UPDATE:

ABCUL’s consultation response advocated for financial inclusion to be a priority for the distribution of the Welsh Dormant Asset Scheme; where a substantial amount of untouched money could be directed towards social and environmental causes.

Background

The Welsh Government provides guidance to the National Lottery Community Fund regarding the distribution of these funds. A review of these expenditures is currently ongoing, and the consultation sought insights on how the Dormant Asset Scheme should be allocated. The consultation was focused on four key areas: Children and young people, Climate and natural emergencies, Financial inclusion, and Community action.

Although the responses were anonymous, the consultation received a total of 357 responses, with the majority coming from third-sector organisations. Notably, questions relating to children and young people garnered the most responses, while community action and climate received equal feedback. Financial inclusion received the fewest responses.

It was noted that the four proposed areas have cross-cutting aspects, especially in the case of Community Action. The cost of living crisis was cited as a major reason for the decline in services provided by schools and local authorities due to significant periods of austerity, especially in relation to children and young people.

Response to the Financial Inclusion:

Question 5: Do you believe that money from the Dormant Assets Scheme in Wales should also be used to support measures to promote financial inclusion?

Strongly agree – 74

Agree – 89

Disagree – 47

Strongly disagree – 28

No opinion – 93

25% of respondents emphasised the importance of improved financial education, including better advice on financial planning, budgeting, and avoiding the risks of credit traps. Many people called for enhanced education for children and young adults. Additionally, more respondents mentioned the necessity for better debt advice, particularly to address the growing use of high-cost lenders. There were also calls for increased support to help maximize income from welfare benefits.

Respondents also highlighted the need to assist vulnerable and marginalized groups, such as refugees, ethnic minorities, young single parents, and care leavers, as these groups face reduced accessibility to services along with language barriers and a lack of affordable and accessible transportation.

Digital inclusion was also identified as a crucial priority due to the declining availability of physical banking and advice spaces.

The responses emphasised the need for greater investment in credit unions and other community development financial institutions. There was a recognized lack of capacity to meet market demands, and financial input is required to enable these institutions to continue providing affordable credit and banking services.

Ranking of priorities outcomes

Question 9: Please rank the four proposed spending purposes in order of importance and relevance to you

Total responses: 316

Score is a weighted calculation. Items ranked first are valued higher than the following ranks, the score is a sum of all weighted rank counts.

Show financial inclusion came last – and the last of the priorities – this is not necessarily mean that financial inclusion will not be included at all in the DAS assets

Recommendations:

The recommendation is to focus on children and young people as the primary spending purpose for dormant assets funding in Wales. This received the most support among the respondents. It’s important to note that this doesn’t exclude other potential spending purposes but allows for a combined approach. The proposal is to recommend new policy directions to the National Lottery Community Fund, emphasising the allocation of funding in Wales to support children and young people in reaching their full potential. This includes: enabling them to take action on climate and nature emergencies,

supporting their participation in community action,

and providing them with the knowledge and skills to manage money effectively throughout their lives.

Next steps

Welsh Ministers will now consider this recommendation. Due to the General Election, the ministerial roles could potentially change hands—the stance of which the current ministers could differ—but it feels unlikely that these recommendations will be ignored altogether.

ABCUL will be reaching out to Welsh ministers to suggest that the weighting process feels slightly unfair due to more respondents in the area should not equate to higher importance – furthermore, to explain how imperative better financial inclusion is during a cost-of-living crisis and should be treated as a priority.

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The Welsh Government has published a consultation on the options for the future spending purposes of dormant assets funding in Wales. They are proposing four potential options to consider:

• Children and young people,
• The Climate and nature emergencies,
• Financial inclusion and
• Community action.

The consultation does stress that it is unlikely for all four options to be funded and that these will need to be prioritised.

The closing date for responses is Wednesday 28 February 2024. ABCUL will be submitting a response on behalf of our members, however we would strongly encourage individual credit unions to also submit a response. An online form can be submitted here or alternatively respondents can complete the separate response form via email to dormantassetsfunding@gov.wales

Last year the Dormant Assets Act 2022 (DAA22) expanded the definition of a ‘dormant asset’ to include assets from the insurance, wealth management, securities and pensions sectors. Which will bring an estimated £3.7 billion of additional assets into the scope of the Dormant Assets Scheme (DAS) and it is estimated that the expansion would release a further £880 million for good causes across the UK. The National Lottery Community Fund (TNLCF) is responsible for distributing any surplus to good causes across the UK while Welsh Government directs TNLCF on how to spend the Welsh portion through the policy directions. The current spending purposes were agreed in 2010, with the recent passing of the DAA22 this could potentially result in more money being made available for good causes in Wales.

Currently dormant assets in Wales are used to support children and young people (under 26 years of age) and as well as climate change.

The DAA22 stipulates that money for good causes arising from dormant assets cannot be used to undercut or substitute government spending and must be distributed to projects that are unlikely to be funded by government or the public services it supports.

Financial Inclusion

Welsh Government have proposed financial inclusion to be one of the four considered funding options.

Proposed purpose: To promote financial inclusion to reduce financial exclusion, improve financial wellbeing and help create a more equal society.

Welsh Government’s ambition is to put social justice at the heart of government. To help reduce financial exclusion, improving financial wellbeing and creating a more equal society.

The need for fair and affordable credit for those who cannot access mainstream finance, and the ability for people to manage income shocks through improving savings habits to help build financial resilience in Wales by maximising income has been highlighted. The Welsh Government has acknowledged that work has been done in the affordable credit space and the advice services area but there is a need to mainstream income maximisation tools into existing platforms and to improve referral pathways to ensure that everyone who is currently engaging with these providers are supported fully and as holistically as possible.

As part of the UK Strategy for Financial Wellbeing the Welsh Government, Money and Pensions Service and key stakeholders have developed a Delivery Plan for Wales. This document is for all organisations who are interested in improving the financial wellbeing of people across Wales. Within the document there is support from Jane Hutt, the Welsh Minister Government for Social Justice for the credit union sector and reaffirms that credit unions are at the centre of financial wellbeing.

The consultation also states that there is considerable scope for using dormant assets to support financial inclusion activities delivered by credit unions, CDFI’s, community and special interest groups, charities, housing associations and advice groups.

In the consultation they have also provided some suggestions on how money from dormant assets could be used to improve financial inclusion:

• Nation of Savers – To re-engage people in the habit of saving. Different people have different needs throughout their lives, and understanding what motivates them to save at moments in their lives that matter is where the opportunities lie. There may be an opportunity to target ‘lapsed’ savers, loosely defined as people who have had the savings habit and can be re-engaged in the process of saving. Following the COVID-19 pandemic, people on the lowest incomes are much more likely to have had to run down their savings due to income variability and other pressures.
• Credit Counts – Moving people away from using high cost credit in an unsustainable or problematic way is at the centre of the financial inclusion agenda. People on low incomes are twice as likely as those on higher incomes to use credit, particularly credit cards, to pay for food and other essentials. People on lower incomes also pay too much for the credit they use and are more likely to have poor credit records that makes them unattractive to mainstream lenders. This can drive them towards high cost, short-term, inappropriate and illegal credit, which is often marketed in a way that understates the actual cost of repayments. Many people do not manage credit sustainably, which again leads to repeat use of credit for essentials.
• Better Debt Advice – COVID-19 significantly elevated the number of people seeking debt advice, often for the first time. The action plan’s goal of 60,000 people accessing better advice can only be achieved through the coming together of a variety of stakeholder workstreams and is not just restricted to the financial sector. People need holistic support to identify and address the underlying causes of financial problems, including non-debt specific issues. Innovation and new delivery approaches, particularly approaches that promote early access to impartial information and advice, must be rolled out to reach as many of those who need support as possible.

The key questions to consider in relation to financial inclusion are:

1. Do you believe that money from the Dormant Assets Scheme in Wales should also be used to support measures to promote financial inclusion?
2. Are there any specific issues relating to financial inclusion that you think it is particularly important for dormant assets funds in Wales to address?

ABCUL will be responding to the Welsh Government’s proposals included in the consultation paper on behalf of its membership. We would welcome any views and feedback on the proposals, please share these by getting in contact at policy@abcul.org by 5pm on the Friday 23 February 2024.