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Chapter Six Benchmarking Templates

Scottish Local Authority Benchmarking Template

6.1 To gain a better understanding of financial inclusion at a local level, a benchmarking template was developed using key indicators of financial inclusion. Key indicators selected for analysis were:-

• Bank accounts;
• Savings;
• Home Contents Insurance; and
• Perceptions of financial management (selected as an indicator of financial capability).

6.2 Although SHS information was available for other measures of financial inclusion, including the use of various sources of credit and borrowing, it was decided to exclude these measures due to the complex relationship that they bear to financial inclusion.

6.3 The proportion of SHS respondents in each local authority, with a bank account, savings and home contents insurance was determined. Similarly, in the case of financial management, the proportion of people who stated that they managed "Very well" was considered. The results are shown in Table 6.1. It can be seen that there is not a perfect correlation. For example, when the top 5 authorities are considered for each indicator, only one, Aberdeenshire, appears in the top 5 on all 4. At the other extreme only one, Glasgow, appears in the bottom 5 on all 4.

6.4 Table 6.2 looks at the r ² values ²⁵ between the 4 inclusion variables. What can be seen is that:-

• All but one of the correlations are statistically significant; and
• The correlations are, however, generally quite low. For example, the maximum variance explained is 53% in the case of the relationship between savings and the "managing very well".

TABLE 6.2 R ² Between Inclusion Variables

Note:-
1. Significant at the 0.05 level.
2. Significant at the 0.01 level.

TABLE 6.1 Scottish Local Authority Benchmarking Criteria Template

6.5 Local authorities were then given a score between 1 and 32 for each measure, with a 1 being allocated to the highest percentages (the most financially included authority) and a 32 to the lowest. The scores for each authority were then summed and averaged. The results are shown in Table 6.3 which ranks the authorities from the most financially included (Aberdeenshire) to the least (Glasgow City).

6.6 The final column in Table 6.3 shows the percentage of Scotland's worst 15% data zones in each authority. The correlation between this and the rankings produces a coefficient of 0.530 that is statistically significant at the 0.01 level.

6.7 Clearly the templates have been drawn up using relatively limited information. What does, however, emerge is that:-

• The various aspects of financial exclusion are only partially reinforcing. Thus some local authorities may do comparatively well on one measure but perform far worse on others; and
• Although there is a relationship with deprivation, it is not particularly strong, explaining only 28% of the variance in the exclusion rankings.

6.8 The policy implications of this would seem to be:-

• Measures to tackle exclusion need to be multi-faceted as the various types of exclusion only partially overlap; and
• Spatial targeting, using the SIMD for example at the local authority level, can be only partially successful given that exclusion is not closely correlated with deprivation

National Benchmarking Template

6.9 An attempt was also made to benchmark financial inclusion in Scotland against the rest of the UK and Great Britain. The results are illustrated in Tables 6.4 to 6.8. These position Scotland against the other countries and regions in the UK. What can be seen is that:-

• In terms of countries (Table 6.4) Scotland's use of financial products is generally behind England and Wales but ahead of Northern Ireland. Where Scotland has above average use of a product this tends to be for those products that are associated with exclusion, such as Basic Bank Accounts;
• Table 6.5 looks at the use of current or savings accounts in Britain. It can be seen that Scotland ranks 7 ^th = out of the 11 regions, with 90% of families surveyed having a current or savings account, against the British average of 92%. Scotland is, however, well behind such regions as the South East where 97% of families have such accounts;
• In terms of regular savings (Table 6.6) 61% of Scottish families surveyed did not save regularly as against the British average of 58%. Although the reasons for saving differ slightly (for example fewer Scots that the average save to pay bills) the differences tend to be slight;
• Table 6.7 looks at households in Britain with multiple debts. Scotland has more households with debts (19% as against the average of 15%). There are variations in the numbers of debts per household , although again the variations are often slight; and
• Finally Table 6.8 looks at the average number of debts per household. Again it can be seen that Scottish households have above average numbers, albeit that the average is exceeded by 3 other regions.

Conclusions

6.10 The templates position Scottish local authorities relative to one another and Scotland against other countries in the United Kingdom and British regions. As the data sources on which the various Tables are based are updated it should be possible to see if Scotland's relative position changes. As such they can be seen as a series of baselines against which progress in combating financial exclusion can be measured.

6.11 The main message for policy comes from the analysis undertaken for the Scottish local authorities. What this showed was that there are often limited correlations between various measures of financial exclusion and an imperfect correlation between financial exclusion and area based deprivation measures. The implications are that any measures to combat exclusion may need to be targeted at the particular type of financial exclusion that it is hoped to influence and that spatial targeting at the local authority level may be too crude a way of dealing with the problem.

TABLE 6.3 Scottish Local Authority Benchmarking Criteria Ranking Template

TABLE 6.4 Use of Financial Accounts in the UK

Source: Family Resources Survey 2004/05 Section 5 Assets and Savings

TABLE 6.5 Use of Current and/or Savings Accounts in Great Britain
(Row percentages)

Source: Families and Children Study 2004

TABLE 6.6 Reasons for Saving in Great Britain
(Row percentages)

Source: Families and Children Study 2004

TABLE 6.7 Proportion of Households With Debt or Multiple Debts in Great Britain
(Row percentages)

Source: Families and Children Study 2004
Note:-
1. The number of debts equals the number of household bills with arrears including rent and mortgage loan repayments, plus one if there are any credit card or catalogue repayment arrears (regardless of the number of individual credit, charge, shop, store or catalogue agreements with arrears) and plus one, if any, loan arrears (regardless of the number of individual loans from banks, finance companies, money lenders, friends or employers with arrears).

TABLE 6.8 Mean Number of Debts Per Household in Great Britain

Source: Families and Children Study 2004

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