Scotland's People Annual report: Results from 2009 Scottish Household Survey

6 Finance

Introduction and Context

The Scottish Government framework to tackle poverty, income inequality and financial exclusion in Scotland is set out in 'Achieving our Potential' which was published in November 2008. It outlines the key actions required by the Scottish Government and its partners such as the strengthening of income maximisation work, launching a campaign to raise awareness of statutory workers' rights and supporting people who find it hardest to get into jobs or use public services. It also calls for the UK government to transfer responsibility for personal taxation and benefits to Scotland, simplify the tax credits scheme and promote the greater availability of childcare vouchers.

Achieving Our Potential is one of three key elements of the Scottish Government's approach to alleviating disadvantage, which also focuses on reducing health inequalities and providing children with the best start in life.

The SHS asks several key questions that are used to measure progress against financial inclusion targets. This chapter begins by providing a picture of how households in Scotland are managing financially and looks at how this has changed recently. Other measures of financial inclusion ⁴³ from the SHS examined across time are whether the household uses a bank account or other finance such as a credit union or Post Office Account, whether the household has savings or investments and what types of credit and debt, if any, the household uses.

The analysis of financial inclusion is presented for a number of different groups - those with lower and higher incomes, different types of household and those with different income sources. Households with children are examined to estimate the number of children living in low income households and the number dependent on out of work benefits or Child Tax Credit.

Analysis on the use of formal and informal childcare was presented within the SHS annual reports previously. The questions on which this was based were removed at the start of 2009, so no analysis is presented here.

Some commentary is provided throughout this chapter based on more in-depth analysis than that actually presented. The actual analysis will be presented as accompanying web tables on the SHS website.

How households are managing financially

The SHS asks respondents to rate how they feel their households have coped financially over the last year. Trends over time for this question are presented in Figure 6.1 below.

Between 1999 and 2007 the SHS data suggest that an increasing number of people felt positive about their household finances, rising from around 40% of households rating themselves as managing 'quite well or very well' in 1999 to a peak of 55% in the fourth quarter of 2007. During 2008 this proportion fell by five percentage points while the proportion of people describing themselves as 'getting by alright' conversely increased.

Throughout 2009, there is a suggestion that people are beginning to feel more positively about their household finances, with an increase of two percentage points over the year for those saying they are managing 'quite well or very well'. There was also a levelling in the proportion of people answering that they either 'didn't manage very well' or 'had some difficulties', following increases throughout 2008.

The proportion of respondents describing themselves as in 'deep financial trouble' has remained consistently low, around one per cent over the period that this question has been asked.

Figure 6.1: How the household is managing financially this year

1999-2009 data, Households (2009 base: 6,965)

This question was only asked between January and March in 2003.

If we combine the data into three broad categories - those managing well, those getting by and those not managing well, ⁴⁴ we can see that households with lower incomes are much more likely to say they are managing badly, with 22% of those with a household income of less than £10,000 saying this, compared with just 4% of those households with an income in excess of £30,000.

Figure 6.2: How the household is managing financially this year by net annual household income

2009 data, Households (base: 6,725)

From June 2007, this question was asked of half of the sample.

Household income in the SHS is that of the highest income householder and their partner only. Includes all adults for whom household income is known or has been imputed. Excludes refusals/don't know responses.

Just under a third of single parent households say they are not managing well financially (Table 6.1), compared with just over one-in-ten households across all household types. Almost one-in-five single adults also say they are not managing well, while only 3% of older smaller households and 6% of single pensioners say this. The likelihood of saying they are not managing well financially reduces with age - the median of those managing well is 54 while the median age of those not managing well is 42.

Table 6.1: How the household is managing financially this year by household type

Column percentages, 2009 data

Households	Single adult	Small adult	Single parent	Small family	Large family	Large adult	Older smaller	Single pensioner	All
Manages well	42	56	20	47	41	51	62	53	49
Gets by	39	34	49	39	47	40	35	41	39
Does not manage well	19	10	31	14	12	9	3	6	12
All	100	100	100	100	100	100	100	100	100
Base	1,316	1,368	384	937	457	618	975	910	6,965

Managing financially for a household can be difficult if housing affordability is a concern. Figure 6.3 shows that those households in social and private rented sectors are less likely to say they are managing well (27% and 33% respectively) as compared to those who live in owner occupied accommodation (59%). Those within the social rented sector appear to have more concerns around not managing very well financially (5%).

Figure 6.3: How the household is managing financially this year by tenure of household

2009 data, Households (base: 6,987)

Those households relying on benefits were far less positive about their finances than those whose income comes mainly from earnings or non-earned sources (Table 6.2). ⁴⁵ Almost one-in-five households relying on benefits say they are not managing well compared with fewer than one-in-ten of those relying mainly on earnings and 4% of those whose income is mainly from 'other sources'.

Table 6.2: How the household is managing financially this year by income sources

Column percentages, 2009 data

Households	Main income from earning	Main income from benefits	Main income from other sources	An equal mix of income sources	All
Manages well	54	36	71	*	49
Gets by	38	45	25	*	39
Does not manage well	9	19	4	*	12
All	100	100	100	*	100
Base	3,741	2,396	584	4	6,725

Respondents in households where the Highest Income Householder ( HIH) is male more commonly say they do manage well (53%, compared with 44% of households where the HIH is female). There are also marked differences in how people are managing financially when looking at age, with an increase in those managing well as people get older (35% of those aged 16 to 24 up to 60% of those aged 75 plus), as against decreasing pattern for those not managing well (22% of those aged 16 to 24 down to 2% of those aged 75 plus).

Table 6.3: How the household is managing financially this year by sex and age of highest income householder

Column percentages, 2009 data

Households	Male	Female	16 to 24	25 to 34	35 to 44	45 to 59	60 to 74	75 plus	All
Manages well	53	44	35	39	44	50	56	60	49
Gets by	37	41	43	43	40	37	38	38	39
Does not manage well	10	15	22	17	17	13	6	2	12
All	100	100	100	100	100	100	100	100	100
Base	4,142	2,823	292	906	1,325	1,963	1,585	894	6,965

There is a concentration of perceived financial difficulty in areas of deprivation (Table 6.4). Twice the proportion of households in the 15% most deprived of data zones (according to the Scottish Index of Multiple Deprivation) say they are not managing well financially, compared with the rest of Scotland (23%, compared with 10%).

Table 6.4: How the household is managing financially this year by Scottish Index of Multiple Deprivation

Column percentages, 2009 data

Households	15% most deprived	Rest of Scotland	Scotland
Manages well	31	52	49
Gets by	46	38	39
Does not manage well	23	10	12
All	100	100	100
Base	975	5,982	6,957

From June 2007 this question was asked of half the sample

Savings and Investments

Previously, information on savings or investments was asked via two questions: whether the highest income householder or their spouse or partner had any money saved or invested then a follow up question to ask how much using banded amounts. These were consolidated into a single question from January 2009. As such, analysis from 2009 may not be directly comparable to those from previous years. Those saying they do have savings has increased slightly from previously, which is likely caused by the introduction of the amount of savings ( e.g. less than £1,000) into the question.

Table 6.5: Whether respondent or partner has any savings or investments by year

Column percentages, 1999-2009 data

Households	Yes	No	Refused	Don't know
Single adult	56	34	9	1
Small adult	64	22	13	1
Single parent	35	61	4	0
Small family	63	26	10	1
Large family	59	30	10	1
Large adult	63	22	12	3
Older smaller	69	10	19	2
Single pensioner	62	17	18	3
All	61	25	12	2

Direct comparisons between 2009 and earlier years is not possible due to a change in questions. As respondents are now asked the amount of savings they hold at the same time as whether they have any savings, there been a move for those who say they have less than £1,000 savings from having previously said they had no savings.

Table 6.5 presents figures about whether SHS respondents had savings or investments between 1999 and 2009. As noted above, it is not possible to make direct comparisons between 2009 and earlier years. One quarter of households did not having any savings or investments in 2009. Almost one-in-five households have less than £1,000 savings. Prior to change of questions in the SHS in 2009, there had been an apparent decrease in the amount of savings being less than £1,000.

Figure 6.4 shows that just over a quarter of households in Scotland do not have any savings or investments (26%), with the proportion with savings or investments increasing from 50% of those with the lowest incomes to 74% of those with the highest incomes. Just over a third (35%) of single parent households have savings and investments compared with 69% of older smaller households (Figure 6.5).

Figure 6.4: Whether respondent or partner has any savings or investments by net annual household income

2009 data, Households (base: 9,965)

Figure 6.5: Whether respondent or partner has any savings or investments by household type

2009 data, Households (base: 10,324)

There are also differences by tenure, with 70% of owners having savings or investments, compared with just 39% of social renters. Income source is also influential, with 77% of those with income from non-earned sources ⁴⁶ and 71% of those with mixed earning sources having savings or investments compared with 55% of those whose main income is from earnings and 36% whose main income is from benefits.

Table 6.6: Whether respondent or partner has any savings by tenure of household

Column percentages, 2009 data

Households	Owner occupied	Social rented	Private rented	Other	All
No savings	14	51	41	35	25
Has savings	70	39	50	49	61
Less than £1,000	16	21	23	20	18
£1,000 or more	54	18	27	29	43
Don't know	1	2	2	4	2
Refused	14	9	7	11	12
All	100	100	100	100	100
Base	6,959	2,276	933	156	10,324

Again, there is a relationship between having savings or investments and age and gender. The median age of those with savings is 53 while the median age of those without is 44, reflected in the changing profile of savings within Table 6.7. Respondents from households where the HIH is female are slightly less likely to report having savings (57%, compared with 64% headed by men).

Table 6.7: Whether respondent or partner has any savings by sex and age of highest income householder

Column percentages, 2009 data

Households	Male	Female	16 to 24	25 to 34	35 to 44	45 to 59	60 to 74	75 plus	All
No savings	22	30	55	39	32	23	15	12	25
Has savings	64	57	38	53	57	63	67	65	61
Less than £1,000	17	20	23	22	19	17	15	15	18
£1,000 or more	47	37	15	31	38	46	52	50	43
Don't know	2	2	1	1	1	2	1	4	2
Refused	13	12	6	6	10	12	17	19	12
All	100	100	100	100	100	100	100	100	100
Base	6,138	4,186	416	1,298	1,932	2,924	2,425	1,329	10,324

Use of Credit

The questions on use of credit within the SHS changed in 2009. Previously, respondents were asked whether they used a variety of sources to either purchase goods or to borrow money using credit. These were replaced with questions on whether in the previous month they had any money outstanding on either accounts ( e.g. credit cards, etc) or through loans ( e.g. personal loans, etc). As such, analysis from 2009 may not be directly comparable to those from previous years.

Owing money through credit

A third of households owed money on their credit card from the previous month, with 4% of those with shop or store cards owing money (Table 6.8). Those households with higher income are more likely to owe money on credit cards, with just under half (47%) with an income of over £30,000 owing money to a credit card in the previous month. The proportion of people who have money outstanding on such credit also increases with household income. Almost four-fifths of households with incomes of up to £10,000 do not have any money outstanding, compared to less than half (48%) with an income exceeding £30,000.

Table 6.8: Whether respondent or partner owe money to the following by gender of the highest income householder and net annual household income

Column percentages, 2009 data

Households	Male	Female	Up to £10,000	£10,001 - £20,000	£20,001 - £30,000	Over £30,000	All
Credit Cards	35	29	18	27	39	47	33
Charge Cards	1	1	0	1	1	2	1
Shop or store cards	4	4	3	3	5	6	4
None of these	59	65	77	68	56	48	62
Refused	5	4	4	3	4	3	3
Base	6,107	4,164	1,788	3,452	2,089	2,592	9,921

Columns may not add to 100% since multiple responses were allowed.

Household income in the SHS is that of the highest income householder and their partner only. Includes all households for whom household income is known or has been imputed.

As illustrated in Table 6.9, single pensioner households were the least likely to own money via credit in the previous month (77%). Small family households were less likely to owe nothing, with 48% owing money to a credit card.

Table 6.9: Whether respondent or partner owe money to the following by household type

Column percentages, 2009 data

Households	Single adult	Small adult	Single parent	Small family	Large family	Large adult	Older smaller	Single pensioner	All
Credit Cards	29	37	26	48	43	34	25	17	32
Charge Cards	1	1	0	2	2	1	0	0	1
Shop or store cards	2	5	6	6	7	5	3	2	4
None of these	64	57	69	47	51	60	69	77	62
Refused	5	4	2	3	4	4	5	5	4
Base	1,912	2,005	568	1,366	689	929	1,434	1,368	10,271

Columns may not add to 100% since multiple responses were allowed.

Figure 6.6 shows that having money outstanding on credit is more commonly associated with affluence rather than financial hardship. Owners, those saying they are managing well financially, those with savings or investments and those whose main income is from earnings are, to some extent, more likely to owe money. Social renters and those whose main income is from benefits are less likely to owe money.

Figure 6.6: Whether respondent or partner owe money to the following by tenure and financial circumstances

2009 data, Households (base: 10,271)

Household income in the SHS is that of the highest income householder and their partner only. Includes all households for whom household income is known or has been imputed.

Use of loans

Credit, as well as being used to make purchases through sources such as credit cards, can be used as a way of borrowing money. Table 6.10 shows the main types of loans people take out. The most common source is through a personal loan (such as through a bank or building society) with 14% of all households having such a loan. There is no apparent difference in the uptake of loans between males and females as highest income householders, though there is in the uptake of personal loans when looking at income. Only 4% of households with income less than £10,000 have a personal loan, compared to just under a quarter (24%) where the income is over £30,000.

Table 6.10: Whether respondent or partner has any loans by gender of highest income householder and net annual household income

Column percentages, 2009 data

Households	Male	Female	Up to £10,000	£10,001 - £20,000	£20,001 - £30,000	Over £30,000	All*
Catalogues or mail order schemes	5	7	4	7	6	6	6
Hire or Rental Purchase Agreements	3	3	0	2	3	5	3
Personal loan, e.g. with Bank, Building Society	14	12	4	9	17	24	14
Cash loan from company that comes to your home to collect payments	0	1	1	1	1	0	1
Loan from a pawnbroker/cash converters	0	0	0	0	0	0	0
Loan from a Credit Union	1	1	0	1	1	1	1
Loan from a Social Fund	1	2	2	2	0	0	1
Loan from an Employer	0	0	0	0	0	0	0
Loan from a friend, relative or other private individual	1	1	1	1	1	1	1
Other type of loan	1	1	1	1	1	1	1
Loan from a student loan company	2	2	2	2	2	2	2
Student loan from a bank or building society	1	1	1	1	1	1	1
A loan from a pay day lender	0	0	0	0	0	0	0
None of these	71	71	82	75	68	61	71
Refused	5	4	4	3	4	4	4
Base	6,115	4,170	1,788	3,455	2,095	2,594	9,932

Columns may not add to 100% since multiple responses were allowed.

Household income in the SHS is that of the highest income householder and their partner only. Includes all households for whom household income is known or has been imputed.

Figure 6.7 shows that the use of credit to borrow money differs depending on the tenure or financial circumstances of the household. Those households who are not managing well financially, those who have no savings or investments or those where the main income is from earnings are more likely to take out a loan.

Figure 6.7: Whether respondent or partner has any loans by tenure of household and financial circumstances

2009 data, Households (base: 10,285)

There is some evidence that borrowing using credit is more commonly associated with financial hardship, with 39% of those who say they are not managing well financially having borrowed, compared with 26% who are 'getting by' and 21% of those who are managing well. Those without savings or investments are also more likely to borrow than those with savings (32% and 24% respectively). Similarly, those whose main income is from earnings are more likely to have a loan (32%) than those where income come from benefits or other sources (less than one in five).

Banking

The SHS has asked about bank or building society accounts annually since 1999, with more details collected on Credit Unions and Post Office accounts since January 2007. The proportion of households with neither the respondent nor their partner having a bank or building society has seen a gradual decrease over the period to 2009. Just 4% of households in 2009 do not have any banking facilities (Table 6.11).

Table 6.11: Whether respondent or partner has a bank or building society account by year

Column percentages, 1999-2009 data

Households	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009
Yes	86	86	87	88	89	90	91	91	91	91	93
No	12	11	11	8	7	6	5	6	5	5	4
Refused	2	2	2	4	4	4	4	3	4	5	3
Base	14,653	15,545	15,558	15,072	14,877	15,936	15,388	15,611	11,424	10,364	10,289

From June 2007, this question was asked of three quarters of the sample.

This analysis excludes Credit Unions and Post Office accounts.

There is a clear pattern between not having a bank, building society or other account and levels of income and deprivation (Table 6.12). Those in the lowest income category were more likely to have no accounts, with 2% giving the 'none of these' option compared with less than 1% of those with household incomes above £30,000. Similarly, 4% of households in the 15% most deprived areas did not have an account of any kind compared with only 1% in the rest of Scotland.

Table 6.12: Whether respondent or partner has a bank or building society account by net annual household income and Scottish Index of Multiple Deprivation

Column percentages, 2009 data

Households	Up to £10,000	£10,001 - £20,000	£20,001 - £30,000	Over £30,000	15% most deprived	Rest of Scotland	All*
Bank account	87	90	94	96	82	92	91
Building Society account	13	17	23	35	10	24	22
Credit Union Account	1	2	3	4	4	2	2
Post Office Card Account	13	9	4	3	14	6	7
None of these	2	1	1	0	4	1	1
Refused	2	2	3	2	4	3	3
Base	1,792	3,458	2,096	2,595	1,339	8,937	10,276