Tag: House of Lords

Lords report: Over half of UK citizens ‘financially vulnerable’

The House of Lords Liaison Committee has published its third follow-up report; Tackling Financial Exclusion: A country that works for everyone?

This report examines the progress made by the Government in the implementation of the recommendations made by the Select Committee on Financial Exclusion in its 2017 report Tackling Financial Exclusion: A country that works for everyone?

In the Liaison Committee’s report Review of House of Lords Investigative and Scrutiny Committees: towards a new thematic committee structure published in July 2019, the Committee recommended that the Liaison Committee (on a case by case basis) could hold follow-up evidence sessions on a former special inquiry committee’s recommendations, followed by the publication of a report.

This is the third occasion on which this new procedure has been utilised.

The inquiry found that over half of the population are classed by the Financial Conduct Authority (FCA) as having characteristics of financial vulnerability.

This issue has been exacerbated by the COVID-19 pandemic with 14.2m people in the UK now estimated to have low financial resilience – characterised by over-indebtedness or with low levels of savings or low or erratic earnings.

Types of financial exclusion can include: not being able to open a bank account, not being able to access financial services due to bank branch and ATM closures, not being able to access affordable credit.

The report recommended that a clear Government strategy and increased FCA powers are brought forward in order to stop people experiencing financial exclusion.

The report calls on the Government to introduce a requirement for the FCA to establish a statutory Duty of Care that banks and other financial services providers must operate toward their customers. This should replace the current insufficient requirement to ‘treat customers fairly’.

Other recommendations in the Committee’s report, Tackling Financial Exclusion: A country that works for everyone? follow-up report are:

  • The proposed legislation to protect access to cash should be brought forward without delay.
  • The Government should publish the timescale and details on the no-interest loan pilot.
  • The powers of the FCA to mitigate the trends in bank branch and free ATM closures should be reviewed and enhanced.
  • The Government should continue to work with the Post Office and UK Finance to roll out a public information campaign about the banking services that the Post Office offers.

Baroness Tyler of Enfield, who was Chair of the Select Committee on Financial Exclusion, said: “It’s time for the financial services industry to recognise they have a fundamental duty to ensure that banks act in their customers’ best interests and that products and services are fair by design.

“That duty of care should now be established in law and overseen by the Financial Conduct Authority to ensure greater consumer protection and prevent banks and others from profiting from their customer’s vulnerability.

“The COVID crisis has laid bare the extent of financial exclusion across the UK. We continue have more than a million adults in the UK without access to a bank account and more than half the country now have characteristics of financial vulnerability.

“It is now more important than ever that Government come forward with a comprehensive financial inclusion strategy that will ensure access to cash, protect the public and end the scandal of the poorest being overcharged for financial and other services. The Government should publish that strategy within 12 months and allow Parliament to assess it and hold them to account for its delivery.”

Gareth Shaw, Which? Head of Money, said: “Millions of people rely on cash as they are not ready or able to take advantage of digital payments. However, rapid closures to the cash machine and bank branch networks in recent years mean that many of these consumers risk being abandoned by their banks.

“Our research has shown that people in some deprived areas have seen significant cuts to free ATMs in recent years, while a domino effect of bank branch closures has taken place without enough regard to whether suitable alternatives are in place.

“The government must urgently set out its vision for the future of cash, including its promised legislation to protect access to it. This should include putting the FCA in charge of the cash system so that it can take the steps that are needed to ensure cash remains a viable payment option for as long as it is needed.”

Substantial reform of Universal Credit needed, says Lords report

The House of Lords Economic Affairs Committee report ‘Universal Credit isn’t working: proposals for reform‘, calls on the UK Government to make substantial changes to universal credit in order to protect the most vulnerable.

Universal Credit is failing millions of people, particularly the most vulnerable. The Economic Affairs Committee agrees with the original aim of Universal Credit but blames the scheme’s design for soaring rent arrears and the use of food banks.

Cuts to social security budgets over the last decade is causing widespread poverty and hardship. Universal Credit needs urgent investment to catch up and provide claimants with adequate income. The temporary increase in the standard allowance in response to the Covid-19 pandemic shows that the previous level of awards was too low. The increase should be made permanent.

The Government is using Universal Credit to recover debt, mostly £6 billion of historic tax credit debt. Deductions of up to 30% of the standard allowance, and in some cases more, can be taken from claimants. This has left many households with less money than they are entitled, often at no fault of their own. Tax credit debt should be written off as it is unlikely to be repaid.

The five-week wait for the first Universal Credit payment is the main cause of insecurity. This wait entrenches debt, increases extreme poverty and harms vulnerable groups disproportionately. The Government should introduce a non-repayable two-week grant to all claimants.

The way payments are calculated can result in large fluctuations in income month-to-month, making it extremely difficult for claimants to budget. The level of awards should be fixed at the same level for three months. There should be a mechanism to enable claimants to have an early reassessment if their circumstances change.

Lord Forsyth of Drumlean, Chair of the Economic Affairs Committee, said: “Most people, including our Committee, broadly agree with the original aims and objectives of Universal Credit. However, in its current form it fails to provide a dependable safety net. It has led to an unprecedented number of people relying on foodbanks and not being able to pay their rent.

“The mechanics of Universal Credit do not reflect the reality of people’s lives. It is designed around an idealised claimant and rigid, inflexible features of the system are harming a range of claimant groups, including women, disabled people and the vulnerable.
 
“Universal Credit needs more money to catch up after 10 years of cuts to the social security budget. It requires substantial reform to its design and implementation, the adequacy of its awards, and how it supports claimants to navigate the system and find work.

“The five-week wait for a first payment must be replaced by a non-repayable two-week grant to all claimants. The monthly payment calculations which can result in big fluctuations to claimants’ incomes should be fixed for three months. Historical tax credit debt needs to be written off.

“The punitive nature of Universal Credit has not worked. It punishes the poorest by taking away their sole source of income for minor infractions. It needs rebalancing, with more carrot and less stick, particularly as large numbers of claimants will have ended up on it because of events completely out of their control.”

The Committee’s other key findings and recommendations include:

  • The Government must prioritise helping people into work, particularly with the increase in unemployment that the Covid-19 pandemic is causing. All claimants should have a work allowance, at a higher rate than now, to allow them to keep more of their award as they move into work.
  • The Government should consider reducing the taper rate to ensure that the poorest in society do not pay higher marginal effective tax rates compared to the richest in society.
  • The conditionality requirements on claimants who can look for, or prepare for work, has been increased significantly over recent years. Less emphasis should be placed on obligations and sanctions. Instead, there should be more support to help coach and train claimants to find jobs or to progress in their current roles. Conditionality should be adapted to accommodate changing labour market conditions, including at the local level, particularly in the light of the economic impact of the Covid-19 pandemic.
  • The UK has some of the most punitive sanctions in the world, but there is limited evidence that they have a positive effect. Removing people’s main source of support for extended periods risks pushing them further into poverty, indebtedness and reliance on food banks. There is a substantial body of evidence which shows that sanctions harm people’s mental health. The Government should evaluate the current length and level of sanctions. It should also expedite its work on introducing a written warning system before the application of a sanction. Sanctions must be a last resort.
  • The Government is doubling the number of work coaches in response to potential levels of high unemployment. This may not be enough to support people to find work in a stagnant labour market with high levels of competition for jobs. A cap should be introduced on the number of cases for which each work coach can be responsible.
  • Paying awards on a monthly basis does not reflect the way many claimants live. It causes unnecessary budget and cash flow problems. All claimants should be able to choose whether to have Universal Credit paid monthly or twice monthly.
  • Including childcare support in Universal Credit was a mistake. Paying costs in arrears has been a barrier to in-work progression and in some cases, it has been a disincentive to work. The Government should remove childcare support from Universal Credit and be made into a new standalone benefit paid in advance.

MSPs take Brexit “dismay” to House of Lords

Six senior MSPs representing three Holyrood Committees will attend House of Lords talks today on the EU (Withdrawal) Bill and Brexit. The MSPs will set out significant cross-party concerns over Clause 11 of the Bill and the lack of progress from the UK Government on amending the Bill during its Commons passage. Continue reading MSPs take Brexit “dismay” to House of Lords