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Stop Relying on Short Term Loans

Written By On 30/04/2014

National think tank, the Institute for Public Policy Research are suggesting that the government steer the poverty stricken families across Britain to save by giving them the correct motivation.

The IPPR released a report as part of their flagship Condition of Britain programme looking into social policy. The campaign explains how the government could set a certain amount aside in proportion with the amount that people are able to save.

Mathew Lawrence, an IPPR research fellow, stated that

Britain needs an initial capital injection to expand the provision of affordable credit and new match saving incentives for people on low incomes, to enable people to build up a stronger asset base of their own and reduce their reliance on credit.

The think tank believes that the poorest would benefit the most by changing their lifestyle habits and encouraging them to save. They say it would decrease the need for short term loans or borrowing from loan sharks.

Apparently nearly four million families would be unable to finance their monthly mortgage premium or rental sum if their income was to stop suddenly.

They recommend that the scheme should extend to only people on tax credits or benefits. The study proposes that for each pound the participant invests with a specified chartered institution, the government sets aside the equivalent of twenty per cent. They believe a twenty pounds cap per month should be put on this.

Their data explains exactly how they feel this might be achieved and it would boil down to being able to help between three to four million people receive an extra forty eight pounds per annum. However, it would mean that the tax payer would lay out almost one and seventy million pounds to finance that.

But many finance experts disagree with the results. Financial advisor Nick Evans says

It is great to raise awareness of the importance of saving, but if people can't afford to set money aside. I find it hard to understand what difference tax relief will make.