17 June 2008

James Plaskitt MP

Parliamentary Under Secretary of State (Commons)

Mind Annual Conference

[Check against delivery]

Debt and mental health

I am delighted to be addressing your conference today – it’s good to be back at Brunel.

I used to be a lecturer here in the Government Department.

That was 25 years ago – I was a very young lecturer!

However I decided lecturing wasn’t my life. So relax – I’m not about to do it again.

I’m a ‘recovering academic’.

Instead I’m going to talk about the important issue of debt and mental health and our shared agenda to tackle financial exclusion.

And let me straight away commend ‘In the Red’ Excellent analysis – very sensible, constructive recommendations

This conference is also timely for us – as some aspects of our work on financial inclusion are still evolving. And so we can ensure that we take on board what you are telling us.

Financial exclusion is not of course limited to people with mental health issues.

But as your research, identifies – those with mental health issues are much more likely to experience financial exclusion than people without mental health problems.

This can hold people back, prevent them from accessing the most basic services most of us consider essential.

So, not even a bank account, nowhere to securely save money, no access to any form of affordable credit, no access even to financial advice.

All of this means that people become pretty vulnerable and they can’t fulfil their opportunities in life.

In extremes, it can push people further into poverty and contribute towards social exclusion.

You know, like I know, that the task before us is considerable. Despite all the progress we have made:

• still nearly 2 million people without access to a bank account
• up to 3 million regularly using high cost door step credit.

So we must overcome this vulnerability that affects so many.

• We must ensure all have access to affordable credit
• We must bank the unbanked
• We must ensure all have access to money and debt advice services

These are big challenges.

Already, much has been achieved to eliminate financial exclusion. But – as you know – much still remains to be done.

So let me take this opportunity to update you on some developments that are on-going in areas of concern identified in the Mind report.

Of the 14 recommendations, I am going to pick up on 4 or 5 – which are of particular relevance to our work in the DWP

Like you I want to see better regulation of doorstep lenders and private finance companies – your first recommendation.

I am pleased to say that work on the home credit market by the Competition Commission has identified some significant remedies that are under way:

Establishing fairer terms for early settlement
This is basically a tweak to the regulations that apply to the rest of the consumer credit sector, to give home credit customers a better deal. This came into force in December 2007.

Placing obligation to share creditworthiness data through rating agencies
Since March 2008, large lenders have been obliged to enter into agreement with at least two credit rating agencies.

The intention is that this will widen home credit customers' access to credit and increase competitive pressure on lenders.

Enforcing use of a price comparisons website
By August 2008, lenders will be obliged to post price information on a price comparisons site, alongside price information from credit unions and certain other lenders.

Ensuring statements are provided to borrowers
We made some amendments to customers' rights to receive statements under consumer credit regulation, so that these statements and the surrounding obligations are more closely suited to the sector.

These rights kick in October 2008.

Next, improving access to sources of affordable credit – your second recommendation.

We have made significant progress here in the last few years. And to increase further the supply of affordable credit we have pledged a further £38 million to the Growth Fund.

This is a notable result and builds on the £42 million already invested.

I think it is important to point out that our case for additional funding was made so compelling because of the great success of the first tranche of work.

Funded organisations have provided more than 70,000 loans to financially excluded customers, including those from vulnerable groups, since 2006.

Credit Unions and Community Development Financial Institutions provide vital support to financially excluded people and I want to see this market grow.

As you rightly say in your report, there are many more people who could benefit from the services they offer.

So the Growth Fund must help build up a network of robust lending institutions.

We are expanding the coverage of affordable credit. We are targeting support at the 25 areas rated ‘red’ and 56 rated ‘amber’ in respect of the gap between demand for affordable credit and existing supply.

We are also working closely with mainstream banks to look at what contribution they might individually make to support Growth Fund contractors and to improve the infrastructure and skills of the third financial sector in general.

As Mind have recommended in their report this could be in the form of developing and providing IT support systems or putting in expertise in the form of consultancy or volunteers.

When you were researching for you report, you found that only 3% of respondents reported getting a loan from a credit union. Where as most other sources of accessible credit were vastly more expensive. It doesn’t make sense.

That’s why I want to see a significant expansion of the credit union movement. Growth Fund is starting to make that happen.

Some existing unions have already doubled in size. Others are joining together in collaborative ventures. And new ones are starting up. Growth fund investment is designed to plug the gaps in affordable credit provision – and to put the doorstop loan sharks out of business.

Furthermore, as a sign of how serious the Government is tackling financial exclusion I am proposing a radical reform of the Social Fund.

I want to investigate how we expand the Social Fund.

Because if the fund is to continue to grow, it must adapt to future trends.

With this in mind, we have commissioned a detailed study for reforming the Social Fund.

We want to look at the possibility of making this a public-private partnership to deliver a reformed and expanded version of the budgeting loan scheme more closely linked with the financial inclusion strategy, including provision of money management advice and support.

A number of your recommendations rightly address the issue of advice.

Financial inclusion is about having access to appropriate financial products and services that give people the opportunity, ability and confidence to make informed decisions about their financial situation and organise their money effectively.

We wish to see a significant increase in the capacity of free face-to-face money advice.

The enterprise department is taking this work forward with the money advice sector, with an initial £47.5 million from the Financial Inclusion Fund in 2005-2008.

Already by improving access to free face-to-face money/debt advice means that tens of thousands of people, who have struggled alone to deal with mounting debts, have been able to talk to someone who can help them take the first steps towards a less stressful future.

And we know that less stress is a key factor in helping people with mental health issues move to a more stable position.

A further £85 million has been made available for face-to-face debt advice in 2008-2011. Debt advice agencies are also being encouraged to do more outreach.

This could for example mean that advice sessions are run in community centres or even GP surgeries.

These measures will make a real difference to people facing financial exclusion by encouraging them to ask for the help they need, when they need it – to break a cycle of deprivation and debt.

And breaking that cycle is often the key to reducing the levels of stress felt by families.

So we are on the same page, because we want to increase the financial capability and financial inclusion for those with mental health problems and indeed the whole population.

We recognise that reaching people is best done at local level and through working with sector specialists including health professionals and support agencies.

We have a ‘Now Let’s Talk Money’ initiative. Within this we are identifying Financial Inclusion Champions.

They are individuals who can help us pull together specific initiatives delivered by partner organisations that are aimed at those with particular needs, for example, people with learning difficulties, the elderly, ethnic minorities and ex offenders.

This is one of the areas where our work is still evolving and so I would be happy to hear from Mind about specific proposals for initiatives in this area, which will directly assist people with mental health problems

It is not only Government working with key stakeholders. I have recently seen a financial information toolkit produced by the FSA and Macmillan Cancer Support aimed at nurses supporting people with cancer.

I know that Chris Pond from the FSA thinks that it is a product which could be adapted for others with specific needs.

Tailoring local initiatives to the specific needs of the community is a reason why we set up the ‘Now Let’s Talk Money’ initiative.

It has helped people on low incomes find out about financial products and how to manage their money better.

Like all the work we do on financial inclusion, central government aims to facilitate, not run the process.

So the initiative works through and with local agencies and organisations who can offer a bespoke service tailored to their clients’ needs.

Financial matters are seen by many as complex and often daunting. Not least by people with mental health issues.

So this initiative has been a great way of getting people engaged with finance.

Empowering them to have confidence to take the right decision. But recognising that some people including those with mental health issues may need a higher degree off support.

I am pleased to say that, ‘Now let’s talk money’ will be expanded under a Financial Inclusion Champions initiative.

We will be spending £12 million over the next three years focussing on areas where the biggest problems exist.

This will sustain the work of the campaign and help widen the scope. As this work gets under way in the regions, keep an eye open for it coming your way and if you can, get involved.

There is of course a wider government agenda aimed to help people with mental health issues.

We have our new mental health teams providing community-based care as an alternative to acute inpatient care.

And within that, our Assertive Outreach (AO) teams – providing intensive support for people with severe mental illness.

And our Crisis Resolution/Home Treatment (CRHT) teams providing intensive support.

And the Early Intervention services for people aged 14-35 who were experiencing a first psychotic episode

But you know this. I know it.

Government alone cannot do everything. So in the work I am doing to address financial inclusion I will be looking to work in partnership with key stakeholders, and that includes MIND.

I am also keen to work with colleagues in other departments to take forward some of the key issues identified by Mind and I am pleased that my officials will be meeting with Mind representatives to do this.

Conclusion

MIND has a vision:

‘Of a society that treats people with experience of mental distress fairly, positively and with respect’

I could readily adopt the same vision for all those currently financially excluded. And of course many of them do have mental distress.

So, let’s join forces. Joint working between us on this issue should ensure real progress. There are many recommendations in your report against which we should be able to write – in a few years time – ‘delivered’

Why not? The will is there, the resources are there, the experience is there. No reason why we can’t do it.

I left academia because although I enjoyed talking – I was more drawn to doing. I’d like to think my students at Brunel got a buzz out of my lectures.

But I tell you what I get a buzz out of now – meeting people whose lives have been turned around. Because we got them out of the clutches of the loan sharks. We broke their cycle of poverty – and re-introduced them to opportunity and personal fulfilment. In other words, ‘out of the red’.

Thank you very much – Essays please by next Wednesday.