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Three-fifths of low and middle income households are currently unable to save money, while for people already saving, the ratio between spending and saving is dramatically falling, researchers say.

A new report from CHASM, University of Birmingham’s research Centre on Household Assets and Savings Management, is calling on the government and employers to do more to help those on lower incomes to start saving. CHASM is a research centre based jointly in the School of Social Policy and Birmingham Business School at the University of Birmingham.

The report found that around 16 million people in the UK have less than £100 in savings, which researchers say creates too much financial risk, something which households should be looking to mitigate.  Low incomes are a key barrier to saving but policy change could nevertheless help people to save more.

The report’s key recommendations include:

  • The government should enhance the Help to Save Scheme to make it more flexible and more generous. The money for this could come from rebalancing the amount spent on savings schemes that benefit the better off.  For example, the cost of tax breaks on Individual Savings Accounts amounted to £2.6 billion in 2015/16, while the Help to Save Scheme is only expected to cost £70 million per year by 2020/21.  A small reduction in the cost of ISA tax breaks could be directed to the Help to Save Scheme.
  • For those in work, employers should provide and promote Save as You Earn schemes, working in conjunction with credit unions where appropriate. These schemes are free to set up with credit unions, who can handle the administration of the schemes.
  • Joined-up working at local level is important, such as Birmingham’s Financial Inclusion Partnership, can lead to important initiatives, like Birmingham Money, to support those on lower incomes. This joint working involves local authorities, credit unions, community development finance initiatives, Citizens Advice, charities and housing associations among others.

The report makes ten key recommendations:

  • A new government spending formula should be developed, linking the amount of support for lower income savers to the level of help given to ISA savers more generally.
  • Policy makers and commercial providers should build on the principles of Help to Save and develop more flexible savings mechanisms and products that coincide with the needs of lower income savers. Matched savings schemes need to be lower, and more realistic targets for savers to reach before rewards from the ‘matched’ saving can be realised.
  • Savings products need to be designed with realistic and positive savings goals as their focus.
  • More needs to be done to meet the appetite for trusted ‘brands.’ Civil society has an important role in creating and sustaining locally branded, trusted savings institutions through effective sign-posting.
  • Central and local government should support the creation of a number of national brand leaders in the Credit Union sector, working with civil society to encourage people to save and to build trust with Credit Unions.
  • The rules governing information routinely provided to savers should include the obligation to inform them of alternative products or more recent offers. Higher standards of service will include this level of transparency, as well as helping lower-income savers navigate the process of switching/ opening an account.
  • Commercial providers should be prevented from defaulting savers onto the lowest interest rate. Instead, lenders should default to a capped percentage of the account opening Offer rate.
  • A Savings Commissioner should be established along the lines of the Children’s Commissioner, with responsibility to protect and promote the interests of savers, particularly those on lower incomes. The Commissioner should also have statutory powers to ensure acceptable standards of transparency in the savings market and to encourage a higher standard of service.
  • Employers should be encouraged by government to provide savings services to their employees. The success of national pension auto-enrolment should be emulated for shorter-term savings, with employers automatically deducting a small proportion of a monthly income, unless employees choose to opt out.
  • Local Authorities should be enabled to take the lead in bringing state, community and commercial providers together to deliver a savings strategy.




Karen Leach, from Localise West Midlands, argues the case for a Birmingham Pound



It’s been fantastic to see all the interest in the potential of a Birmingham Pound over the last few days. Just one tweet following a very first-stage meeting of a few potentially interested people, and the Birmingham Mail were covering the story. I don’t want to belittle my abilities to attract conventional media to the Localising Prosperity agenda, but we’re hardly used to being sought out like that! Thanks Tom Davis – your professional interest is much appreciated.


For those who don’t know: the current new rash of local currencies are worth a look. In our meeting we heard from Steve Clarke of the Bristol Pound. They are taking off in Bristol, Brixton and Totnes particularly – though lots of other places are following, like Birmingham. The local pounds are exchangeable with sterling: for every Bristol Pound in circulation there’s a sterling one in the credit union’s account. Local currencies can be used with locally-owned businesses. Businesses can trade with other local businesses. Bristol council accepts council tax and business rates in Bristol Pounds, and council employees can accept part of their wages in them. There are locally-designed paper notes, which are great for spreading awareness of the scheme, but most transactions are electronic with a handy mobile-to-mobile payment system. This means for example that market traders are enabled to take electronic payments.


You can buy bathrooms, get bikes repaired, have plumbing carried out, as well as buy all the local produce you would expect to be able to buy. Yes, it needs funds to run the scheme, but the returns look healthy, if hard to measure: Bristol Council thinks it’s worth around £100,000 per year in tourism benefits alone. It also raises the profile of local money circulation as an idea: far more people are becoming aware that they can choose to spend their money in a way that supports livelihoods.


One thing I’m going to bang on about constantly as we progress these plans is that we must make this an inclusive local currency: Birmingham is good at ‘superdiversity’ and if this local currency happens we want it to be something everyone in the city feels is theirs to use, in whatever shopping culture they find themselves. I live just off Ladypool Road and would love to see all those great indie grocers taking Birmingham Pounds, and paying their suppliers at the Birmingham Wholesale Markets with them… The credit union also plays a role: electronic transactions happen via accounts with the local credit union, which gives them new members, new capital and higher public profile.


Not that I think any of the new currencies are as ‘exclusive’ as some critics think they are. It’s not the disposable income brigade shopping in trendy independents that have brought about the massive global rise in inequality and environmental injustice, is it? It’s the corporate shareholder model, sucking out the value from the real economy that gives us our livelihoods.


And to despise the ‘trendy independents’ aspect of local currencies because of their exclusivity, overlooks how local money flows can work.  Surely when some have more disposable income than others, we want that income to be going to the ‘livelihoods economy’ not the ‘parasitic economy’? Spending money at Glynn Purnell’s restaurant sends it into the Birmingham wholesale markets, whose vital role in providing jobs and affordable fresh food is well documented: better  than some big chain providing a fraction of the local livelihood value. Trickle down is a myth – until you decentralise money flows.


No scale of economy automatically generates equality and inclusion, but tackling the concentration of wealth in so few hands has to be pretty crucial.


So we’re meeting again in a couple of weeks to start to make some plans – for fundraising, promotion, getting signup, organisational models, banknote design competitions, partners to involve. People involved so far are from a credit union, the new Impact Hub, the council, Birmingham Friends of the Earth, Kings Heath Transition, Equality West Midlands, academics and business organisations. There’s a good buzz about it. Watch this space.


This blog was originally published on the Localise West Midlands website

Nearly half of all payday lenders have pulled out of the UK market in the last 18 months. The UK’s high-cost short-term credit market has been coming under relentless pressure from the media and campaigners to change its ways.


Jennifer Tankard, the director of advocacy and research at the Community Development Foundation and leader of the Community Investment Coalition, noted that the Consumer Finance Association, the trade body for payday lenders, has repeatedly expressed concern about the impact of regulation on the industry, arguing that a regulated and innovative financial services industry will be replaced by unregulated and illegal lenders.


While the number of payday loan providers may be declining, credit unions and community development finance institutions (CDFIs) are slowly scaling up and offering a wider range of services, such as short-term loans, at affordable prices. The government is investing £38m to support credit unions to modernise and grow. The Community Development Finance Association, the trade body for CDFIs, estimates that in 2013, almost 10,000 small and social businesses were able to launch and grow with a CDFI loan. These businesses created and saved more than 17,000 jobs, many in the UK’s most disadvantaged neighbourhoods.


However many of the credit unions and CDFI’s potential customers are not aware of their existence. Community projects such as Big Local and Community First are helping to tackle this. The £38m invested in credit unions is almost the same amount as the top five payday lenders spent on advertising in 2013 (an estimated £36.3m). The financial services market remains still distorted.


In an article in the Guardian, Jennifer Tankard summarises the need for tighter regulation of payday lenders and the scaling up of credit unions and CDFIs to serve poorer communities.