Brown tackles financial exclusion

GORDON Brown has set out a range of initiatives to tackle financial exclusion and stop people being exploited by doorstep lenders and loan sharks.

The Chancellor unveiled a £120m Financial Inclusion Fund and a special taskforce to battle exclusion.

The Government wants to improve access to banking facilities, affordable credit and face-to-face money advice.

Brown said: 'Two million families have no bank account. It costs them more to pay their bills. Credit costs more. It makes it harder for them to get a job.

'I can announce that the banks and Government have agreed to work together to reduce by half the number of families without bank accounts. And I am now setting aside £120m to tackle financial exclusion, including more face-to-face money advice, support for not-for-profit lenders, with the possible extension of the Community Investment Tax Relief.'

Among the measures being considered are plans to allow people on benefits to take out a loan and then have repayments deducted from their benefits.

The Government is worried that financially vulnerable people are at the mercy of doorstep lenders, which charge astronomical interest rates for small loans.

Cash will also be made available from the Financial Inclusion Fund to support not-for-profit organisations provide affordable loans for the poor.

Extra support will be given to credit unions to lend to vulnerable individuals without a saving record.

Measures to help disadvantaged families include spending another £15m on a second pilot scheme that matches the savings of low-income savers through what is known as the Saving Gateway.

The Treasury said: 'The interim evaluation of the first Saving Gateway pilot found that the Government matching savings of low-income savers can be an important new dimension in Government support for saving, encouraging genuinely new saving.'

The Government will launch a larger, Saving Gateway pilot in 2005. It will investigate alternative rates of matching, measure the impact of matching for a wider range of income groups and will use the support of a wider range of community financial education bodies.

The Saving Gateway is a proposal for an account targeted at individuals from low-income groups. It aims to increase incentives to save through a Government-funded match of all money saved – up to a limit.

Tailored financial education and information would be provided alongside the account to enable individuals to make informed saving choices, says the Treasury, which adds: 'For many younger or low-income individuals, the account will provide an effective bridge to other forms of saving, such as Isas.'

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