lifetime ISAs, what if you cannot afford to start a lifetime ISA? We are exploring ideas around helping local councils to invest money into lifetime ISAs for people who cannot save and, therefore, they could share the rewards on that. It is about thinking creatively.
We talk about tools, because we absolutely understand that saving is a very tiring thing to do. You have to be constantly on it if you are going to make it work for you. We need to create tools that help me think, “If I have just saved a penny here, can I put it over there safely and securely and in a way that does not make me feel embarrassed or ashamed?”
Joe Lane: One stark comparison is to do with the fact that we know how important savings are for individuals—for their broad welfare and not only to avoid financial difficulties. Despite that evidence, I think the Government’s spending commitment to Help to Save was £90 million over the course of the Parliament, in comparison with their incentives to help better-off people save, such as the Help to Buy ISA, the savings allowance and increasing the tax-free savings in an ISA from £7,000 to £20,000. From a quick look over Treasury documents, I think they have committed about £8 billion to that over the five years of the Parliament. Help to Save sounds nice, but if we really want to help people to save who do not have savings—the quarter of people who have negative financial assets—we could look more closely at how much we are prepared to spend on that commitment.
Q120 Viscount Brookeborough: On the Post Office and its connection with the issues today—we have read the evidence—what role do you think post office branches and the Post Office account play in addressing these, not only for people who may not have a bank account but where banks are closing? I have a quote from the Bank of Ireland, which is closing a branch with a site on the periphery, and its advice is, as well as the option for customers, to use a local post office for lodgement. Would you like to give your ideas on how the Post Office might help out and whether it might need reform in such a way that it could happen, because its offices are getting smaller anyway?
Sian Williams: Citizens Advice has a lot to say on this, so I will be very quick and simply say, first, that the Post Office card account needs to be transactional. We do not want to stop people using the post office for their banking, but we want to improve the service to them. Since DWP contracts for that, it has a huge amount of contracting power, and we would like to see that being used properly.
Secondly, the post office, particularly in communities that are out of town, provides a meeting point for people. We absolutely want to support that. We want the post office to be recognised as a place where people go and where they trust the information that they are getting. We do not want that to be compromised in any way.
Thirdly, there is a population that we are forgetting: the young people who live in out-of-town communities. If there is nothing to keep them there, they will leave. If there is nothing to keep young people in communities like that, those communities die.
We have to look to the future. Banks might not want to be there now, but a post office serves multiple purposes. We need to think about how the post office can be the delivery agent for a wide range of financial services and products, thinking almost like a small supermarket option. How legislation needs to change to understand that and support that involves understanding that it is perfectly possible to have different products provided within the same space in a way that is not somehow anti-competitive. Actually, you can have agents who are able—like a financial adviser—to provide people with a wide range of options, and you can do that through post offices. That changes the skill set in post offices, but I think that is an interesting option.
Joe Lane: We have recently published a report on this, so I will share that as well. Just to say something on it, you can separate the issues into the accounts themselves and how people use them, and the issue of physical access to bank branches or to the post office. Those two things are separate challenges in both those areas.
Post Office card accounts are incredibly popular for budgeting and accessing cash, and they are still around. Almost 3 million people use them.
The introduction of basic bank accounts should naturally diminish the demand for Post Office card accounts, but it will be interesting to see how that develops. It is not a rule, but there is encouragement for people moving on to universal credit that they use a basic bank account where they have used a Post Office card account in the past. It will be interesting to see how that develops.
There is the branch issue. Separately, there is the account issue, about what basic bank accounts are offering people and how that affects the people who use Post Office card accounts. On that, the important development to monitor is how eligibility criteria around basic bank accounts develop as we go forward. Now, somebody has an entitlement under the Payment Accounts Regulations to the basic bank account. Will the eligibility criteria slim down to the extent that people are pushed into current accounts that they do not need or that are putting them into worse financial circumstances?
Baroness Primarolo: On the question of how they might be limited, would it be feasible to do it by value? What I mean by that is, for instance, if you save into a bank account and they are going to pay you a better interest for the credit balance in it, they limit it. They can do that. The banks are concerned that expanding post offices means that they have unfair competition, because people will go for that. Could you do all the products by value, but, by definition, these people have smaller budgets?
Joe Lane: I am not 100% sure of banks’ feelings towards the perceived competition from post offices. Either it has happened or it is happening, but there are agreements between banks, allowing people to access their bank accounts through the post office. There are already agreements. You can already get a transactional account at a post office, but it is a paid-for account. The system is relatively complex already and, echoing what Sian said, that needs to be clarified in terms of the services that people access and where they do that, and ensuring that people have access to some sort of physical banking.
The Chairman: A final question from Lord Shinkwin.
Q121 Lord Shinkwin: I apologise: I am going to put you on the spot and ask you to answer this inside one minute each.
Sian, you said that you are an optimist and that the Treasury is now listening. Joe, you said that there is an amazing opportunity now to influence policy. In terms of the Committee’s focus, what one recommendation would you like us to make to maximise the chances of government and other sectors listening and, crucially, actually changing?
Sian Williams: I would like you to recommend that the Treasury take a lead, appointing a Minster for financial health, and that that Minister should be able to direct the activities of Treasury, DWP, Cabinet, financial education, health, et cetera, in a combined strategy towards the financial health of the UK.
Joe Lane: My single recommendation would be that financial inclusion means building services for people as they are, and not to commit to the vague benefits of financial education. Financial education sounds nice, but the evidence for its impact is relatively limited, and it is obviously very much deferred. I think we need to focus on the markets that we have at the moment, the services that are available to people and how we provide money advice and guidance.
The Chairman: Thank you very much indeed. It has been a really excellent session. We are going to have a very quick five minutes in private to finish off.
