New report raises the alarm on financial exclusion in Scotland

A new report launched yesterday in the House of Lords reveals the extent of financial exclusion across the UK, and particularly in Scotland where many still lack access to basic services like current accounts, car and home insurance, loans and savings, and free money advice.

The dearth of these services in more deprived areas of the country can make it exceedingly difficult for ordinary people to manage their daily budgets, cope with unexpected bills, or receive the financial guidance they need.

The statistics are troubling. According to the report, almost 1 in 6 (17%) Scottish households are facing serious financial difficulties, rising to 1 in 3 in some of the most deprived areas of the country. In total, about 69% of Scottish adults are experiencing financial distress, and almost 4.6% of households accessed a food bank in the four weeks before being surveyed (compared to a UK average of 3.2%).

Research Launch: Financial Inclusion across the Four Nations

Across the UK as a whole, over 8 million adults need debt advice, and one in five (22%) have increased borrowing to cover their living costs due to a lack of affordable credit. In deprived areas of Scotland, this lack of access to basic financial amenities is stunting growth and limiting the economic horizons of entire communities.

Chris Pond, FIC Chairman and lead spokesperson for the report, comments:

“Our findings reveal a truly depressing picture of wasted human and economic potential which is holding the country back. The Government needs to close the financial inclusion gap as a priority to unlock inclusive growth by drawing on the skills and ambitions of all citizens, including millions who are currently financially excluded.”

The FIC believes the key to unlocking inclusive growth in places like Northern Ireland is for the government to implement a ‘National Strategy for Financial Inclusion’ — which Labour committed to in January before the election.

This is necessary to address social inequalities and the deep-rooted and worsening problems of exclusion in Scotland, and the wider country. Crucially, it would also unlock growth and opportunity in areas that for too long have been left behind by the financial system.

The report’s recommended measures include improving access to face-to-face banking services and cash for local people; expanding the availability of affordable and well-regulated credit options; and encouraging greater savings habits through incentives and new programs. It also calls for not-for-profit debt and money advice to be freely available to all, and for an overhaul the UK’s network of banking hubs. For reference, there are currently only 12 hubs in Scotland out of a total of 76 UK-wide.

According to Chris Pond, the Treasury has a big part to play in driving this plan forward:

“This research provides a baseline for a government-led National Financial Inclusion Strategy, which we hope is now imminent. The Treasury should report to Parliament each year on progress in achieving greater financial inclusion. We need clear outcomes and targets to ensure the right focus in the key areas of inclusion.”

The FIC/CHASM report can be read online at the University of Birmingham's Centre on Household Assets and Savings Management (CHASM) website.