The Relationship between Financial Exclusion, Health, Poverty & Wellbeing (shortened)

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The RelationshipbetweenFinancial Exclusion, Poverty, HealthandWellbeing | 2014 | Victoria Mackay-Parkin
The Relationship between
Financial Exclusion, Poverty,
Health and Wellbeing
Victoria Mackay-Parkin

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Contents
PAGE NO.
1. Introduction 3
2. The Relationship 4-9
3. Conclusion 10-11
4. References 12-13

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Introduction
Coming at a time where the bite of the recession is still being felt by the majority, when 1 in
5 citizens live below the UK poverty line, and during the largest welfare benefit reform since
the 1940’s, this paper investigates the relationship between financial exclusion, poverty,
health and wellbeing.
The links between poverty and ill-health are well established and it is known that people
with a long term ill-health problem or disability are more likely to be living with a low
income or in poverty (The Poverty Site, 2009). Current evidence also shows that the health
inequality gap is widening - income inequality has risen in each of the last three years and is
now at its highest level since a comparable time series began in 1961 (Brewer M, Muriel A,
Phillips D and Sibieta L, 2009). What is less well known are the root causes of poverty, and
how financial exclusion can play a significant role in the creation and exacerbation of
poverty.
The issue is also an important one for government. Financial exclusion has long been
recognised as an area of disadvantage that bears a cost for both the individual and broader
society (Resolution Foundation, 2008), but increases in the numbers experiencing poverty –
particularly food and fuel – also comes with a price tag. Health conditions and disabilities
are worsened, and new ailments manifest themselves putting a strain on the already
stretched UK health care system. Foodbank usage is at an all-time high (Trussell Trust,
2014), up to one third of the UK population rely on credit to bolster their income (Payplan,
2014), and for 9 million of these people, that credit has become serious problem debt
(thisismoney, 2013).
This paper seeks to explore how poverty and/ or being financially excluded can have a
detrimental effect on a person’s health and wellbeing.
The essay questions whether enough is being made of the research available, and whether
the agendas are joined up at a strategic level so as to make a lasting impact.

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The Relationship
We begin with asking, what is financial exclusion? The term ‘financial exclusion’ first appears
in 1993 when a group of geographers concerned about physical exclusion from banking
services reference it as part of their work (Leyshon and Thrift, 1993). In 1999, financial
exclusion starts to be used in a broader sense to refer to people who have reduced access to
mainstream financial services (Kempson and Whyley, 1999).
European Social Watch state that a person is considered financially excluded “when they
have no access to some or all of the services offered by mainstream financial institutions in
their country of residence, or do not make use of these services”. The study ‘Financial
services provision and prevention of financial exclusion’ (Réseau Financement Alternatif,
2008) establishes a list of basic financial services considered essential to daily life: a bank
account to receive income; a transaction account to make payments from; a savings
account to store money; and access to unsecured credit to manage temporary cash
shortages and unexpected expenses.
Research aimed to help the Payments Council understand the needs and experience of
using payments systems among people over 80, and those living with cognitive, physical or
sensory impairment (Policis, Toynbee, 2012), identifies a number of issues. These include:
physical inaccessibility of ATMs, bank branches and payment terminals; difficulty with text
layout, screen colours and back-lighting for ATMs; lack of standardisation between ATMs;
small and fiddly buttons on payment terminals and ATMs; a requirement to remember PINs
and passwords.
Some of the Policis/ Toynbee findings have also been echoed in a recent report undertaken
for Dosh Ltd, an organisation which supports people who have a learning disability with
their money via advice and advocacy services. Their report raises concerns that for people
with a learning disability, basic access to banking can be denied:
“The research has highlighted four key issues in relation to this: mental capacity, proof of
identity, access to money and consistency of service and information. Within these, a
number of common themes emerged, notably around lack of clarity about how to reconcile
the inclusive and supportive message of the Mental Capacity Act and Equality Act with the
security and regulations focus of banking laws. These problems were compounded by the
inconsistency between the service and information received in different branches which
seemed to stem from head office policies not being effectively communicated to, or
implemented in, branches, as well as a lack of guidance and training for all staff.” (Beckford
M, 2004).
Other acknowledged difficulties for people with disabilities or poor health include the
reliance on family members or carers to assist with bill payment, cash withdrawals,

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purchasing goods and day-to-day money management. This in itself causes issues as the
individual can expose themselves to financial exploitation. These findings highlight
situations where health and financial exclusion are inextricably linked.
‘The poverty premium’ is a term very often associated with financial exclusion and presents
a clear example of how it can impact on health. It describes when an individual or
households pays more for goods or services and usually happens when the individual does
not have access to a bank account and is unable to take advantage of cheaper payment
methods like Direct Debits or online paperless incentives. In the case of home energy, this
results in a household having to use a pre-payment meter. A 2013 report by ‘thisismoney’
states people using pre-payment meters pay on average £19 per week more than those
paying by Direct Debit. The high costs associated with pre-payment meters are therefore a
well-documented factor contributing to fuel poverty (Purcell S, 2014).
Fuel poverty can lead to people living in cold, damp homes. Such conditions can cause or
contribute to the following health conditions:
• Increased risk of hypothermia
• Increased respiratory illness
• Increased risk of heart attack and strokes
• Underweight infants
• Social isolation
A household is said to be fuel poor if it needs to spend more than 10% of its income on fuel
to maintain a satisfactory heating regime, usually 21 degrees for the main living area, and 18
degrees for other occupied rooms. This measurement is set to be changed by the current
government but most existing statistics refer to this definition.
Not only do low temperatures and cold homes aggravate exiting conditions, in extreme
cases they can actually result in death, especially in older people. This is commonly referred
to ‘Excess Winter Deaths’. Each year around 20,000 more people aged 65 or over die in
winter months than other months. Respiratory problems, cardiovascular issues and
hypothermia are very often the underlying cause or a contributory factor to these deaths.
Other instances of the poverty premium in effect can be evidenced through the accessing of
credit. Many without a bank account, or seeking small loan amounts over short periods, or
with a limited/ damaged credit report, are excluded from borrowing from mainstream credit
providers like banks. Such credit is instead obtained via sub-prime lenders who typically
charge an APR (annual percentage rate) upwards of 300%, so the financially excluded not
only end up paying more, they also expose themselves to the increased risk of credit
becoming unmanageable debt due to high repayment costs.
Debt, a growing issue for households in the UK, has a huge impact on mental health and
wellbeing. Nearly half (44%) of people who currently have or have had mental health

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problems have severe or crisis debts. Just one in ten people who have never had mental
health problems have severe or crisis debts (survey - moneysavingexpert.com, 2011).
A 2012 survey by debt counsellors Christians Against Poverty found that 68% of those
seeking debt help had been prescribed medication by their GP to help them cope, 75% of
those in a couple said debt affected their relationship and 40% had considered or attempted
suicide.
In 2013 it was estimated by the Money Advice Service that 9 million UK citizens are
currently experiencing ‘serious debt’. If we apply this figure against the findings of Citizens
Advice who state three-quarters of their debt customers feel their mental health has
affected by their situation, then we might conclude that 6.75 million people are suffering in
the UK as a result.
Mental health sufferers can also find themselves experiencing financial exclusion or finding
financial difficulties being heightened because of an existing condition. Mind, one of the
UK’s leading mental health charities acknowledges that many common mental health
conditions can make managing money more difficult because of the symptoms a sufferer
can experience. It goes on to describe some specific ways that mental health problems can
affect finances:
 If the ability to work is affected there may be a sudden or, possibly, dramatic
reduction in income.
 If time is spent in hospital, it may be difficult to keep up to date with financial
commitments.
 If experiencing symptoms such as mania, capacity to make financial decisions may be
affected as a sufferer could act recklessly or unwisely.
 Depression can result in losing the motivation or the ability to concentrate to keep
control of finances.
 If unable to make their own independent decisions, a person could be more
vulnerable to financial exploitation or abuse.
The example of debt as an issue serves to demonstrate how financial exclusion can
contribute to ill health, but also, how health can impact on financial exclusion.
On the flip side of debt, having savings and/ or financial products like home contents, health
or life insurance can have a positive effect on health and wellbeing. ‘The Asset Effect’ by
Bynner and Paxman (2001), explores the value of owning assets and having savings – the
study concentrates specifically on males and females aged 23 from the USA. Their findings
conclude that having assets at 23 positively effected a number of outcomes:
 Marital breakdown less likely
 Less likely to spend time unemployed or experience unemployment

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 Savings at age 23 relate to positive good health and an absence of depression
 People who have assets at age 23 are less likely to smoke at age 33
 ‘political interest’ is positively related to the possession of assets at age 23, and
there is evidence of more political trust and a commitment to the work ethic
What this report also highlights is that there is very little correlation between the value of
the asset and the resulting positive outcomes. This tells us that it is the presence of an asset,
not its monetary value that matters.
Supporting these findings is a more recent American study which finds that a young person
with their own savings and an account in their own name is seven times more likely to
attend college than a similar youth who did not have an account. A savings account also
increases the chance that they will persevere and do what it takes to get through college.
Those with a savings account opened for them as children are twice as likely as their peers
without savings to have graduated or to be on course to graduate college by age twenty-
three (Elliott, Monique Constance-Huggins, Hyun-a Song, 2012)
In the UK, The Savings Gateway proposal supported these conclusions with a scheme that
would have seen the government match the savings of ‘the poor’ by 50p for every £1, with a
maximum investment of £300. It was due to start in July 2010 following two pilots but was
scrapped by the current coalition government after being deemed too expensive. The Child
Trust Fund, a scheme which gave children two vouchers worth £250 (£500 for children from
low income families) to invest, and enabled friends and family members to invest tax free
on their children's behalf, was also axed in the same year. To date, nothing at a national
level has been introduced to replace them.
Like savings, insurance products can provide the policy holder with a sense of security and
peace of mind, which can in turn being linked to a person’s health and mental wellbeing.
Both savings and insurance can provide a monetary buffer in times of need, and are a key
determinant of financial resilience. People without such measures in place are more at risk
of making expensive or poor financial decisions if faced with an income shock, this can
include using high cost or illegal forms of credit to make ends meet (Lewis S and Messy F,
2012).
It is acknowledged that those diagnosed with potentially life-threatening illnesses like
cancer or stroke are likely to experience a negative impact on their finances. This could be
due to a reduction or loss of earnings if work has had to be given up or scaled back – both
on the part of the sufferer, and any family carers. As part of their treatment, it is likely that a
specific diet, exercise, hospital visits and a warm home are recommendations to aid
recovery – all of which can add significant financial pressure to potentially stretched
household.

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And it isn’t just newly diagnosed conditions that affect income or heighten levels of poverty,
existing conditions can also be worsened. People with a disability (mental or physical) or in
poor health are not automatically going to experience financial exclusion or poverty, but
there is an increased probability. Disabled people are twice as likely to live in relative
poverty as non-disabled people (Parckar, G, 2008) and when the additional costs disabled
people face as a result of their impairment are factored in, figures imply that well over half
of disabled people in the UK could be living in poverty.
Recent Experian data ranking areas of deprivation in England listed the ‘risk of chronic
obstructive pulmonary disease’ (COPD) as one of its key poverty indicators. As the only
medical factor on the list, COPD highlights the strong impact of fuel poverty on chronic
health conditions in England and demonstrates how health conditions/ disabilities can be
both caused or worsened due to the effects of poverty and financial exclusion.
COPD, a collection of respiratory diseases including emphysema and chronic bronchitis, is
usually caused by smoking. However, there is also sufficient evidence to suggest that living
in inadequately heated environments can exasperate pre-existing health conditions such as
COPD, indicating a link between COPD and poverty. In 2009 NHS Northeast published
findings that high levels of fuel poverty in the region due to elevated fuel costs is causing
people to live in the cold conditions known to exacerbate COPD (Roger E, Ford C, Sumby P,
2009).
Food poverty is another growing area of concern which can be directly linked with low
incomes and financial exclusion, and has negative health impacts.
According to an independent report commissioned by the current government, low
incomes, unemployment and benefit delays have combined to trigger increased demand for
foodbanks among the UK's poorest families. (Lambie-Mumford H, Crossley D, Jensen E,
Verbeke M and Dowler E, 2013). Cutting out fresh food or skipping meals is also
commonplace as household budgets are increasingly squeezed. A third of the households
consulted in the second Real Life Reform paper reported that they now spend less than £20
a week on food, partly to cope with spiralling gas and electricity bills. This is up from a
quarter since their previous report in September 2013. The households spent an average of
£2.10 a person each day on groceries, having cut their daily food budget drastically (from
£3.27) since the summer of 2013 (NHC, 2013). However, it is not just those impacted by the
welfare reforms that have changed their eating habits, an IFS report found that household
food purchasing behaviour has changed significantly since the recession with people
spending an average of 8.5% less. Pensioner households, single-parent households and
households with young children saw the largest declines in the nutritional quality of the
foods purchased between 2005–07 and 2010–12 (Griffith R, O’Connell M and Smith K (2013)
So what does this mean for health? Well it will come as no surprise that going without food
or consuming food with a poor nutritional value will have a negative effect. Obesity and

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obesity-related illnesses like diabetes are on the rise in the UK. Many families cite
diminishing household budgets on making food choices for their family they know lack
nutritional value or are filled with empty calories – this is especially evident in the school
holidays when children normally in receipt of free school meals have to be catered for all
mealtimes at home (Gill O and Sharma N, 2005)
Low birth weights, dental cavities and a weakened immune system are all linked to
malnutrition, a sure sign of food poverty. A poor diet is also associated with low academic
performance in children as concentration levels wain amongst pupils who have no breakfast
or an insufficient/ inappropriate breakfast. According to a 2005 study published in
‘Physiology and Behaviour’, eating a healthy breakfast in the morning has beneficial effects
on memory and attention, allowing children to more quickly and accurately retrieve
information.
Households experiencing financial exclusion and low income may also find the cost of food
heightened further if they are unable to afford the transport costs to shop at cheaper, large
supermarkets, frequently built out of town. It is well documented that local convenience
stores cost significantly more in comparison, though many families feel they have no choice
but to purchase goods there. Not having access to the internet or a bank account aggravates
the situation as individuals are be unable to take advantage of online discounts, offers and
home delivery services.

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Conclusion
Financial Exclusion - This report notes that there is very little research available which
specifically draws parallels between health and financial exclusion, far more is written about
poverty, particularly low income, and the impact it has on health and levels of wellbeing.
Debt, which can be a symptom of financial exclusion, is in contrast a well-documented
financial area that has a specific impact on health and wellbeing – particularly mental
health.
Debt can cause significant damage to person’s mental health; the stress and worry of being
unable to make payments, and the added burden of creditors applying pressure and making
recovery threats can cause countless individuals to experience amplified levels of anxiety
and depression. This in turn can result in the breakdown of relationships, absenteeism and
even dismissal from work, weight loss through lack of appetite, and in extreme cases,
feelings of and attempts at suicide. Other pre-existing health conditions are also often
worsened if a sufferer is experiencing the negative mental health effects of debt.
The inability to access bank accounts is cited as the main reason for people falling victim to
the poverty premium. As we have heard, those without a transactional account are forced
into the sub-prime lending market, and have to pay for their energy consumption via costly
pre-payment meters. They are also unlikely to be able to access traditional insurance
products which require the holder to pay premiums by Direct Debit or standing order
leaving them financially exposed.
Not having insurance cover or a savings buffer can not only leave an individual vulnerable,
but can also invoke feelings of worry. Conversely, we have explored that having such assets
not only results in feels of security and wellbeing, but is also linked to a whole host of
positive outcomes, especially in young people.
The uptake of welfare benefits is one area where, if the claimant is successful, income can
be maximised helping to alleviate the effects of poverty. However, the complexity of the
welfare benefits system coupled with the largely digital access route has resulted in many
going without.
Poverty - Putting financial exclusion aside, poverty clearly has the biggest impact on health
and wellbeing. Fuel poverty and food poverty in particular are reported to not only worsen
existing health conditions and disabilities, but are also the direct liked to the development
of new ones. Low birth weight, malnutrition, cerebral palsy, respiratory diseases, heart
failure, stroke, type 2 diabetes, obesity, sudden infant death, and many mental health
conditions have all been linked to poverty – either as a direct or indirect cause.

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Worryingly, trends show that the income gap is widening forcing more low income families
into poverty. This will not only have an impact on those individuals affected, but will be
detrimental to the UK economy, potentially increase the country’s welfare bill, and put
added costs and pressure on the advice sector and the NHS – all of which are unsustainable.
Next Steps
Although links between these agendas have been made, more could be done, though it
does appear that the tide is turning. It has recently been announced that the CCG (Clinical
Commissioning Group) in Liverpool has awarded £1 million to Citizens Advice to help the
health sector and advice sector to work more closely together. Banks have begun reviewing
their ATM machines and access methods. Housing provide Gentoo Group and participating
local GPs have piloted a successful ‘prescribe a boiler scheme’, targeting those with a cold
home and pre-exiting medical conditions including asthma and COPD – this is to be
extended further. The findings in the review carried out for NHS Greater Glasgow and Clyde
evidences the important role that the health sector could play in overcoming benefit access
issues for patients, and charities like Macmillan are incorporating welfare benefits advisors
into the service offer to cancer sufferers and their families.
Greater collaboration between the health, advice and financial sector could ultimately
overcome many of the issues consumers face around financial exclusion, and can
undoubtedly reduce the health and wellbeing impacts in doing so. We are, however, left
with the broader agenda of poverty and the knowledge that overcoming the causes of this
significant issue is a far greater ask, but that reducing financial exclusion will go some way in
doing so.

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References
 Leyshon, A. and Thrift, N. (1995) ‘Geographies of financial exclusion: financial
abandonment in Britain and the United States’, Transactions of the Institute of
British Geographers, New Series, 20, pp.312-341
 Kempson, E. and Whyley, C. (1999) Kept Out or Opted Out? Understanding and
Combating Financial Exclusion.
 Resolution Foundation (2008) In Brief: Financial Exclusion
 Réseau Financement Alternatif, (2008) Financial services provision and the
prevention of financial exclusion.
 Helen Harvey, (date unknown) Financial Inclusion and Capability: What’s in a Name?
 Peter Townsend, (1979) Poverty in the UK
 Leonard Cheshire Disability, (2010) Disability and the Downturn
 Parckar, G, Leonard Cheshire Disability, (2008) Disability poverty in the UK
 HMSO, Department of Social Security, (1990) Disability, household income &
expenditure
 Policis, Toynbee Hall, (2012) Payments Council - Consumer research with ‘older old’
consumers and those living with cognitive, physical and sensory disabilities
 Ipos MORI, Social Institute Research, (2013) Disabled People and Financial
Wellbeing
 Dobbie L and Gillespie M, (2010) The Health Benefits of Financial Inclusion: A
Literature Review
 ONS, (2011) Wealth Assets Survey 2008-10
 The Marmot Review Team, (2011) The Health Impacts of Cold Homes and Fuel
Poverty
 Collins KJ, (1986) Low indoor temperatures and morbidity in the elderly
 Brewer M, Muriel A, Phillips D and Sibieta L, (2009) Poverty and Inequality in the UK
 Roger E, Ford C, Sumby P, (2009) Alleviating Fuel Poverty in Order to Improve Health
in the North East (Final Report for the Economy, Culture and Environment Regional
Advisory Group of Public Health North East)

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 Department for Health, (2005) Choosing a Better Diet: A Food and Health Action
Plan
 Press V (2004) Nutrition and Food Poverty: A toolkit for those involved in developing
or implementing a local nutrition and food poverty strategy
 Yusuf S, Hawken S, Ounpuu S et al, (2004) Effect of potentially modifiable risk
factors associated with myocardial infarction in 52 countries (the INTERHEART
study): case-control study
 Routledge M, and Sanderson H, (2001) Valuing People: a new strategy for learning
disability for the 21st century
 Doll R, Peto R, (1981) The causes of cancer: quantitative estimates of avoidable risks
in cancer in the United States today
 Vellas B et al, (1986) Malnutrition and Falls
 Acheson D, (1998) Independent inquiry into inequalities in health
 New Philanthropy Capital, (2007) What price an ordinary life?
 James WPT et al, (1997) Socioeconomic Determinants of Health: the contribution of
nutrition to inequalities in health
 Scope, (2013) Disabled People and Financial Wellbeing
 Social Finance, (2011) Financial Inclusion: Families with Disabled Children
Understanding their financial needs
 Beckford M, (2014) Access to banking for people with a learning disability (Dosh Ltd)
 Bynner and Paxman, (2001) The Asset Effect
 Lewis S and Messy F, (2012) Financial Education, Savings and Investments: An
Overview
 NIACE, (2011) Work, Society and Lifelong Literacy - Report of the inquiry into adult
literacy in England
 Elliott, Monique Constance-Huggins, Hyun-a Song, (2012) Journal of Family and
Economic Issues
 Northern Housing Consortium, (2013) Real Life Reform: Report 2
 Gill O and Sharma N, (2005) Food Poverty in the School Holidays

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 Lambie-Mumford H, Crossley D, Jensen E, Verbeke M and Dowler E, (2013)
Household Food Security in the UK: A Review of Food Aid
 Griffith R, O’Connell M and Smith K, (2013) Food Expenditure and Nutritional
Quality over the Great Recession
 Burton L, (2013) Low income and Digital Exclusion
 NIACE, (2013) Key Facts on Family Learning: Intergenerational Cycle of Disadvantage
 Purcell S, (2014) Let us switch! How prepayment meters trap people in fuel poverty

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