Household finances, including problematic indebtedness, inter-generational issues, lifetime financial planning, and the effectiveness of the market in financing solutions and products for low income households, are to be scrutinised by the parliamentary Treasury Committee.
The Committee will look at what determines the levels of savings for households and whether government policy has an effect on this. This will include determining what the “right” level of savings for households is in the current economic environment, and how that could change with economic conditions in the future.
In addition, the Committee will examine the housing market and look at whether the decline in ownership is affecting long-term financial planning.
Further to that, the role of the state pension and the triple lock in supporting households’ lifetime finances will be scrutinised, and whether households are receiving appropriate advice as a result of the pension freedoms.
The committee will also investigate whether the current levels of household debt are sustainable and whether the scale of the debt is problematic. This will include looking at whether the increase in “gig economy” work has had an impact on household incomes, and whether new types of credit products are required to help households dependent on flexible working.
Financial services watchdog, the Financial Conduct Authority (FCA), will also come under scrutiny as to whether it does enough to monitor problematic debt, and whether the market functions effectively to provide sustainable credit products for low income households.
Commenting on the launch of the inquiry, Rt Hon. Nicky Morgan MP, chair of the Treasury Committee says: “The UK’s household saving rate has fallen in the last year. 15% of adults are over-indebted. And there is £200 billion worth of consumer credit in the UK.
“It is therefore timely for the Committee to launch an inquiry into household finances.
“Debt is a huge emotional burden for people. Unstable personal finances often emerge as problems raised by constituents, so we hope to take evidence for this inquiry from around the country.
“We will examine what policies could support households in achieving appropriate levels of saving, and the sustainability of the UK’s household debt and consumer credit.”
'Growing savings gap is of huge concern'
Kate Smith, head of pension at Aegon comments on the Treasury Committee inquiry: “We welcome this inquiry into household finances. The growing savings gap in the UK is a huge concern, especially in terms of retirement planning. Many people won’t realise the scale of their savings shortfall until it’s too late to do anything about it.
"This inquiry is an opportunity to identify the barriers people face to saving and the solutions that might need to be put in place to avoid this happening. But it’s not just about short-term savings, the inquiry also needs to consider the role of pension savings and link into the review of auto-enrolment, which is due to make recommendations in December."
Georgie Frost, Gocompare external head of consumer affairs is sceptical as to whether such a broad inquiry will be successful however: "It is good that the government is prioritising the issue, which needs to be addressed, and that it wants to listen to different stakeholders, but there is no single silver bullet here that can fix household finances for the millions who are 'just about managing' or worse. A number of more focused inquiries might be more productive and may actually be the outcome of this ‘super inquiry’."