In the UK, efforts to eradicate child poverty have rightly focused on improving low-income families’ lives through tax credits and benefits. But what’s not been taken into consideration by policy makers is what happens to that money once it’s paid into the family.
What happens if the washing machine breaks down or the winter fuel bill is a bit higher than expected?
Families on low incomes are already struggling to get by so putting any money aside in case of emergencies is impossible. Too many families who are excluded from mainstream credit find the only place left to borrow in a crisis are the high-interest lenders.
A small loan from a high-interest lender can take weeks to pay off, taking vital money out of the family budget.
So not only are low income families getting into debt to pay for essentials, but the money that should be going to help families escape poverty is instead being used to pay high-interest lenders and debt collectors.
We need to break this cycle of debt and poverty for low income families and one solution we’re proposing is for the banks to do more.
Save the Children wants the government to introduce a Community Reinvestment Act, similar to US legislation.
In the US, such a move has had a major impact on banks’ lending policies. It has increased the finance available to people from disadvantaged neighbourhoods which can be delivered via local credit unions and community development finance institutions, and make financial institutions more accountable.
It’s wrong that UK banks are still failing to meet the needs of disadvantaged communities, especially considering that the government recently used public money to bail the banking sector out of a crisis. A Community Reinvestment Act would help plug this gap and make affordable credit available to thousands of families that need it most.
Please show your support and make banks pay their part by texting DEBT to 84880 (standard call charged apply) or by filling in our online petition.