In a new pamphlet setting out his ideas for modernizing the welfare state, former UK home secretary David Blunkett has proposed various initiatives to ensure low-income consumers open bank accounts and build up savings.
The pamphlet, which has been published by the Resolution Foundation, includes ideas to reform the social fund, which provides emergency loans and grants to people on low incomes. By attracting private finance, the proposals seek to extend the fund to help those whose needs it is currently unable to meet. The reforms would also aim to help loan recipients become self-reliant by requiring and enabling them to open bank accounts and build up savings.
Under these proposals, loans would be conditional on recipients opening an account, for example with a bank or credit union, which is appropriate to their circumstances, and on them agreeing to make small additional payments once the loan has expired, so that a savings pot is built up.
Mr Blunkett is calling for a new generation of policies to help people to build up assets, a stronger focus on tackling financial exclusion by bearing down on exploitative lending and improving access to financial products, and an increase in the availability of financial advice and support for people on low incomes.
The pamphlet comes as the UK government is preparing a 10-year strategy to improve financial capability and amid rising concern about the scale of consumer debt.
It also follows new research published by the Resolution Foundation which highlights the benefits of providing financial advice to people on low to moderate incomes. The research showed that, by accessing financial advice, young people in this income group could be GBP60,000 better off by the time they reach 60.
The research also identified potential public expenditure savings of GBP100 million a year within 10 years of the advice being provided, as people are lifted clear of the threshold for receiving pension credit.