Building resilience – and dealing with risks Jim McCormick Scotland Adviser, Joseph Rowntree Foundation

About financial capability (1) Dilemma: how to get better outcomes with less money = reduce need/demand for crisis support Financial exclusion is one pathway towards crisis, affecting those who can’t, find it hard or won’t access ‘mainstream’ financial goods/services Financial capability: the ability and motivation to plan, seek information & advice and make use of it. Just one part of the story, but an important strand for reducing hardship.

About financial capability (2) Low levels of financial capability can affect anyone. But those with assets and access to affordable credit can get by with only rough knowledge. Financial capability works best as a shared responsibility: it applies to employers and service providers (banks and utilities as much as councils) as well as consumers

Getting by or struggling on? (2008) Managing well Getting by Not managing well ALL52%37%10% Lowest income (up to £10k)38%43%19% Next lowest (up to £20k)44% 12% Single parent25%48%27% Other single adult40% 19% 15% most deprived places35%47%18% Rest of Scotland55%36% 9% O/S mortgage at least 4x annual income 44%43%13%

Some recent trends (SHS 2008) Overall 6% drop in households with any savings to 48% ( ) Single parents least likely to have savings (21%) Most low-income households don’t use credit for purchases, and single person households are least likely to But half of those not managing well and those without savings use credit for purchases And the same groups are most likely to use credit for borrowing

Understanding risks better Low financial capability is not the same as being poor: most say they are ‘getting by’ despite living in hardship Nor is it necessarily about going without certain products or services We need better ways to spot the risks e.g. - those who are struggling financially, have no savings and are using credit - those caught in the low pay-no pay cycle whose incomes are both low and unstable

Attitudes of the un-insured Distinguish between previously insured and never insured Uninsured in four broad groups: - The risk averse - The risk calculators - The risk resigned - The risk unaware

Dynamics of poverty During , persistent poverty affected 8% of adults, lower than in the early 1990s (12%). Each year about one in three poor adults move out of poverty but further mobility is limited and many drop back into poverty in subsequent years. Getting out of poverty: extra pay, higher benefit income or increased number of adults working. Falling into poverty: drop in pay, benefits and other income; and risk for new lone parent households.

Recurrent poverty Work as the best route out of poverty? – 64% poverty rate for workless couples versus 1% when both work full-time – BUT 70% of families who were persistently poor stay poor after someone gets a new job JRF examined job insecurity and low pay – Identified barriers to escaping these Labour market, structural, personal – And why employers operate this way

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