Resolution Foundation hosted a ‘Financial Health’ breakfast at Labour Party Conference in partnership with Money Advice Trust to explore what can be done to improve the financial health of vulnerable people on low incomes. Gavin Kelly, Chief Executive of Resolution Foundation, opened and chaired the meeting pointing to the importance of financial health issue not only for those at the bottom of society but also for the seven and a half low earning adults just above. Low incomes here prevent people from building up a safety net of support; 67 per cent have less than one month’s pay packet away from a potential crisis and 0.9 million are already in acute financial health. Liam Byrne MP argued that low earnings growth among the ‘squeezed middle’ in relation to the rest of society has meant that low earners are falling behind to the sum of £2 billion each year. He argued that the Labour party cannot afford to neglect the group, one in six of whom swung to vote Conservative at the last election.
While the recession might be over in technical terms, Joanna Elson, Chief Executive of the Money Advice Trust, argued that the effects are still being felt. Despite record low base rates, pressures on household budgets meant that one million people in the last year had using their credit card to make mortgage payments. And at the same time, a large proportion of the population do not have the skills to negotiate these tough times: the Financial Consumer Panel has found that under half of the population think they are well equipped to make a financial decision. She argued that financial health needs to be understood and supported holistically, referring to the Resolution Foundation’s model – from prevention (education), through to primary (generic advice) and in the worst cases remedial support (in cases of financial crisis).
The roundtable discussion identified issues and challenges for all parts of the mixed economy over the coming months. For the advice sector, more limited resources mean that organisations need to work more efficiently than they have in the past and signposting and partnership working will be ever more important – particularly now that the Money Guidance service is set to become a universal service. There is a challenge for Government and politicians to strike the right balance between solving problems today and ensuring the next generation don’t pick up bad habits. Young people in particular need to be educated on the difference between good and bad credit and debt, something that will prove more difficult without a focus on financial education in schools. However, this also requires affordable and appropriate products – a challenge to providers of financial services. The opportunities for a Post Office style provider were noted, in order to provide low income households a viable alternative to high cost credit providers.