Money, money, money – why we need a fresh approach to financial inclusion

It’s time for a financial inclusion strategy that recognises the scale of problems in Wales and proposes effective action, says Victoria Winckler.

The Welsh Government has issued a draft ‘refreshed’ version of its financial inclusion strategy for consultation. Weighing in at 48 pages and claiming to be ‘refreshed’ you might expect something that recognises that the world has changed a lot since the 2009 version.  Instead, we have something that is full of good intentions but in my view falls short of what is required.

A vision of financial health

First of all, there needs to be be need a clear picture of what the Welsh Government is trying to achieve. Rather than going round in circles with the vision repeating the actions, a much simpler goal is ‘financial health’. This is easy for everyone to understand, desirable and – with will and effort – achievable.

The world has changed since 2009

2009 seems a long time ago. Since then we’ve seen the rise of insecure employment like zero-hours contracts, a radical shake-up in social security benefits that has cost some households thousands of pounds, little if any real-terms growth in wages and a rapid rise in the costs of essential goods and services. We’ve also seen the rise and (partial) decline of pay-day lenders, tougher rules on mainstream lending and bank accounts, and an explosion in internet-based products.

These changes have increased the hardship experienced by households and have also dramatically changed who faces financial difficulty – those most likely to be over-indebted these days are women, young people, lone parents and the low paid.

This is much more than an exercise in recent history – if Wales has changed since 2009 then maybe we need to be doing something different now?

The importance of low income

Low income is like the elephant in the room in discussions about financial inclusion. In all the talk about improving people’s financial capability or developing better financial products, the real issue – which is that some people do not have enough money to meet their needs – is obscured. For an unemployed person living on £73.10 a week they can have all the skills and credit union accounts in the word, but the truth is that keeping warm, eating healthy food and doing anything other than staring at four walls will be a real struggle.

Outcomes please!

In all its 48 pages, it is virtually impossible to get a sense of the scale of the problems in Wales or the outcomes the strategy will achieve. How many people are affected by problem debt? How many advice sessions will the Welsh Government fund? Who are the target groups? What outcomes are expected?

The strategy needs to do what it says on the tin – provide a plan of action to achieve a long-term aim. An absolute basic of any strategy is that it is SMART (specific, measurable, achievable, realistic and targeted in case you’ve forgotten).  I’ve looked hard for these attributes in the ‘refreshed’ version but failed to see them.

This really matters, not only to get a sense of whether the strategy is likely to be effective but whether government funding of credit unions, advice services etc is appropriate.

Effective collaboration

The draft strategy has been informed by a Ministerial group and will also be delivered by – you guessed it – a partnership. The members of the group have enormous experience and expertise – but there’s one draw back: they are almost all government-funded bodies. An effective collaboration would involve the most important groups of all – financial institutions and the people who are experiencing financial exclusion. They are independent and would be willing to tell Welsh Government how things really are.

What next?

So let’s abandon the euphemisms of financial inclusion and exclusion, and talk instead about achieving a state of financial health in Wales. Let’s focus on the drivers of financial difficulties, encourage provision of affordable financial products, and provide effective advice when people need it. Let’s be clear about numbers of people affected, who they are, how we’re going to reach them. And let’s be able to assess if we’ve really made a difference in one year’s time.

With so many households struggling at Christmas, a half decent strategy and action is the least that Welsh Government can do.

You can read our full response to the Welsh Government consultation here.

Victoria Winckler is Director of the Bevan Foundation. She undertook a review of indebtedness for the Public Policy Institute Wales.  To enable us to speak out on this and other issues, please subscribe or donate as little as £3 a month.