Author: david.collings

The price of poverty: why being poor still costs more

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By David Collings and Sara Davies

Over 14 million people in the UK population live in poverty, and many more live on low incomes. Unfair poverty premiums – the additional costs people on low incomes incur when paying for essential goods and services – put undue strain on the household budgets that can least afford it, locking people into cycles of poverty. Since we published our 2016 research, the nature of the poverty premium may have changed but it certainly hasn’t gone away. And according to our latest research for Fair By Design and Turn2Us, a national charity providing practical help to people struggling financially, people already struggling financially are paying almost £500 more for essentials like energy, credit and insurance.

The average premium is almost £500, and reflects the current market and regulatory landscape

In 2019, Fair By Design and Turn2US asked us to explore recent changes to the poverty premium landscape – including both regulatory and technological changes – to understand if they are having an impact on the cost of poverty premiums or the number of people paying them. To do this we surveyed 1,000 people living in low-income households who had contacted Turn2Us for help. Our research showed that low-income households incur an average £478 of extra costs through energy, insurance, and credit poverty premiums:

  • Car insurance was the biggest contributor to the premium in 2019 at nearly £500 – some pay nearly £300 more per year because they live in a deprived area, and additional charges for paying monthly instead of annually could add a further £160. This premium is markedly higher than it was in 2016, when together these cost an extra £155.
  • Credit is particularly expensive on a low income, in whatever form it takes. For example, a sub-prime credit card costs around £200 more per year on average, and personal loans cost more than £500 extra.
  • And we found similar inequalities in relation to energy; the best prepayment tariff could still be around £130 more expensive than the best online-only deal, and paying on receipt of bill could cost an additional £143 more per year. However, the drop in the premiums incurred via energy costs since 2016 suggests that the tariff caps implemented by Ofgem have had a positive effect.

Of course, while £478 is the average premium, there is no such thing as an average low-income household. The extent and experience of the poverty premium varies widely between groups and families.

Unfair poverty premiums are yet another example of the inequality of poverty

Our research was undertaken in late 2019, before the onset of the pandemic. However, recent evidence shows that the economic and social consequences of Covid-19 are being felt most keenly by those on low incomes, with lower-paid workers more likely to have been furloughed or to have lost their jobs. Coping with tough times is hard enough when approached from a generally constrained financial position, but the finances of low-income households had already been worsening in the years leading up to 2020 – real income growth stalled in 2017-18, something that affected the poorest the most. And the social safety net had been badly damaged, with cuts to working-age benefits and tax credits further pushing down the incomes of low-income households. Seen in this context, poverty premiums are yet another example of the inequality of poverty, compounding and extending hardship at a time when increasing numbers are experiencing major falls in income, perhaps tipping people over from just about managing to not managing.

What happens next?

We can be certain that the pandemic’s economic impacts are with us for the foreseeable future. But while much in 2020 remains outside of our control, the poverty premium was and remains a solvable problem. Regulators and policymakers should now work together to find solutions for people struggling across all markets. In recent years we’ve already seen the positive impact of such interventions, most notably in the form of price caps. So what more can we do now?

We’ll leave the last word to Jamie Greer of Turn2Us:

“Stronger regulation of financial products, an improved social security net with crisis grants and protective changes to the energy market would mean we can start eradicating the poverty premium.”

Read the report and executive summary

‘Zealous and unsympathetic’: are Government debt collection practices outdated?

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By Jamie Evans

In what many will consider a somewhat worrying sign of the times, in the UK, job adverts for debt collectors surged in August. This comes after news that during and following lockdown, households receiving financial support from the Government were increasingly likely to have missed debt repayments or fallen behind on household bills.

Where the UK’s economy heads next is something that will cause concern for many of us. Financial difficulty and, in particular, debt can be a major source of stress and poor mental health – and can also impact on numerous other aspects of our lives, including our relationships and productivity at work.

But, while debt itself can be problematic, the actions of creditors when collecting money owed to them are just as – if not more – important. Where good debt collection practices will hopefully help the debtor find a route out of difficulty, poor practices will simply make problems worse.

Government debt collection practices ‘worst in class’

As I outlined in a new briefing paper for the House of Commons Library, the debt collection practices of central and local public sector bodies have increasingly been called into question in recent years. There are reported to be as many as 500 different public bodies that an individual might owe money to, including the Department for Work and Pensions (DWP), HM Revenue & Customs (HMRC), the NHS, and local authorities.

In 2019/20, public sector bodies were owed an estimated £16 billion across several types of debt – including benefit overpayments, council tax arrears, benefit advances, criminal court financial impositions, and rent arrears on local authority housing. The total value of all debt owed to the public sector, however, is not currently measured.

While commercial lenders and debt collectors have begun to improve debt collection practices in recent years – mainly as a result of regulatory action from the Financial Conduct Authority (FCA) –government bodies have been heavily criticised for not following suit.

Debt advice charities, including Citizens Advice, StepChange and the Money Advice Trust, have all called on the Government to improve practices – and their calls have been echoed more recently by the Centre for Social Justice and a growing number of MPs and Peers. In 2018, the Treasury Select Committee concluded that public bodies are “often found to be the most zealous and unsympathetic of creditors in collecting arrears” and more recently former Conservative MP Nicky Morgan (now Baroness of Cotes) wrote the following:

“Regrettably, the public sector continues to lag behind. Despite glimmers of progress, the Committee’s verdict in 2018 that the public sector was ‘worst in class’ for debt collection remains sadly accurate.”

Aggressive practices causing downstream problems

Criticisms of the public sector’s approach to debt collection have focused on their perceived heavy-handed nature, with a reliance on enforcement agents (bailiffs), rapid escalation of debts (including the use of imprisonment for non-payment of council tax debt), and increasingly aggressive practices as the financial year-end approaches.

Overall, it is argued that a short-term incentive to collect money owed as fast as possible may come at the cost of longer-term sustainability and may in fact lead to a lower likelihood of all money being recovered or of individuals being able to escape the cycle of problem debt.

These issues are exemplified by the BBC’s docudrama ‘Killed by my debt’, which tells the real-life story of 19-year old courier Jerome Rogers who found himself in debt to Camden Council as a result of two minor traffic violations. In 2016, after the two initial £65 fines he received spiralled to a £1,000 debt and bailiffs clamped his motorbike – his primary means of making a living – Jerome sadly took his own life.

Jerome’s case raised awareness of the issues associated with debt collection and prompted Camden Council (and others) to introduce formal policies related to the treatment of vulnerable debtors. Nevertheless, according to Freedom of Information (FOI) requests made by the Money Advice Trust, in 2018-19, English and Welsh local authorities used bailiffs 1.1 million times to collect council tax debts and 780,000 times for parking debts.

Important geographical differences

The aforementioned FOI requests also highlight the variation in practices across the country, with bailiff use increasing in some areas but not in others and some local authorities adopting ‘good practice’ measures (such as policies for supporting vulnerable individuals). The Money Advice Trust have mapped these practices across England and Wales, as shown below.

Differences also exist between the constituent nations of the UK. England, for example, remains the only country in UK (and, more widely, in Europe) to imprison people for non-payment of council tax. Wales abolished this practice from April 2019, with Mark Drakeford describing the sanction of imprisonment as ‘an outdated and disproportionate response to a civil debt issue’. Scotland and Northern Ireland also have very different rules around the enforcement of debts more generally.

Recommendations for change

While the Government has already made some changes in this area, including reforms to the bailiff industry in 2014, it recognises that more can be done. In June 2020 the Cabinet Office published a consultation on fairness in Government debt management.

Campaigners argue that the Government needs go much further. In particular, there have been calls for independent bailiff regulation and an end to the practice of imprisonment for non-payment of council tax, as England is the only remaining country in Europe to continue using this type of enforcement. Campaigners also want to end rules which make individuals liable for an entire year’s council tax payments after just one missed instalment, as this fails to offer those having repayment difficulties a route out of debt.

Additionally, a group of 55 cross-party peers and MPs have written a letter to support the idea of a ‘Government Debt Management Bill’. This would place current codes of practice on a statutory footing and more generally ensure consistency across public bodies (and across the country) in the way that they calculate repayment affordability and treat those in vulnerable situations.

With the impact of the pandemic potentially leading to an increase in those facing financial difficulties, such calls for change are only likely to grow louder.

About the Author: Jamie Evans is a Senior Research Associate at the Personal Finance Research Centre, within Bristol’s School of Geographical Sciences. He is currently on a part-time Parliamentary Academic Fellowship at the House of Commons Library within the Business and Transport team. For more information on these fellowships, please visit UK Parliament’s website.

Suggested further reading

Evans, J. (2020) Debts to public bodies: are Government debt collection practices outdated?. House of Commons Library briefing paper number 9007. https://commonslibrary.parliament.uk/research-briefings/cbp-9007/

Evans, J., Fitch, C., Collard, S., & Henderson, C. (2018)  Mental health and debt collection: a story of progress? Exploring changes in debt collectors’ attitudes and practices when working with customers with mental health problems, 2010–2016. Journal of Mental Health, 27(6): 496-503. https://doi.org/10.1080/09638237.2018.1466040

Anderson, B, Langley, P, Ash, J, Gordon, R. (2020). Affective life and cultural economy: Payday loans and the everyday space‐times of credit‐debt in the UK. Transactions of the Institute of British Geographers. 45: 420– 433. https://doi.org/10.1111/tran.12355

García‐Lamarca, M. and Kaika, M. (2016), ‘Mortgaged lives’: the biopolitics of debt and housing financialisation. Transactions of the Institute of British Geographers 41: 313-327. doi:10.1111/tran.12126

“Now is literally the worst time in decades to be entering the work force”: the impact of COVID-19 on university students’ finances

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By Katie Cross and Sara Davies

As students return to University campuses, the discussion has largely focused on worries over increased COVID-19 rates. But our survey of University of Bristol students suggests their approaching financial position should also be cause for concern. 

The economic impact of COVID-19 has been both rapid and widespread. By June, the economy was around 17% smaller than it had been in February. The sharp increase in Universal Credit claims after lockdown was unprecedented, with almost 2.5 million household claiming between mid-March and late June. And the Office for Budget Responsibility is projecting an unemployment rate of 11.9 per cent in Q4 of 2020. It is a very uncertain time for all.

But one group whose financial position we have heard less about during this time is that of university students. Each year we conduct a survey for the University of Bristol’s Widening Participation team to look at the impact bursaries have on students, comparing the financial experiences of those from low- and middle-income backgrounds who receive financial support from the University, with those from higher-income backgrounds[1], who do not. This year the timing of the survey allowed us to ask students about their financial experiences both pre- and post-COVID, and to look at how they may have fared during the crisis.

Financial impacts so far

As with the wider UK population, COVID-19 and the subsequent lockdown has had an unparalleled impact on student employment. Prior to the pandemic half of students surveyed (51 per cent) were employed in some form. Since the outbreak however, over two thirds of those previously working were no longer doing so, with a further 12 per cent working fewer hours than before. Of those no longer working, two thirds said this was due to their employer being closed (either temporarily or permanently). Although the majority of students receiving some form of maintenance loan, earned income is still important to students in order to manage financially, particularly among those who are not in receipt of a bursary, where this loss of income could be worryingly detrimental.

“My maintenance loan does not even cover my rent which means I have to borrow money from family and work in order to cover my rent and food.”  – Year two, unfunded

Overall, the impact of coronavirus on the students we spoke to had been fairly evenly split across those finding it easier to manage financially (30 per cent), much the same (40 per cent) and harder to manage (30 per cent).

This means that, for the majority of students, COVID-19 had not had any major negative impact on their financial situation. Indeed, nearly half said they had been able to save money as their costs had generally reduced – a finding which is perhaps unsurprising as lockdown prevented social spending. A third also reported not having to pay for their final term of accommodation, representing a further considerable saving. This does, however, still leave 65 per cent of students paying for at least part, if not all, of their accommodation for the summer term, despite no physical teaching and (for the majority) returning home. Unsurprisingly the majority (95 per cent) of those who weren’t required to pay for their final term of accommodation were first year students (typically living in University owned halls), as opposed to second and third year students who were more likely to rent privately.

“No change at all despite the fact that our bills are included in rent so we are paying more for water, electricity etc that none of us are using (no one living there at the moment). When we contacted to ask for some reduction in rent, we were told that the property is the landlord’s primary source of income (seems an irrelevant argument) so we wouldn’t get any reduction.” – Year two, funded

Overall, 3 in 10 reported their costs and outgoings being harder to manage due to the outbreak. This rises to over half for mature students (who were more likely to have financial dependents) and around two-fifths for those who had lost income from employment.

Support from family

Many students rely on financial support from their families and friends to manage. Indeed, eligibility for bursaries and maintenance loans is based on parental household income from the previous tax year, and there is an expectation that those from higher-income households will receive support from their family. Almost two thirds of Bristol students who were ineligible for bursaries relied on support from family and friends, with 19 per cent having their accommodation paid for and 57 per cent receiving a set amount of money each week or month. Since the outbreak, a small number of (mainly non-bursary) students had received additional support from family or friends. Mature students were also more likely than younger students to have turned to family and friends for financial support since the lockdown, whereas beforehand they were significantly less likely to have done so.

However, the ongoing impact of COVID-19 – particularly once the furlough scheme comes to an end – may have dramatic impacts on family household income, and the worry is that students may fall through a gap, without university funding or family support.

“[I have] concern over lack of employment for my parents, who I rely on financially to pay for my living and accommodation in Bristol, as my maintenance loan was significantly lower than my accommodation cost.” – Year one, unfunded

Prospects

While almost a third of students were currently finding it harder to manage financially, even more were worried about the coming academic year. Half were concerned over their lack of paid employment/income during the holidays or coming year and 41 per cent were worried about how they would manage financially in the Autumn term. Those who usually rely on paid work may run into financial difficulties, particularly if they are unable to return to work or find alternative employment. In our survey, over a third who worked considered employment income ‘very important’ to financially continuing at the University.

It is also important to consider the longer-term financial impact and job prospects for students. The unemployment rate is expected to rise to almost 12 per cent by the end of the year, and those who have recently left education are likely to be disproportionately affected. We are already seeing a reduction in job vacancies and in our survey 69 per cent reported being generally worried about their future, with nearly four in ten third-year students concerned over their post-graduate prospects since COVID-19.

“Now is literally the worst time in decades to be entering the work force.” – Year three, funded

Given the general worry about the future, concern over personal and familial health, uncertainty around teaching in the coming year and reduced socialising with friends, it is unsurprising that some students also commented on the negative impacts on their mental health.

“Due to some of my family members being high at risk to corona, I am increasingly anxious as to what is going to happen to them. My mental health has suffered a lot from being very isolated over the Easter term. I am worried that the global economy is about to collapse and the whole world is going to go into recession. So all in all, quite a lot to be stressed about.” – Year one, funded

“My depression has got much worse, my father is at risk, I am struggling to focus at all so I am behind in all of my work and I don’t know how I will cope financially if I cannot work in the summer” – Year two, funded  

Overall, the student community has faced an unprecedented situation with remarkable resilience, but it is apparent that the challenges brought by COVID-19 will impact students for a long time to come. It is crucial that universities understand that, for some students at least, it will be much harder to manage financially than in previous years, and institutions therefore need to provide an appropriate level of practical and pastoral support to help them.

Firstly, we need greater recognition of how important earned income is to students’ financial position and participation at university. Secondly, the increased likelihood of financial difficulty among families of students should be considered, and the impact of this on students – both financially and emotionally – given the role that family support plays in getting by while at university. This suggests that there will be a need for a well-funded and accessible hardship fund in the coming years, because increased financial difficulties may well effect likelihood of withdrawal from studies.

Some students will need more help than others; previous surveys have found that bursaries appear to have some protective effect, therefore attention should also be given to those from higher-income households, particularly those just outside of eligibility, as they are more likely to rely on income from employment. Mature students, who we have previously found struggle financially more than their younger peers, are already turning to their families for support in greater numbers, but what about those who do not have people to turn to?

Finally, the ongoing emotional toil of dealing with a global crisis should not be underestimated. It is worrying enough leaving university in normal times, let alone doing so during a time of recession and increasing unemployment. Giving students as much support and guidance as possible, both to manage during their studies, and to help them to prosper as they leave, is going to be vital over the next few years.

[1] Low income = Residual Household Income (RHI)  > £25k; Mid income = RHI £25-44k; Higher income =RHI £43-80k

Introducing Katie Cross, PFRC’s new Research Associate

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Katie Cross

By Katie Cross

When I applied for a job at the University of Bristol’s Personal Finance Research Centre (PFRC) three months ago, I never expected my first week would be spent working from the comfort of my own home. No commute, no struggling to navigate my way around campus and no face-to-face introductions with colleagues. Instead I find myself writing this blog as a way of introducing myself to everyone at the University and to those within the wider research community.

So hello, I am Katie the new Research Associate at the PFRC. My background is in quantitative, policy-focused research, most recently working for the Association of Convenience Stores, a trade association that lobbies government on behalf of small shops. The best thing about working in an applied social research setting is that your research can have a direct impact; the intention is that the findings you produce will be used to inform and drive change. This was just one of the reasons I was drawn to working for the PFRC.

Moving into personal finance and being able to work at the University is an extremely exciting opportunity, which will bring with it a whole host of new experiences. But researching small shops has more in common with personal finance than you might think.

Access to cash

Firstly, during my time at ACS I saw how many people were dependent on the financial services that local shops offer, including post offices, cash machines and bill payment terminals. From a business perspective it is important that offering these services remains viable, as retailers can end up operating them at a loss, replacing ATMs with pay-to-use models or removing them all together. From a personal finance perspective, the removal of these services can be detrimental, especially to the most vulnerable. Almost half of the UK population (47%) believe it would be personally problematic if there was no cash in society and 17% (over 8 million adults) would struggle to cope without it. These figures were reported prior to the coronavirus outbreak, which will only have brought this into the spotlight even further. With hygiene concerns around the use of cash, an increase in the contactless card payment limit and more shops only accepting card, it is now even more important that we do not leave those who rely on cash behind. This makes the work that the PFRC and Dr Daniel Tischer are doing with the Financial Conduct Authority, Payment Systems Regulator and various industry stakeholders on mapping access to cash across the country even more valuable.

Helping people in vulnerable situations

Secondly, helping people in vulnerable situations is a top priority for the PFRC, and the same is often true of local shops. I was always impressed by how much local shops do for their communities, whether this is through delivery services for the elderly, training staff to become dementia friends, or just being there for people who don’t have anyone else to talk to. This has become more apparent during this unprecedented period, with shops going even further to get vulnerable customers the help they need. With Coronavirus pushing many more into vulnerable situations, this is now more important than ever. If the virus has taught us anything, it is that our lives and personal circumstances can change quickly, and sometimes with very little warning.

It is with that in mind that I start my new role.

I am really looking forward to working within the area of personal finance, especially at a time of such great economic uncertainty when we need this research more than ever. I can’t wait to use my past experience and research abilities to help inform all areas of personal finance and help drive change for those who need it.

Mind the (data) gap: we need national statistics on people’s banking experiences

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By Sharon Collard

Since lockdown, millions of UK adults are reported to have switched to mobile banking as banks close branches or restrict their opening hours and struggle to cope with high call volumes. However, we seriously lack data on how people are coping with banking – both offline and online. From a policy and advocacy perspective, these important data gaps need urgent attention, especially as the UK’s ‘new normal’ will almost certainly mean ‘online’.

The UK has pretty good data on people’s internet access and – by extension – their capacity to bank online. This also tells us who the banks are leaving behind in their digital transformation programmes, which have been given an extra boost by COVID-19.

According to Ofcom, while 90% of the UK adult population used the internet in 2018, this falls to 67% among people with a disability. The gap in smartphone use is even bigger, with 78% of UK adults saying they personally use a smartphone compared with just 45% of adults with a disability.

ONS data shows that women and people aged 65+ are also less likely to use the internet. And, while 69% of adults bank online (rising to a whopping 93% of 25-34 year olds), this falls to 47% of 65-74 year olds and 23% of 75-79 year olds – although there are reports of growing numbers of older people registering for online banking since lockdown.

The two most common reasons people gave (pre-COVID) for not using the internet were lack of interest and lack of digital skills. Lloyds Bank estimates that nine million people are unable to use the internet or their devices without assistance; and 6.5 million cannot open apps (which presumably includes banking apps). CapGemini highlights cost as an important reason for ‘digital disconnection’ among young people.

This begs the question: how are non-internet users and others who find digital difficult – including consumers in vulnerable situations who physically can’t get to a bank – coping with banking in lockdown? Despite interesting innovation, the worry is that people resort to risky workarounds like sharing their PIN number or bank cards, exposing them to the threat of financial abuse.

There is some excellent ‘lived experience’ data as well as a whole range of new COVID-19 studies looking at its impact on every aspect of people’s lives – including the financial impact. However, none of these seems to shed much light on how people are coping with ‘offline banking’.

It is also hard to find any publicly available data on people’s experience of online banking. The most recent waves of the Financial Capability Survey of UK Adults and Financial Lives Survey (both fantastic data sources) don’t cover online banking in any detail – although future waves may do – and they are biennial. In the meantime, while banks have their own data and can pay for other data, these data are not freely or publicly available.

From a policy and advocacy perspective, these data gaps need urgent attention, especially as the UK’s ‘new normal’ will almost certainly mean ‘online’.

Lessons learnt so far on spending controls for gambling transactions: an update from the MAGPIE research study

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By Jamie Evans and Sharon Collard

Yesterday’s move by the Gambling Commission to ban gambling using credit cards is a welcome public health intervention and one that now shifts the focus onto other ways for people to control their gambling spend. ‘Spending controls’, offered by a growing number of banks, provide one such solution, giving customers the option to block gambling transactions from their accounts. But how can banks maximise the effectiveness of such controls? In this blog, we provide an update from our strategic partnership with GambleAware, which aims to answer this and other questions about the potential role of financial services firms in reducing gambling-related harm.

In September 2019, we officially launched ‘Money and Gambling: Practice, Insight, Evidence (MAGPIE)’ – a three-year programme between the University of Bristol’s Personal Finance Research Centre (PFRC) and GambleAware, a charity who fund research, prevention and treatment into the harms of gambling. The programme is designed to explore and improve the way that financial firms tackle gambling-related harm.

Since then, we have been busy working on the first of several projects within the programme. This considers how ‘spending controls’ – otherwise known as ‘gambling blocks’ – that are available on a growing number of debit and credit cards can be as effective as possible in reducing gambling-related harm. To do this, we have conducted expert interviews with banks and other key stakeholders; consulted people affected by gambling through Advisory Boards and interviews; and reviewed academic and other literature on this topic.

We are also working with banks that have launched spending controls to understand patterns in customer data and are running an online survey of people affected by gambling to find out more about their views and experiences of spending controls. Collectively, we hope the new data collected from these different sources will help improve the industry’s understanding of what does and doesn’t work when it comes to spending controls.

So what spending controls currently exist?

Customers of several UK financial services firms now have access to gambling blocks on their accounts (as shown in the below diagram) – and we know of at least one other firm that offers a similar service on request if you telephone them. Blocks on credit card transactions should, in theory, be unnecessary once the wider ban on gambling with credit cards is introduced in April 2020.

The diagram shows that gambling blocks differ in terms of their ‘cooling off’ period (i.e. the length of time after choosing to turn off a gambling block that someone would have to wait until they can gamble again on their account). Some currently offer no cooling-off period, which means that a customer could use the card to gamble as soon as they turn off the block. CashPlus and HSBC both have a 24 hour cooling off period; while Lloyds Banking Group (including Lloyds Bank, Halifax, Bank of Scotland and MBNA) and Monzo require customers to wait 48 hours before they can gamble again.

This cooling-off period is generally recognised, by banks and treatment providers, as a crucial component of an effective gambling block – especially for customers engaged in more high-risk gambling behaviours. As such, we are very likely to see more firms incorporating this kind of ‘friction’ into their spending controls in the near future.

More than the ‘cooling-off’ period…

While obviously important, our work recognises that an effective gambling block is about more than just its cooling-off period. Friction can come in many forms and there are some really interesting ideas on the horizon about the shape that these could take.

There are also a range of other fascinating, albeit challenging, questions that we need to answer. For example, we need to understand more about the customer’s engagement with staff if and when they try to turn off the block, or what happens if they try to gamble when the block is turned on. How are gambling blocks being communicated to customers, and how do financial services firms reach the right people? Who even are the ‘right people’?! It might be the case that a whole spectrum of products and services should be made available to customers engaging in a wide range of gambling behaviours, including those who might not be engaged in risky gambling behaviours right now but may do so in future.

And there are questions that may stretch beyond the usual remit of the financial services sector. How, for example, might unscrupulous gambling operators try to circumvent such spending controls, and – crucially – what can we do about this?

Lessons from the literature

There exists a rich body of academic literature about gambling and ways to reduce gambling-related harm.  To bring this literature to a wider audience – including financial services firms – we have published a Roadmap which sets out the rationale for our programme and summarises some of the existing evidence that is relevant to spending controls. It highlights, for example, the importance of viewing spending controls as one tool in a wider harm minimisation toolkit, as well as the importance of considering the other people affected by gambling (such as partners, families, friends) and the help and support they might require from financial services firms.

You can read this roadmap document here and sign-up for updates about the programme here.

This article was originally posted on the MAGPIE blog. Read the original article here.

Gamble Aware announce new partnership with University of Bristol to explore potential role of financial services firms in reducing gambling-related harm

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The University of Bristol’s Personal Finance Research Centre (PFRC) is today pleased to announce the launch of Money and Gambling: Practice, Insight, Evidence (MAGPIE), a new three-year strategic programme, in partnership with Gamble Aware, which looks at the role that financial services organisations can play in reducing gambling-related harm.

Gambling problems can destroy lives, often leaving those affected to live with severe financial and social consequences. Indeed, around seven in ten people seeking help for gambling problems report that they are in debt, with a third of these owing £10,000 or more. Between 2007 and 2014 there were an average of 500 bankruptcies per year known to be linked to gambling – the true figure, however, may be much higher because people may not disclose that their bankruptcy is related to gambling.[1]

While many people do enjoy gambling safely, the number of people who are ‘problem gamblers’ or who suffer negative consequences as a result of their gambling is far from insignificant. It is estimated that in 2016 nearly a million adults in Britain experienced sizeable negative consequences as a result of their gambling, with around 360,000 adults classified as ‘problem gamblers’ (Gambling Commission, 2019).

Betting on the banks?

Money and gambling are clearly intricately linked, with ‘gambling more than you can afford’ one of the key indicators of a gambling problem. As such, it makes sense that organisations that help us look after our money – the world of ‘financial services’ – might also be able to take actions to help those at-risk of gambling-related harm.

Such firms are regulated by the Financial Conduct Authority (FCA), which in recent years has upped its focus on the way that companies treat customers in vulnerable situations – including those living with gambling problems. As a result, firms are paying increased attention to the way that they identify and support such customers.

Indeed, in 2016, PFRC conducted research with over 1,500 frontline debt collection staff working in a wide range of financial services firms, including high-street banks, lenders and debt collection agencies. This research focused on staff members’ experiences of working with customers in vulnerable situations, including those with mental health problems, suicidal thoughts and addictions, and highlighted some of the challenges that they face – whether in identifying ‘vulnerability’, starting a conversation about it, or providing customers with adequate support or sign-posting to other sources of support.

Following that research, we held a number of ‘problem-solving workshops’ with firms, charities and those with lived experience of different vulnerable situations to develop new tools and guidance for debt collection staff when working with such customers. Many of the solutions developed have now been adopted (or, in some cases, even adapted) by firms – highlighting the fact that there is considerable appetite among those working in financial services to do what they can to help such customers.

When the funds stop, stop?

Last year saw the introduction of spending controls or ‘gambling blocks’ by several UK banks – most notably Barclays, Monzo and Starling. Once turned on by customers, these essentially prevent spending on a bank card at gambling outlets (both online or in-person).

We know that people in recovery from problem gambling already use informal workarounds to prevent themselves from spending money on gambling, such as forfeiting their card to a third party or scratching off the card security number. The new solutions from banks, however, allow customers to do this more formally – and, possibly, more successfully.

But at present there is limited evidence about the effectiveness of such spending controls, nor about the characteristics of those who use them. We also don’t know much about the unintended consequences of these spending blockers (for example, whether it leads to customers withdrawing more money as cash and gambling with that).

As such, the first six months of our programme will focus on answering these questions and building the evidence-base around what works for recovering gamblers. We will use this evidence to produce practical guidance for financial services firms around the design of spending blockers.

Get involved in the research

In order to build the evidence-base, we’ll be working closely throughout the project with financial services firms – but, more importantly, our research will place those with lived experience of problem gambling at the centre of the project, as well as those with expertise in the treatment of recovering gamblers.

So, if you’re interested in being part of the research or if you simply want to be kept updated, you can join our money and gambling network by filling out this short form.

Notes:

GambleAware is an independent charity that champions a public health approach to preventing gambling harms. The charity is a commissioner of integrated prevention, education and treatment services on a national scale, with over £40 million of grant funding under active management. In partnership with gambling treatment providers, GambleAware has spent several years methodically building structures for commissioning a coherent system of brief intervention and treatment services, with clearly defined care pathways and established referral routes to and from the NHS – a National Gambling Treatment Service. Follow GambleAware on Twitter: @GambleAware

GambleAware also runs the website BeGambleAware.org which helps 4.2 million visitors a year and signposts to a wide range of support services. Follow BeGambleAware on Twitter: @BeGambleAware

[1] See RGSB (2015) Understanding gambling-related harm and debt. Available at: https://www.rgsb.org.uk/PDF/Understanding-gambling-related-harm-and-debt-July-2015.pdf

This article was originally posted on the MAGPIE blog. Read the original article here.

Does borrowing behaviour influence wellbeing?

Posted on by david.collings

by Sara Davies

Standard Life Foundation recently commissioned us to conduct a rapid evidence review to understand people’s borrowing behaviour and how it impacts their financial wellbeing. This involved a structured, critical analysis of around 150 relevant items and an assessment of their methodological strengths and weaknesses. We found:

  • Income strongly influences borrowing behaviour. Low-income households are less likely to use consumer credit than those on higher incomes, but more likely to use high-cost lenders when they do borrow, often to make ends meet.
  • Owning assets has some relation to borrowing behaviour. Homeowners have higher levels of borrowing than non-homeowners; their borrowing is linked to their level of housing assets. However, we lack evidence on the effects of savings on borrowing.
  • Psychological factors shape borrowing behaviour, but not as much as socio-demographics. There are complex interactions between different psychological factors; and one can mediate (and moderate or amplify) the effects of another. Psychological effects seem less powerful in explaining borrowing behaviour than other personal factors, such as income.
  • Macro-economic conditions play a major role in shaping people’s financial situations, their access to borrowing and the cost of borrowing. Aggregate consumer borrowing rises when macro-economic conditions are good and falls when they deteriorate. At firm level, credit card design and marketing (such as credit limit increases and zero-interest offers) encourage borrowing. Speed, convenience and easy access attract borrowers to use high-cost credit, particularly where they have few other credit choices.
  • Lower financial literacy is linked to poor borrowing behaviours and over-indebtedness. There are concerns young people, with lower financial capability overall, are particularly at risk from poor borrowing decisions. The evidence is weak regarding the impact of financial literacy programmes (which tend to focus on financial knowledge) upon financial behaviour

Read more about this research

Report | Key Findings

Older and poorer communities are left behind by the decline of cash

Posted on by david.collings
by Daniel Tischer, University of Bristol; Jamie Evans, University of Bristol, and Sara Davies, University of Bristol
An increasingly rare sight.
ShutterStockStudio / Shutterstock.com

A future without cash seems almost inevitable. Recent statistics paint a damning picture: while cash accounted for 62% of all payments by volume in 2006, this dropped to 40% in just a decade and is predicted to fall yet further to 21% by 2026.

Digital payments, on the other hand, are trending strongly in the opposite direction. Contactless payments in December 2018 in the UK were 28% higher than the same month in the previous year (at 691m in total), while the total number of card transactions increased by 12% over the same period.

In the long term, such a shift may well have benefits for many, given the speed and convenience that digital payments offer. But in the meantime, in the next five to ten years or so, there remain lots of people still dependent on cash – particularly those who are older or from lower income households. These people, it seems, are at risk of being forgotten if current trends continue. Ironically, those who are least likely to need cash have the best access to it.

Cash still king for many

We know there is still a sizeable proportion of the UK population that continues to depend on cash. An estimated 2.2m people report that they only use cash, while there are as many as 1.3m people who are “unbanked” (do not have a current account).

In our research, we regularly encounter people who find it difficult to access mainstream banking products, do not use digital payments because they find it easier to manage their money in cash, and/or simply lack trust in digital banking. For these people, cash very much continues to be king.

This means it’s important to understand the way in which access to cash is changing for the UK population. But much of the debate so far has focused on the overall number of ATMs or bank branches in the UK, without much understanding of the importance of geography. Where these dwindling number of ATMs are located makes a big difference.

Indeed, when this was studied in the early 2000s, we learnt that bank branch closures and fee-charging ATMs were more often found in poorer parts of the country. The issue was then seemingly remedied by measures such as the “Financial Inclusion Programme” put in place by LINK, the UK’s main ATM network. This programme incentivised ATM operators to provide cash machines in lower income neighbourhoods.

More and more people are relying on post offices for cash.
Michael J P / Shutterstock.com

In our new research, we therefore sought to reexamine the geography of cash provision, using Bristol as a case study. Through detailed mapping of the city’s cash infrastructure, we found stark differences in access to cash between different types of neighbourhood. Sites of economic activity, perhaps unsurprisingly, are well served; as were some of the most deprived, relatively central, neighbourhoods.

But we also found that areas we classify as “squeezed suburbs” – relatively deprived areas on the fringes of the city – were poorly catered for. This represents a significant challenge for some of the older and less well-off residents in these areas, who are most likely to depend on cash. We found Post Offices, which offer cash withdrawals and some banking services, are often geographically best-placed to serve these communities and could be a crucial asset moving forward, at least if used correctly.

Deprived areas worse off

There are signs that the situation is now changing again. Recent research revealed that around 1,700 ATMs nationwide changed from free to fee-charging at the start of 2019, likely the result of lower overall demand for cash and a recent drop in the interchange fees paid by banks when someone withdraws cash from another company’s ATM.

This was also noticeable in our research, as we gathered data both in October 2018 and March 2019. Importantly, we found that such changes were happening more often in deprived areas. Over two-thirds of the ATMs that became fee-charging in Bristol over this time period were within particularly deprived neighbourhoods.

This seems to be because ATM infrastructure in more deprived areas tends to be non-bank owned. Comparing a relatively affluent part of the city (Whiteladies Road in the Clifton neighbourhood) with a more deprived area (Stapleton Road in the Easton neighbourhood), we noticed that while just 29% of ATMs in Whiteladies Road are non-bank owned, this rises to 89% in Stapleton Road. Some such non-bank ATM owners have publicly stated that they will convert more free ATMs to fee-charging ATMs following the recent reduction in interchange fees.

This could have far-reaching implications for already under-served communities. So, while a future without cash may be almost inevitable, if the patterns found in Bristol are replicated nationally, it is likely that we’ll see a return to old geographies of financial exclusion, with deprived communities struggling most on the journey there.The Conversation

Daniel Tischer, Lecturer in Management, University of Bristol; Jamie Evans, Senior Research Associate, University of Bristol, and Sara Davies, Senior Research Fellow, University of Bristol

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Read more about this research

Mapping the availability of cash (PDF)

Responding to citizens in debt to public services

Posted on by david.collings

Early intervention is key to stopping Welsh households from falling behind on their council tax or social housing rent payments, according to a new report from the Wales Centre for Public Policy. In 2018, the First Minister asked the WCPP to explore the evidence around the question ‘How might public services and their contracted partners in Wales better respond to vulnerable debtors, especially those subject to prosecution and prison?’

The report – which was co-authored by Professor Sharon Collard of PFRC, and Helen Hodges and Paul Worthington of WCPP – focuses on council tax debt and rent arrears to local authorities and social landlords as key forms of citizen debt to Welsh public services and their contracted partners.

As councils across Wales are seeking large increases in their council tax rates for the coming year, the report highlights the importance of building personalised and proactive support for vulnerable citizens, rather than a one-size-fits-all approach.

Key features of an effective support system would include:

  • Building trust with citizens right when they start being responsible for paying council tax or social rents
  • Identifying any problems and acting on them as early as possible
  • Easing the process of referring people in debt into partner services, and improved access to independent specialist help

But the report also warns that the ability for councils and housing associations to respond to future increases in demand, particularly in relation to any roll-out of Universal Credit, could be hampered because of increased workload pressures.

67,600 (5.2%) of households in Wales have problem debt according to the ONS, with a greater number of them in arrears for their council tax or social housing rents than in previous years.

Read more about this research

Responding to citizens in debt to public services – a rapid evidence review (PDF)