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Launch of Financial Inclusion Strategy and Farepak report
Today the Economic Secretary, Ed Balls, and Consumer Minister, Ian McCartney, responded to the Pomeroy Review on Farepak. The Pomeroy Review was set up by the Government to look at Christmas hamper savings schemes following the collapse of Farepak and the financial losses suffered by its customers.
Ed Balls, Economic Secretary, also published today Financial inclusion: the way forward setting out the next steps for the Government's work to tackle financial exclusion. Events such as Farepak can only be prevented in the longer term by achieving much greater financial inclusion in our society.
Responding to the Pomeroy Review, the Government has announced today:
* it has secured agreement from the hamper industry to establish an industry-led scheme to ensure that consumers' interests are fully protected through the establishment of secure, ring-fenced accounts;
* £1 million funding for the Office of Fair Trading to conduct a consumer awareness campaign in the coming months on Christmas saving schemes and mainstream alternatives;
* the OFT has agreed to investigate the findings of the Pomeroy review in full, and whether a further inquiry into competition in the market for Christmas saving schemes is needed, following preliminary analysis on competition as part of its work for the DTI on Christmas saving schemes;
* that following encouragement from the Government, and support from the Growth Fund, credit unions are now offering Christmas saving accounts with a lock-in. The Post Office also has plans to launch a Christmas saving account. The Government has asked the Financial Inclusion Taskforce to monitor developments, and consider what further detailed actions are needed to expand community-based provision of saving;
* the Thoresen review will consider how to provide better generic advice on informal saving;
* the financial inclusion campaign, "now let's talk money", is working with local charities and community organisations to promote credit unions as an alternative to hamper schemes;
* the FSA will enhance the saving information on its MoneyMadeClear website by including information about Christmas hamper schemes; and
* the new Wealth and Assets Survey will collect information on informal saving. The Government will use the first results of the survey, due by the end of the year, to inform any further data gathering.
Ed Balls said:
"I'm very happy that my Ministerial colleague has agreed with the Christmas hamper industry a scheme that will protect customers from financial loss in the future. To ensure that customers are fully aware of their saving choices I have today asked the OFT to conduct a £1 million awareness campaign. Nobody in the future should suffer the hardship that Farepak customers endured last Christmas."
Ian McCartney said:
"We have been working with Christmas savings firms to develop an industry-led scheme to ring-fence money they collect from families so it can't be swallowed up among other debts if a company or its parent firm collapses. The collapse of Farepak caused untold stress and financial worry for thousands of families in the lead up to Christmas. Many of these people were among the most vulnerable consumers, and I am determined that they must never be left unprotected again.
Ring-fencing contributions will ensure that customers' money can only be returned to customers and agents should the company go bust. Families will then be able to put something aside for Christmas in the confidence that their money is safe and there will never be another Farepak. I am delighted the companies have agreed to put these measures in place to protect their customers."
Financial inclusion: the way forward sets out the Government's goals for financial inclusion policy. Building on the Economic Secretary's announcement before the Budget, that there will be a new Financial Inclusion Fund for the next spending period, which will maintain the current level of intensity of action to promote financial inclusion, the document also highlights progress being made with the Government's strategy. According to the latest data, the number of adults living without access to a bank account had fallen in 2005-06 to 2 million, down from 2.8 million in 2002-03, demonstrating that progress is being made with the Government's goal, shared with the banks, to reduce the number by half.
The document also announces immediate new action to promote financial inclusion, including £6 million to further support the valuable work of credit unions and community development finance institutions in making affordable credit and banking services available to the excluded.
Ed Balls, commenting on Financial Inclusion, said: "We have made real progress on financial inclusion but there is still a lot more to do. Tackling financial exclusion is essential for both our economic prosperity and for social justice. It is good for individuals, for society and the economy as a whole. I look forward to working with everyone to drive this agenda forwards in the coming months."
NOTES FOR EDITORS
1. Ed Balls, Ian McCartney and Brian Pomeroy launched Financial inclusion: the way forward and the Pomeroy Review at the DTI Conference Centre in London.
2. The Pomeroy Review was set up by Ed Balls to look at the Christmas hamper savings schemes following the collapse of Farepak. The Economic Secretary asked Brian Pomeroy, Chairman of the Financial Inclusion Task Force, to conduct the Review.
3. Financial inclusion: the way forward is available at http://www.hm-treasury.gov.uk/documents/financial_services/financial_inclusion/financial_inclusion_wayforward.cfm, the Pomeroy Review is available at http://www.hm-treasury.gov.uk/independent_reviews/pomeroy_review/pomeroy_index.cfm, The family resource survey is available at http://www.dwp.gov.uk/asd/frs/2005_06/index.asp.
4. Today's announcements build upon Ed Balls' speech to the Resolution Foundation Conference on 14 March, where he sketched the Government's new agenda on financial inclusion.
5. The current Government strategy, Promoting Financial Inclusion, was published in December 2004. This included a Financial Inclusion Fund of £120 million to support initiatives to tackle financial exclusion, and a Financial Inclusion Taskforce created to evaluate these projects and make recommendations to Government on what more can be done.
6. A substantial portion of the current fund has been used to support access to free face-to-face money advice and affordable credit. The DTI is administering a £47.5 million fund, which will train and recruit over 500 new money advisers by the end of April. The DWP is running a £36 million Growth Fund to enable third sector lenders - credit unions and community development finance institutions - to expand their lending service to target financially excluded people unable to access mainstream credit. The Financial Inclusion Fund is also supporting a nationwide rollout of projects to tackle illegal lending by loan sharks and provide support for victims.
7. Under the industry-run hamper scheme, pre-payments will have to be held in independently controlled ring-fenced trust accounts, similar to the scheme that protects National Lottery prize money in the event of Camelot becoming insolvent.
8. The Department of Trade and Industry is working with the industry to ensure these arrangements are monitored by a new, strengthened trade association with a reinforced code of practice to monitor companies and ensure the trust accounts are established and operated effectively.
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