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Councils urged to provide place-based credit building and salary-linked loans

A new report has urged local authorities and all other public-sector employers to offers their employees salary-linked loans and saving systems to boost financial literacy and end “punitive” borrowing costs.

The think tank, ResPublica, also argues that this could boost the credit ratings of those in the most disadvantaged communities, as poor credit ratings are disproportionately more common in more deprived areas.

The report, ‘Credit Emancipation: How salary-linked lending can help turn around disadvantaged places,’ received praise from Guy Opperman MP, minister for pensions and financial inclusion.

He said: “We have already brought forward a range of proposals, from auto-enrolment to the Single Financial Guidance Body. But ResPublica’s report unveils an exciting and interesting new set of ideas to lessen debt and the cost of debt.”

According to the report, improving the aggregate credit score of a local authority, from the bottom 10% to the middle of the credit score distribution, would improve median weekly earnings by £36, increase employment by three percentage points and increase home ownership by 6% points.

Opperman added: “ResPublica’s argument for salary-linked lending to become the norm across both the public and private sector is an important contribution to the debt reduction debate and one that I will be discussing with ministerial colleagues.

“I will be interested to see if the public sector – whether locally or nationally – can play its part in exploring, and piloting, the possible benefits and practicalities of developing a system of salary-linked lending for the UK’s civil servants.”

Phillip Blond, director of ResPublica, said that given the government wage restraints on the public sector, “finding other ways to support hard pressed workers is common sense.”

He added: “Across government, some 5.5 million people are employed, many of whom are on low incomes. Offering all of these people access to affordable credit will improve workforce retention and productivity. It will also help to put another nail in the coffin of predatory companies.”

Top image: georgeclerk


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