Financial Inclusion

Somerset may not be thought of by many outside or even within its borders as suffering from deprivation or financial exclusion. However, a significant number of its residents experience financial hardship, debt and a range of other challenges which are exacerbated by the rural nature of the county in relation to transport and access to services.

Financial services play a key role in most people’s lives. Yet many people lack access to basic financial services, and the essential skills to manage their finances. This is often at a great cost to their financial well-being and the wider financial health of Somerset.

The Somerset Financial Inclusion Strategy 2014-18

This report has been produced in order to:

• identify and address the problems that lead people to becoming financially and socially excluded 
• celebrate the good work that is already being done to help 
• propose new initiatives and coordinated actions that will help improve the situation

The Somerset Financial Inclusion Strategy 2011-13 was the county's first attempt at addressing the issues related to financial exclusion in a strategy, while recognising the ongoing work of local authorities, advice agencies, social housing, voluntary, health and private sectors, and many others in this field. Against a national background of welfare reform, public sector budget reductions and a growth in short term loans and problematic debt, the strategy has been refreshed for 2014-18.

The full document is available below for downloading. Please note that this a slightly amended version (August 2014) of the document originally published in April 2014.

• Somerset Financial Inclusion Strategy 2014-18
  

The Executive Summary is also available below for downloading

• Somerset Financial Inclusion Strategy 2014-18 Executive Summary
  

 Key Issues:

• Child Poverty - More than 15,000 dependent children (about one in seven) in Somerset under the age of 20 live in poverty. In some areas, the proportion is above one in three (see this page for more analysis)
• The Poverty Premium - national research (Save the Children 2010) has shown that a typical low-income families could pay over £1,200 a year more than better-off families for their basic goods and services. Those lacking a bank account (particularly young men, people with disabilities or addiction problems) or having no internet access are especially affected; for example, by being unable to shop around for cheaper fuel prices.
• Accessible Financial Institutions - in the year to April 2016, ten bank branches closed in Somerset, including three in Glastonbury alone.
• Fuel Poverty - more than one in eight households are extimated to be living in fuel poverty, and at least one in five in West Somerset (see this page for more analysis)
• Debt - An estimated 57,000 adults in Somerset have been at least 3 months behind with bills or say that debts are a heavy burden. One in four problems handled by Citizens Advice in Somerset are related to debt.
• High-interest Loans - 'Payday loan' customers increased nearly twenty-fold nationally between 2004 and 2010. A 2009 study estimated that around 20,000 people in Somerset borrowed from lenders who collect from their homes.
• Unemployment - although the number of Job Seeker's Allowance (JSA) claimants have fallen in the second half of 2013, the number of people claiming for at least 6 months remains three times higher than it was in 2008. 
• Affordable housing - the ratio of house price to income in Somerset is higher than the national average. Somerset ranked 43rd out of 49 sub-regions in England and Wales in terms of affordability (1st being the most affordable). (see Housing section for more analysis)
• Welfare Reform - Recent changes (e.g. benefit caps and the spare room subsidy) are already having an impact on households across Somerset and elsewhere
• Foodbanks - in the April to September 2013 period alone, the use of Trussell Trust foodbanks in Somerset was more than double the number for the whole of 2012/13
• Rurality - Somerset has some of the most deprived localities in England in respect of barriers to housing and services (see pages on Rurality and Deprivation for more analysis)

The Poverty Premium

In November 2016, the University of Bristol updated previous research into the impact of different factors on lower-income households. The average cost was estimated to be £490 per year per household although for some households exposed to a number of Poverty Premium components, this could be much higher.

The research identified 29 individual premiums across eight different components, which reflect the extent to which they are more or less imposed on low-income households or driven by the complex choices households find themselves making. Ranked in descending order of the percentage of lower-income households affected, the components are:-

• Not switched to best fuel tariff
• Premiums related to where people live
• Not paying by the cheapest billing method
• Paying to receive paper bills
• Using pre-payment meters
• Paying to access money
• Insuring specific items
• Using higher-cost credit

For a summary or the full report, along with details of how the figures were calculated, please go to the University of Bristol website.

Managing Money

In June 2015, the Office for National Statistics (ONS) published findings from its Wealth and Assets Survey (covering Great Britain) relating to how good people are at managing money. As the ONS explains, measuring financial capability is important as it tells us about the skills, knowledge and behaviours people need to make decisions about their finances.

Results of survey questions in 2010 and 2012 were used to create scores for six broad themes:-

• Making ends meet
• Choosing products
• Organised money management
• Controlled spending 
• Staying informed
• Planning ahead

Main findings:

• Financial capability tended to be better amongst those of retirement age than young adults
• However, making considered choices on products declined with age
• Those with higher financial wealth tended to be better at controlled spending and making ends meet than those with property and pension wealth.
• People with the lowest incomes and without qualifications were much less likely than those with highest incomes and qualifications to plan ahead, be informed and have the ability to choose products.

Insolvency

Somerset’s individual insolvency rate in 2015 was 17.3 per 10,000 adults, a decrease of 6.4 compared to 2014, and 0.3 percentage points lower than the England and Wales average, according to figures from the Insolvency Service. The figures combine Bankruptcy orders, Debt Relief orders and Individual Voluntary arrangements (IVAs).

The most common type of insolvency in Somerset was IVAs, at 55%. The male total individual insolvency rate of 17.3 was marginally higher than the female rate of 17.2. The total individual insolvency rate was highest in the 35-44 age group

Further Information

The 2011-13 Somerset Financial Inclusion Strategy is available here.

The Financial Inclusion Commission has produced a report Improving the financial health of the nation, bringing together the evidence the Commission has gathered from around the country, and identifying "the progress made towards financial inclusion as well as the significant gaps that remain and the challenges ahead."