5 July 2005 - Asset ownership central to long term poverty solutions, says Blunkett
Tackling the growing assets divide is crucial to ensure future generations are removed from, rather than managed in, poverty, David Blunkett said today.
Speaking to the IPPR, the Work and Pensions Secretary spelt out three key ways of ensuring assets enable families to build intergenerational stepping stones out of poverty:
- Social fund reform including additional funding of £210 million over 3 years
- Raising capital limits to ensure that the benefit system encourages households to save appropriately
- Working with institutions to encourage greater community partnerships and tackle financial exclusion
Highlighting the work that is already being done across government, such as the Child Trust Fund, the new shared equity scheme for homebuyers, and the savings gateway, David Blunkett said that giving everyone the opportunity to build assets for the future would be at the heart of our reforms.
“If we are to prevent future poverty as opposed to ameliorating it, the support we provide to enable people to build assets – both at an individual and a community level – will be absolutely crucial.
“Asset policies can offer unparalleled opportunity in the fight to prevent future poverty, stopping people falling into poverty when circumstances change, and by enabling families to build intergenerational stepping stones out of poverty.
“Recent years have seen an ownership revolution – from business and share ownership to homes. Now we need to think about the change in the next thirty years when grandparents, aunts and uncles pass on their assets to the next generation in a way that was never possible before.
“But as well as opportunity there is also danger as those who are asset-poor will become ever more entrenched in their poverty and ever further from the asset-rich.
“We face a new equality challenge. There are still major issues of income inequality – but physical assets and financial holdings, share and bank balances, all provide the backcloth to the divide of the future.
“As do non-material assets such as education and social capital. This can range from family and friends to the kind of communities people live in – both geographically and in terms of shared interests, concerns and aspirations.”
On developing the social fund, David Blunkett said: “In the short term, changes to the budgeting loan scheme from next April, supported by additional funding of £210 million over 3 years will give greater consistency and transparency in access to budgeting loans and will strengthen the contribution that the social fund can make to affordable credit.
“In the longer term, we cannot stop there, but must look more widely at whether the fund should be operated by government or whether there is scope for greater partnership arrangements with third sector lenders. Social fund reform could also link to the savings gateway and the wider financial inclusion agenda – so people build assets, become more financially confident and do not need to rely on emergency payments from the state in the future.”
David Blunkett also detailed how we are going to further ensure those with modest savings are not penalised, saying: “We are committed to ensuring that the benefit system encourages households to save appropriately – and particularly for those on lower incomes.
“From April 2006, the threshold above which savings begin to reduce eligibility for income support, jobseekers’ allowance, housing benefit and council tax benefit will be raised from £3,000 to £6,000. And the upper capital thresholds for income support and jobseekers’ allowance will increase from £8,000 to £16,000.
“Access to mainstream financial services is restricted for many people on low incomes, imposing costs on those who can least afford them and preventing people from getting started on the savings ladder.
“It’s also important to see support coming from commercial financial institutions – playing their role in the community. For example in Sheffield, Barclays have provided the core funding for the development of a community finance organisation called ‘Financial Inclusion Services Yorkshire.’ The project involves a Community Development Finance Institution and local credit union working in partnership and is being led by a former member of Barclays staff as part of their community placement programme.”
In conclusion, David Blunkett said: “I want the reform of the welfare state to be a crucial element in both addressing this central issue and in focussing minds on a different role for the state than has been necessary over the last 60 years.
“Collectively we must examine how we face the asset and aspiration gap at home between the asset rich and asset less – just as we are concentrating rightly at the G8 on the much bigger, much more difficult and more dangerous gap worldwide.
“Together, government and the financial services industry must work with individuals, families and communities to unlock the potential of an asset state and build a future of welfare that does our part here in the UK to make poverty history.”
Notes to editors
- A full version of the speech can be read online at: http://www.dwp.gov.uk/aboutus/2005/05_07_05.asp
Press office: 020 7238 0866
Out of hours: 07659 108883
Public enquiries: 020 7712 2171
Website: www.dwp.gov.uk