Low Income Households
The most common definition of low income is households earning
60% or less of the average UK household income in a year. The most
recent average weekly earning figures available state that the
average UK wages is £391.00, 60% of which is £234.60. The average
wage for residents in Dover District is £386.90 but £425.00 in the
South East
This means that on average each working adult has up to £38.10
per week less to spend in Dover District on his or her rent,
Council Tax, utilities and to support the local economy compared
with the rest of the South East region (1).
Many families living on a low income have only about £10 per day
per person. This needs to cover all of their day-to-day
expenditure, including necessities such as food and transport. It
also needs to cover occasional items such as new shoes and clothes,
school trips and activities for children, and replacing broken
household items such as washing machines and kitchen equipment. In
addition to this, it must pay for all household bills such as
electricity, gas and water, telephone bills, and TV licences. A
family with two adults and two children needs to have £346 each
week in order to be above the poverty line. The total weekly
expenditure for an average couple with children in 2007 was £630.60
per week for all households, that’s equivalent to £163.50 per
person. However, a family with an income in the lowest 20 per cent
spent just £371.60 each week, equivalent to £87.50 per person.
That’s almost half what the average family spends.(2)
The Office for National Statistics reports that the top 20%
of areas nationally that have been identified as the most
income deprived include the Buckland, St Radigunds and Tower
Hamlets areas of Dover.
(1) Resident based earnings in Kent 2008
(2) Barnardo's report into Child Poverty
Employment
The unemployment figures for December 2010 shows that
2510 people were unemployed, an decrease of 285
since December 2009 and an decrease of 70
since November 2010. This is 3.3% of the working age
population of the district; the average for Kent is 3.0%. The wards
most affected by unemployment are Castle with 8.1% of
residents unemployed and St Radigunds with 6.7%. The
wards with the highest number of residents unemployed are
Buckland andMaxton, Elms Vale and Priory each with 232.
|
|
December 2010
|
|
Aylesham
|
88
|
|
Buckland
|
232
|
|
Capel
|
23
|
|
Castle
|
96
|
|
Eastry
|
72
|
|
Eythorne and Shepherdswell
|
60
|
|
Little Stour and Ashstone
|
72
|
|
Lydden and Temple Ewell
|
17
|
|
Maxton, Elms Vale and Priory
|
232
|
|
Middle Deal and Sholden
|
137
|
|
Mill Hill
|
140
|
|
North Deal
|
139
|
|
Ringwould
|
32
|
|
River
|
30
|
|
St Margarets
|
49
|
|
St Radigunds
|
207
|
|
Sandwich
|
84
|
|
Tower Hamlets
|
208
|
|
Town and Pier
|
82
|
|
Walmer
|
95
|
|
Whitfield
|
55
|
| Total |
2510 |
Credit Sources available to low income households
People who do not have access to a bank account have to resort
to alternative methods of credit.
- Home credit companies – also referred to as
doorstep lenders, provide small, short-term, unsecured cash loans,
with weekly repayments traditionally collected from customers’
homes by a network of agents. Home credit lending often begins with
agents canvassing people’s homes for new customers with vouchers.
Home credit companies canvass with vouchers rather than cash, as
they are not permitted to canvass with cash loans under the
Consumer Credit Act 1974.These vouchers can be redeemed in
particular high street shops and are repaid weekly in the same way
as cash loans. Some lenders then use the voucher credit agreement
as the means to gain the written permission needed under the Act to
subsequently offer a cash loan. Concerns have been raised about the
transparency of this process.
- Pawnbrokers – also cater for the need for
small cash loans over short periods of time, offering credit
secured against goods such as jewellery.
- Sale and buyback shops – buy second hand goods
and give the seller the option to buy them back after 28 days at a
higher price. Although similar in structure and effect, sale and
buyback is unlike pawnbrokers in that there is no actual credit
agreement. The item is bought by the shop, which then agrees to
retain it for sale back to the customer. There are no set interest
rate charges and the individual shop determines the amount paid for
the item and the resale price. People using the sale and buyback
service tend to equate the transaction with a pawnbroking and
additional confusion can often arise due to the fact that many
companies offer both types of transaction. However, unlike
pawnbroking, sale and buyback does not fall under the Consumer
Credit Act 1974 and therefore customers are not offered the same
protection as they are under a pawnbroking agreement. But, as many
sale and buyback traders are also pawnbrokers, they are licensed
under the Consumer Credit Act.
- Payday loans – a relatively new form of
short-term credit, whereby customers can apply for a short-term
loan, which must be repaid within a maximum of 3 months. Payday
loans however require borrowers to have a bank account and a
regular salary. No credit checks are made. The loans can attract an
interest rate as high as 2100%
- Mail order catalogues – provide a wide range
of goods on credit and often operate through a network of
credit-assessed agents, on commission, who either buy for
themselves or for a number of customers. Customers can make small
weekly or monthly payments over a set period. The Interest rate for
an account can vary between 44.9% for non-direct debit payments to
40.9% for direct debit payments. This information was provided by
the Marshall Ward catalogue company.
- Illegal moneylending – lenders operating
without a credit licence – provide small cash loans to those
excluded from even the alternative credit market.
- The Social Fund - this provides a safety net
of grants and interest-free loans, with repayments deducted direct
from benefits if claimed, for the most vulnerable in times of
crisis. The Social Fund is successfully targeting those families
who are most in need and is likely to be a valuable source of
credit for financially excluded groups. Recent research found that
Social Fund customers were more likely to be lone parents, younger
people, tenants, more likely to have a young child, a longstanding
illness, health problem or disability, as well as caring
responsibilities. They were also more likely than others to have
debts and less likely to have a bank account.
- Credit Union - A Credit Union is a financial
organisation that is owned and controlled by its members. They are
authorised and regulated by the Financial Services Authority and
the Financial Services Compensation Scheme protects members’
savings. Credit Unions have the potential to offer a more
accessible, prudent (and therefore cost effective) service than
either banks or other financial institutions.
They provide a safe and convenient place to save money, access
loans at a very reasonable rate of interest and can offer other
financial products and services such as a bill-payment facility,
which enables individuals without bank accounts to benefit from
purchasing their utilities in the most cost-effective manner.
helping people to learn the value of making
regular savings. Credit unions use this pool of savings to provide
a source of low-cost credit which is particularly valuable for
those who have difficulty borrowing at affordable rates of interest
from mainstream financial providers and might otherwise turn to
loan sharks.
One of the objectives of a credit union, set out in the 1979
Credit Unions Act, is the education of their members in the wise
use of money. Credit unions can play a valuable role in equipping
people to be effective and responsible users of financial
services.
How do credit unions work?
- Each CU has a "common bond" which
determines who can join it. The common bond may be for people
living or working in the same area, people working for the same
employer or people who belong to the same association, such as a
church or trade union.
- The members of a credit union pool their savings together. The
money paid in by members is lent out to other members, who pay
interest on the money loaned to them. The main source of income for
a credit union comes from the interest charged on members’
loans.
- Savers are paid a return on their money in the form of
dividends or by an interest rate payment.
- The credit union’s operating costs has to be met out of the
profits. It is therefore very important for credit unions to
actively market the benefits of saving with the credit union, as
well as the availability of loans.
- The credit union is managed and controlled by a volunteer Board
of Directors, who are elected by the membership at the Annual
General Meeting. All members of the credit union have one vote;
regardless of the size of their savings.
- Whilst credit unions employ staff to manage the credit union on
a day-to-day basis, control lays firmly within the hands of the
members – through their elected representatives – the Board of
Directors.
How safe are credit unions?
Credit unions are regulated and authorised by the Financial
Services Authority. This is the same regulator as banks and
building societies and all other providers of financial services in
Britain. A group of members known as the Supervisory Committee
checks that the credit union is running safely and is taking care
of members’ money. An auditor carries out an annual inspection of
the Credit Union’s business The credit union is required by law to
maintain an insurance policy (fidelity bond) to protect the credit
union against fraud or theft. The Financial Services Compensation
Scheme protects members of credit unions with savings. The FSCS is
a safety net for customers of authorized financial firms in the
case of a credit union going out of business. This is set at 100%
of up to £50,000 for money in deposit type accounts, the same as
for Banks.
Provision in Dover District
|
Type of provision
|
Example
|
How accessed
|
Typical % APR
|
|
Doorstep Lenders
|
Provident
|
Name and address lists bought by the company and unsolicited
leaflets sent though the post.
Word of mouth.
Internet advertising.
|
|
|
|
Morses Club
|
Also Provident
|
|
|
Pawnbrokers/ Sale and buy back shops
|
Albermarle and Bond
Gold Mine
The Trader
|
3 outlets in Dover
|
Unknown
|
|
Payday Loans
|
Paydaybank.co.uk
|
Widely available on the Internet
|
1,355% based on a 30 day loan
|
|
Mail order catalogues
|
Marshall ward.co.uk
|
Via catalogue and internet
|
Up to 44.9%
|
|
Illegal Money Lending
|
|
Word of Mouth
|
Unknown
|
|
The Social Fund
|
Budgeting Loan/ Crisis Loan
|
Via Jobcentre Plus
Budgeting Loan restricted to those claiming benefit for at least
26 weeks
Crisis Loan only available if no other means to obtain money in
the event of a crisis or disaster
|
0%
|
|
Credit Union
|
Kent Savers Credit
Union (from February 2010)
|
DDC Offices
CAB offices
Children’s Centres
Social Landlords
Libraries
|
26.8% Based on a £400 instant loan
|
Contact Community Development
Tel: 01304 872061
Email: communitydevelopment@dover.gov.uk
