£190m fund for vulnerable to be axed

A £190million fund which provides hard-up families with free debt advice, low cost loans and access to bank accounts is likely to be scrapped this year, as the government continues its radical public spending cuts.

Ministers have failed to offer any reassurances that various financial initiatives to help low-income households, such as The Financial Inclusion Fund, The Growth Fund and Saving Gateway, will be continued beyond the end of March.

These schemes have provided thousands of families with easy access to affordable credit and financial help, encouraging people to develop sensible money-handling skills and saving habits.

The National Housing Federation, which represents England’s housing associations, fears that the axing of these funds will have a widespread impact and could ultimately leave many people across the country at risk of falling into the hands of predatory loan sharks and deepening levels of debt.

The initiatives were launched to tackle the ‘financially excluded’, meaning people who had no access to money advice, no bank account, no assets, no insurance, no affordable credit or no savings.

The cuts come at a time when financial support for low income families is more important than ever as jobs dry up and benefit payments are reduced.

Federation chief executive David Orr said: 'These schemes have provided vulnerable families with a financial lifeline over recent years by offering affordable loans, debt advice and banks accounts.

'If these services disappear, there's a very real danger that loan sharks and doorstep lenders will fill the void and suck people into chronic levels of debt and hardship.

'The banks and government have a moral responsibility to help families in deprived communities access the financial services many of us take for granted every day.'

The National Housing Federation is backing a new scheme, My Home Finance, which provides low-cost loans for borrowers who are forced to seek expensive credit from doorstep lenders and loan sharks. It has opened 10 high street shops in the West Midlands and hopes to go nationwide in the next few years.

The My Home Finance branches provide affordable loans of a typical APR of 29.9%, compared to the rates charged by illegal and doorstep lenders, which can range from 200% to 2,000%. It has benefited from money from the Growth Fund.