Jam Jar Bank Accounts

Part of the debate – in Westminster Hall at 1:18 pm on 28 February 2012.

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Photo of Chloe Smith Chloe Smith The Economic Secretary to the Treasury 1:18, 28 February 2012

I shall, with pleasure, come on to some of the work that the Government are doing to encourage simple financial products, via explaining briefly the next steps for the DWP and via credit unions.

From June this year, the Government will run a series of housing demonstration projects in which we will pay housing benefit direct to tenants to test the support required to help claimants budget and manage their rent payments effectively. They will be an opportunity to consider what type of budgeting products—whether from the commercial sector or elsewhere—can be used to support universal credit claimants in the longer term.

Several hon. Members have mentioned credit unions. They play an important role in offering access to financial services—bank accounts, affordable credit, insurance and savings to name but a few—to people who may not be able to, or may not wish to, access those services through mainstream banks or building societies. They work within a local community ethos and often actively seek to help those most in need of support. The recent legislative reform order brings new and exciting opportunities to credit unions. It is now for the sector to respond to those opportunities by seeking new ways to reduce their costs, to improve the products and services that it offers and to reach out to new markets to become self-sufficient and sustainable. To support credit unions in making this leap, the DWP has carried out a feasibility study to look at options for expanding their role. That study has reported to Ministers and an announcement on its findings will be made soon.

On the point about how the Government can otherwise help consumers take responsibility for their finances and make better choices, jam jar accounts may be one useful tool, but consumers need access to both financial advice and an appropriate range of products. That is why last year the Government launched the Money Advice Service, which promotes understanding of the financial system and helps to raise financial capability across the UK. In particular, its financial health check is helpful to some of the citizens referred to by my hon. Friend the Member for East Hampshire.

Another part of empowering consumers is ensuring that the right products are available. They need to be straightforward, easy to understand and simple to provide consumers with a benchmark with which to compare products, make good decisions and make sense of an often bewildering marketplace. Earlier this month, the Government launched a steering group to design a range of simple financial products, made up of representatives from both industry and consumer advocates. The group will report to Ministers in July and has announced that it will focus initially on developing simple deposit savings and protection insurance products. This is an opportunity for industry to innovate and develop a range of simple products, and it comes at a time of exciting developments elsewhere in the industry.

Under the various developments that I have outlined today, it is clear that there is an appetite, in the Government and in the third and commercial sectors, to find a way forward. I thank my hon. Friend and other hon. Members for their remarks. I am sure that my colleagues, the Financial Secretary to the Treasury and the Secretary of State for Work and Pensions, will appreciate the insights that they have contributed and will continue to take them into account in the further development of work in this area.