Low earners 'encouraged to save'
Low-income households should be encouraged to save for the things they want, rather than buy on credit, according to a new report from a policy commission chaired by the Anglican Bishop of Birmingham.
The bishop, the Rt Rev David Urquhart, accused payday lenders of "preying on some of the most vulnerable in society" and called on ministers to take action to reverse an "escalating debt crisis".
The University of Birmingham Policy Commission report called for the establishment of a new not-for-profit organisation to represent the interests of savers, which could be funded by a £1 levy on investment trades worth more than £10,000.
The report, entitled Sharing our Good Fortune, said: "In terms of debt prevention, increased levels of saving would clearly help to avoid the need to borrow. Saving is clearly difficult for those on very low incomes but if people can afford to repay a loan, this suggests that they could afford to save."
The Bishop of Birimingham warned: "The debt problem in this country is spiraling out of control. Payday lenders are preying on some of the most vulnerable in society.
"The less well-off used to save hard for things they wanted, but today's society puts everything on credit and serious problems occur when those loans have to be repaid. We need to persuade more people to save, even if it's very small amounts, and policy-makers need to grasp the nettle to reverse the escalating debt crisis."
Other recommendations included:
:: Automatic enrolment into a savings account for people starting a new job;
:: A match-saving scheme to encourage and reward savings by those on low incomes;
:: Fresh incentives to increase the amount saved in occupational pensions for those on low and middle incomes;
:: Increased funding for debt advice and Credit Unions.
Commission member Dr Paul Cox said: "An organisation that serves savers' interests has to be established if value for money is to be secured for the millions of working adults who are starting to save through pension auto-enrolment and their desire to provide for their future.
"Currently, investment products still do not have fixed prices and usually carry a product fee plus a multitude of add-ons that consumers neither agree to or are even aware of.
"An organisation serving savers that independently challenges these and other conventions can help the benefits of competition pass to consumers as they do in other industries.
"The organisation could be funded through a flat rate £1 charge collected on all UK investment trades over £10,000 or alternatively funds might come from charitable trusts and eventually, ideally, direct debits from savers who would become members."