The hidden costs of false economies…  

poundcoins2WE’VE ALL probably made false economies in our time – and it’s a life lesson we often learn the hard way.

In striving to make an apparent financial saving it can actually cost you more in the long run: like buying cheap batteries or shoes, or not servicing the boiler just to have it fail on the coldest night of the year.

The same can be said of the public sector pay freeze introduced by George Osbourne in 2010 – a seven-year squeeze that has hit workers, families and communities hard in the name of economic austerity.

What did it gain in the short-term? Well, attacking the public sector may have gained some populist headlines and made marginal savings on Treasury spreadsheets but the opportunity costs – what could have been achieved with that money instead – weren’t considered because of political dogmatism.

Real median household incomes today are just five per cent higher than in 2007 and the UK is now in the worst period of pay growth in 150 years, affecting both the public and private sector. Clearly, George’s marvellous medicine didn’t work.

Public sector incomes have fallen way behind inflation and as the cuts bit deeper it meant people working even harder for less money.

It hit the lowest-paid frontline workers in the most vital services – health, education, police and care – disproportionately hardest. And it has lowered morale, increasing the problems of staff retention at a time of rising demand, which can mean having fewer colleagues to share the work around.

Worried Senior Woman Sitting On Sofa Looking At Bills

The impact has been equally bad for household budgets. ‘In work’ poverty is now at the point where a recent TUC survey found that one in seven public sector workers were forced to skip meals this year and almost a quarter reported they would not be able to pay an unexpected bill of £500.

And there’s been a much wider impact on the local economy…

By significantly eroding the value of public sector pay through this freeze – with frontline staff earning around £2,000 less than if their pay had risen in line with inflation – it’s meant workers have cut back on their spending. That has hit local high streets hard to the tune of an estimated £48bn less spent in shops since 2010.

Council employees last week were offered a two-year pay increase of 2 per cent with more, rightly, for the lowest-paid such as staff in children’s centres, school support, parks, libraries and those who keep vulnerable children and elderly people safe.

But it’s a long way back and only the first step in any kind of serious attempt to tackle national issues around pay and productivity.

Crucially it also needs extra funding from Government to help local authorities deliver it, not just placing even more burden on our budgets and putting more services and jobs in peril.

Another part of the ‘austerity’ agenda has been cuts to welfare that have gone hand-in-hand with demonising some of our most vulnerable people.

UCREDITAs the cruel winter frost blew our way last weekend I found myself again fearing for those families facing hardship through Universal Credit (UC).

As the national rollout for the new benefit continues many thousands of families are still enduring the in-built six-week wait for help.

Yes, the Chancellor did reduce this wait to five weeks in the budget – a very small step in reducing the pain, in my view – but this does not start until February 2018.

Many others are also facing a difficult time because around 67,000 UC claimants are paid weekly and 25,000 might be affected over the festive season because of when their assessment periods fall.

That simply isn’t fair and it means Foodbanks – like the fantastic one in Oldham – will be strained to their limit again.

None of the above feels very festive, I know, but we can all do #ourbit by bearing in mind those less fortunate than ourselves at this time of year and also by ensuring our neighbours and relatives are safe during wintry weather.

This will be my last blog before the holidays but I will return with a New Year’s Blog on January 1 looking ahead to the opportunities, landmarks and challenges that lie ahead for 2018.

In the meantime I want to wish you all a happy Christmas blessed with great quality family time and memories.

Jean

Credit Unions: Needed more than ever in 2017

OCU - Logo
I CHAIRED the Annual General Meeting of the Oldham Credit Union (OCU) last night.

I’ve been chair of the OCU for around 12 years now and I’ve seen its offer change significantly in that time.

In 2017, Britain continues to face a mounting debt and savings crisis and Credit Unions can help with the issues faced by many individuals and families.

These were highlighted by a new survey into personal finances this week.

The research, by MoneySuperMarket, showed many people are getting into even more debt – and the vast majority blame the rising cost of living.

Studio Shot Of Worried Couple Looking At BillsMore than a third of adults said their debt is going up because of rises in transport costs, household bills and grocery costs.

Another issue now is that whilst inflation is slowly rising – up to a 32-month high in February – most people’s salaries are continuing to flatline. This means their spending power is steadily declining.

Inflation is expected to hit 2.4 per cent later this year, mostly because of the weakness of the pound, and this means people who are already in debt will find it even harder to ever get back into the black.

With the possibility of interest rate rises to come, these are very hard times for many people.

The average debt per person in the North West is £5,811 – just below the UK average of £6,372 – and its known that younger people (in the 18-34 age bracket) are racking up debt much quicker than those nearing retirement age.

A third of people surveyed admitted they rely on cards and loans just to get by from month to month, so it’s clear this is a widespread problem in the context of an insecure labour market where zero hours contracts also mean a steady, predictable income is a pipedream for many.

Good Bad Credit Signpost Showing Customer Financial RatingSo, what can Oldham Credit Union do to help?

OCU is a not-for-profit, democratic co-operative owned and controlled by its members. Its philosophy is about mutual self-help and it is not run on the same basis as lenders like banks and building societies.

Their services are there for anyone aged over 16 living or working in our borough. They try to promote the savings ‘habit’, provide fair loans at competitive interest rates, and provide advice on managing finances. They have a range of services on offer for different circumstances.

Imagine, for example, being hit with an unexpected car repair bill that needs doing immediately so you can get to work. In this scenario, some people without access to affordable credit end up falling prey to high-interest lenders or loan sharks.

OCU works with Greater Manchester Police and the Illegal Money Lending Team to keep people away from loan sharks because borrowers don’t just risk high interest repayments. Sharks often also employ extreme collection methods that include intimidation, threats and violence.

That kind of behaviour isn’t welcome here and we want people to know there is a responsible alternative in Oldham.

OCU offers access to fair and straightforward financial services, including secure savings and affordable loans. It works closely in neighbourhoods offering Junior Savings clubs and Community Collection Points in some areas.  Members include people who cannot access a bank account and don’t have any substantial kind of savings buffer – and it continues to develop partnerships with organisations like Regenda, Great Places, First Choice Homes Oldham – and Oldham Council – to tackle financial exclusion.

An example of how OCU can help is a Jam Jar budgeting account. This is a simple way of ensuring key bills like Council Tax and rent get paid. When opening an account, people agree how much they will pay towards each key bill per month and the OCU does the rest. Any surplus left over is then available in your OCU Savings Account. A Jam Jar account is free (subject to a one-off £1 joining fee) and you can also have benefits paid directly into the account.

Worried Senior Woman Sitting On Sofa Looking At BillsDespite the clear need for Credit Unions – there are about 350 across the UK – we’re small compared to this sector in other countries. UK Credit Unions have assets worth around £1.32bn and 1.2m members, but globally we’re small players in a sector boasting more than 208m members and assets worth $1.7tn.

That’s why UK Credit Unions are trying to raise their profile now through increasing awareness and getting more members from all income groups – and the OCU is no exception.

This all needs to be done at a sustainable pace. A three-year business plan has seen OCU grow in recent times and the range of services is now expanding.

A new Engage Pre-paid Visa Card and E account offer members modern online payment services and, in the year head, OCU will launch a new loan offers and an automated Lending Decision system for members.

MAServiceIf you’re facing any kind of financial difficulties or issues, I’d also recommend the Money Advice Service, which is a not-for-profit government organisation set up solely to advise people on their finances. You can find it at: https://www.moneyadviceservice.org.uk/en

Credit Unions provide a public good filling an important gap in the market: and not just for people who are rejected by High Street banks. Many join because they want their money to be used to support the principles of ethical lending.  If you want to find out more, visit the OCU website at www.oldhamcreditunion.co.uk or call 0161 678 7245.  If you don’t already have an account, why not open one now?

OCU needs to appeal to that wider audience in future but our overriding goal – offering Simple Affordable Fair and Ethical financial services – has never changed, and it never will.

Jean