Financial inclusion

Money makes the world go round. Our research explores how people manage money throughout their lives, from saving to housing to pensions.

At a time of increasing economic uncertainty and growing inequality, the UK has seen a shift from collective welfare provision towards individuals shouldering the burden of responsibility and risk. However, many people do not have the financial means or capability to manage this effectively.

We are championing the need for policy makers and businesses to evolve practices and services to meet the needs of the population more effectively.

Heroes campaign banner for financial inclusion, featuring: Professor Kimberley Scharf, Professor Andrew Lymer, Professor Karen Rowlingson, and Dr Louise Overton.

Within Birmingham Business School and the School of Social Policy, we are driving forward research that is changing the way that personal finance works.

Through research projects being carried out in our interdisciplinary Centre on Household Assets and Savings Management (CHASM) we:

Monitor the ongoing changes to personal financial wellbeing, and fight for fairer finance for all
Examine the evolving roles the state, financial services sector, employers, third sector and individuals/families have in improving outcomes
Explore the impact of demographic change, including population ageing, on household finances
Drive meaningful changes that can bridge the gap towards financial inclusion, rather than exclusion.

Championing financial inclusion

Credit is a vital lifeline to many people, especially those on low incomes. However, those on the lowest incomes often pay the most to borrow money - even when they are borrowing for essentials.

Financial exclusion, problem debt and a lack of access to affordable credit is a pressing problem in the UK. Our research has increased financial inclusion by shaping UK government policy and regulation, specifically influencing reforms to high-cost, short-term, credit.

The Financial Conduct Authority’s evaluation of these reforms demonstrates that credit is now cheaper and better regulated, leading to real and measurable benefits, such as financial savings and reduced debt problems, for a large group of low-income consumers.

By influencing these changes in regulation and by providing resources and training for credit unions, our research has enhanced responsible, inclusive lending.

Professor Karen Rowlingson

“It is extremely difficult for those ‘just about managing’ to save and they get very little support to do this. The government spends a tiny amount of money on supporting people on lower incomes to save compared to the amount it spends on schemes to support the better off. This balance needs to be shifted.”

Helping to Save

Savings are a critical aspect of financial wellbeing. Yet 60% of low and middle-income households in the UK have no savings, and where saving does occur, the ratio of saving to spending is dramatically falling across the country.

How can we change the conversation and improve financial wellbeing, making savings about more than ‘saving for a rainy day’? How do we help develop sustainable savings habits that build financial resilience?

Research at CHASM has extensively analysed the financial risk posed by these trends and developed an inclusive savings agenda. This has shaped the UK Government’s policy on savings for low-income households, specifically through its Help to Save scheme, and enhanced understandings of savings behaviour within the financial sector.

Alongside the production of the 2016 Savings for All Manifesto, our work has led to better access to savings opportunities and improved financial wellbeing for those on lower incomes.

Ensuring financial security in later life

A key consequence of increased life expectancy is that older people are having to manage their income and assets over a longer period than previous generations, and take on greater responsibility for their financial security.

This increasingly complex retirement landscape brings a number of risks, challenges, and opportunities to individuals and households, but also to financial services regulation, industry practice, and government policy.

Our research, ranging from investigations into the use of housing wealth and equity release products, to how people engage with financial information and advice in later life and fund their long-term care, always puts people’s experiences in the spotlight.

The findings of our research help to shape the development of the later-life financial services sector towards more effective and inclusive practice and product offerings.

Read our 2018 Homes and Wellbeing report

Moving towards smarter tax and benefit systems

An optimal, responsible tax and benefit system can help to reduce financial exclusion. What is the direction of travel for the UK landscape around taxes and benefits? Is it heading towards an effective and fairer system that works for all?

CHASM researchers explore these issues independently and through collaborations with researchers at the National Audit Office University of Birmingham Tax Centre, which was launched in January 2018. Researchers working on these topics provide evidence about issues such as behavioural economics insights into taxpayers’ responses to changes, the impact of making tax digital, tax evasion and avoidance, and customer service. In addition to our work on tax, researchers also focus on benefits – a fair, effective and inclusive tax system has natural dependencies on and implications for benefit programmes, all of which directly impact on taxpayers’ financial decisions. It provides insight into issues such as behavioural economics insights into taxpayers’ behaviours, the impact of making tax digital, tax evasion and avoidance, and customer service.

We are studying administrative data to provide the first ever evidence showing how effective and inclusive the tax incentive Gift Aid is in encouraging more donations and donors in the UK.

We are also doing ongoing work to examine tax in relation to childcare, an area in which there are several different policies supporting different groups of parents with different age children, in different ways and potentially also with different aims: tax-free childcare; childcare element of working tax credit/universal credit; 15 and now 30 hours of free childcare for 3 and 4 year olds. These policies might be expected to affect parents (e.g. via labour supply or cost of living) and/or children (e.g. if access to high quality childcare produces long-term developmental benefits) but we know remarkably little about how fair, effective or inclusive they are.