Britain's financial 'underclass' ignored by traditional institutions
Published On 27 March 2007
The people at the edge of British society are increasingly marginalised by the country's financial institutions and are being forced into seeking expensive home owner loans or debt consolidation services.A recent long-term study by the Alliance Trust Research Centre highlighted how Britain's financial underclass is increasingly ignored by the main indictors of economic prosperity.
According to its figures, inflation for the least economically well-off members of British society has been 34 per cent higher on average than measures - such as the consumer price index - would seem to suggest.
Typically, households with the lowest incomes have to spend more of their total budget on the items - such as housing, utilities, food and beverages - which have seen the largest price increases in recent years.
In fact, households with an income of less than £7,000 end up spending 41 per cent of their total household budget on these proportionally more expensive items.
"Our two-year study has shown consistently that the UK's lowest income groups are facing an inflation rate which is substantially higher than the average headline inflation rate," warned Shona Dobbie, head of the Alliance Trust Research Centre.
"This is a direct result of this income group's shopping basket. Inevitably the lowest income group will spend more of their budget on necessities such as housing and utilities and unfortunately it is these goods that have seen the sharpest increase in prices over the last two years," Ms Dobbie added.
It is factors such as these that are causing personal debt in the UK to grow at a rate of £1 million ever four minutes, according to the charity Credit Action.
Faced with these increasingly dire financial burdens, low-income families have found themselves becoming more and more in debt and this has meant that the number of homeowner loans and debt relief services used by this group have rapidly increased.
However, the UK's financial exclusion also extends to other groups. For example, rapidly increasing house prices mean that the country's young first-time buyers are increasingly prevented for getting on the property ladder and possibly achieving financial security.
Recent research from Moneyextra.com has shown that the amount of deposit that first-time buyers have to spend has reached £37,632 - 11 per cent more than a year ago.
"It's no wonder the so-called lower end of the housing market is stalling with young people attempting to get onto the housing ladder being required to save a figure effectively equivalent to more than a year and half’s average earnings," a spokesperson for the website explained.
Women also face financial exclusion as they approach retirement. A new study from HSBC found that 60 per cent of women are not making any contributions to their pension.
Of these, 31 per cent said that they could not make any contributions because they were not working.
Ian Martin, head of pensions and retirement income at HSBC, said that "despite efforts by both the government and the industry to generate more awareness around retirement planning, our research clearly shows that that there is still a lack of clarity over how to go about it - especially among women and particularly stay-at-home mums".
It does appear that the government is now trying to act to help those at the financial margins of society. The recent 'New Deal for Families' policy aims to improve the lot of the nation's financially underprivileged children.
But, the fact that UK personal debt has increased by £1 million in the time it's taken you to read this article, means there is still a long way to go before Britain can claim to be a financially inclusive nation.
