23 April 2008

James Plaskitt MP

Parliamentary Under Secretary of State (Commons)

Quids In: Financial Inclusion in a rural context

Wednesday 23 April 2008

[Check against delivery]

Financial exclusion is important

It’s a pleasure to join you here this afternoon.

Particularly, as today you are focussing on financial exclusion issues in our rural areas

There is a natural tendency, when discussing any sort of deprivation issue, to think of it as essentially urban.  But the reality – as you all know, and as I know, representing a partly rural constituency – is different.

The main difference is often simply this – the deprivation, or the poverty, is more concentrated and thus more visible in urban areas than it is in rural areas.  But the important point is, it is just as real – wherever it occurs.  No less real for being dispersed.  No less real for being less visible

And after all on St George’s day, it’s important to consider our country and its people in all their dimensions – not just one.

So as we bring forward our second phase of work to tackle financial exclusion, I want to be sure that we are going to extend its reaches into all corners of the country.  So we need to adapt the programme to ensure it is ‘rural proofed’ – in the current jargon. 

That’s why I particularly welcome the conference you are having today and why I value you helping us to get a grip with financial exclusion in its harder to reach areas.

A dominant rural issue is simply that of access.  Our rural communities are often stronger communities – in the pure sense of the word – than is the case in urban areas.  But they have weaker infrastructure.

That tends to draw services away.   Businesses look for economies of scale.  Putting it bluntly, rural services are often more expensive to provide

But the need is no different.  And that point is fully understood in my department.
 
It isn’t that we can’t reach.  We can.  We just have to adopt a different, smarter approach, and not rely on top-down attitudes.

Let me just outline why financial exclusion matters so much to us.

Put simply, it’s a question of poverty and social justice. 

We want to give those born to poorer families the same chances as those from more wealthy backgrounds.

Poverty must not be a way of life.

During the last 10 years we have consistently sought to empower those who are less well off and to remove barriers that prevent people playing a full part in society.

Financial exclusion is one such barrier. 

It can hold people back, prevent them from accessing services most of us consider essential even routine.

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 over the last 10 years:

• nearly 2 million people still do not have access to a bank account
• up to 3 million regularly use high cost door step credit
• and similar numbers do not have even the most basic insurance cover in the event of fire or flood in their homes

And, as this forum, your forum, importantly shows, we must not lose sight of the rural context.

For example: one in 5 people live in the countryside, but only one in 8 banks are based there.

And less than 10% of all cash points are located in rural areas.

Simply accessing your money in a rural area can mean driving miles, rather than simply walking down the High Street.

So our strategy seeks to take account of the specific financial exclusion issues people can face in rural areas.

The strategy, involves building on local initiatives to spread the provision of basic banking, affordable credit and increasingly, appropriate insurance.

And there have been some notable successes in a rural context.

For example Just Credit Union are based in Shrewsbury but their common bond covers 1,200, mostly rural miles reaching places such as Oswestry, Ludlow, Craven Arms and Market Drayton. 

Since their Growth Fund contract started in August 2006, Just have made affordable loans to almost 400 financially excluded people (total value of £140,000). 

In addition Growth Fund has made a contribution towards the introduction of transactional banking services for members of Just Credit Union.

More recently Growth Fund has made it possible to offer affordable credit in Cumbria.  Derwent and Solway Housing Association are the lead organisation working closely with 6 credit unions in Millom, Workington, Whitehaven, Carlisle, Cleator Moor, and Maryport. 

And since October last year these partner organisations have been able to make over 300 loans (with a total value over £160,000) to financially excluded people across Cumbria.

Now Let’s Talk Money

Over the next three years we have committed £135 million to tackle financial exclusion.

One of our most exciting initiatives is Now Let’s Talk Money campaign.

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

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

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

From local authorities to Jobcentre Plus and from Citizens Advice Bureaux to the NHS, we want to make the most of the contact people have with these organisations.

We know that financial matters are seen by many, often as complex and rather daunting.

So if someone has financial problems we want intermediaries to be able to recognise this and know where to direct them.

If someone is in need of advice, we want to ensure they get the right advice.

We want to get more people to engage in finance.

That is precisely what this initiative is all about.

Giving people the right information and tools and empowering them to have confidence to make the right decision about their finances.

But we in Government know that we do not have all the answers.

Progress is not just a product of Government action, it essentially requires partnership.

As you will all know better than anyone else, our success relies upon the close cooperation and collaboration between many diverse organisations.

From voluntary organisations, housing associations, local authorities to the financial services sector, all bringing different skills and expertise.

That is why events like this are so important – because you make a difference.

I am interested in hearing new innovative ideas and understanding the latest best practice.

I have received reports on your discussions today and I am encouraged by some of the themes that have emerged.

I have noticed amongst them some common threads. Many of the solutions proposed are simple and straight forward, as the best answers to problems often are.

And in many cases they exist already, but we need to work together more closely and effectively so that we can better tailor help to those in rural areas

I welcome the suggestion by Dr Stuart Burgess to increase the use of technology to help those in rural areas overcome financial barriers.

And this technology need not be complex.

Simply installing an ATM or encouraging a local shop to accept cash cards can help those on the cusp of financial exclusion back into the fold.

And I am encouraged by the suggestions from Eric Leeders that the banks have a role to play in investing in these simple important technologies.

As this event shows, only through deeper collaboration can we help address the problems of financial exclusion in rural areas

 

Financial Inclusion Champions

I am pleased to say that, Now Let’s Talk Money will be expanded under a Financial Inclusion Champions initiative.

My Department 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 I believe help widen the scope.

We will provide dedicated members of staff who will work in specific areas and regions to spread best practice and link up local and national priorities.

Although the primary focus of this champions initiative will be on the red and amber alert areas identified in recent HM Treasury research, this does not necessarily take into account issues of rural poverty so easily masked by low population density. 

So, I am happy to announce today the creation of a financial inclusion champion team that will focus on the unique challenges rural financial exclusion presents. 

The rural champion team will develop and support more activities like the ones you’ve heard about today, and over the coming months we will develop the role in consultation with the Commission for Rural Communities and their partners.

Our thinking at the moment is at a very early stage, but we envisage the rural champion team being made up of people with knowledge of the effect of financial exclusion in rural communities

We would expect them to make significant progress on work to engage and co-ordinate with rural councils and other rural intermediary organisations (including the third financial sector) to deliver greater levels of financial inclusion at a rural level.

 

Conclusion

As you can see, we have a wide agenda to tackle all forms of financial exclusion.

I said earlier it’s St Georges Day.  St George slew dragons.  But they are mythical beasts (I think) – so that job was relatively easy. We’re after a different beast. Sharks. To be precise, Loan Sharks. 

And I simply want to put them out of business.  That means we have to expand access to affordable credit and impartial advice – ultimately leaving no estate behind – and no village

So, with your help we can expand initiatives even further and reach even more people in rural and urban areas.

With investment from government and impetus at a local level we can all help drive out the loan sharks.

Enable people to take back control of their financial situation.

Give people, wherever they live, the chance to make the most of their opportunities.

In short, to make a real difference to people’s lives