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6 Finance and Childcare

INTRODUCTION AND CONTEXT

The 2005 Financial Inclusion Action Plan ³⁶ set out the (then) Scottish Executive's strategy for financial inclusion (defined as access for individuals to appropriate financial products and services, including having the skills, knowledge and understanding to make best use of those products and services). This was linked to the Closing the Opportunity Gap approach to tackling poverty and disadvantage. On 31 January 2008, the Scottish Government launched "Taking Forward the Government Economic Strategy ( GES): a discussion Paper on Tackling Poverty, Inequality and Deprivation in Scotland", ³⁷ to inform the development of a new anti-poverty framework. The UK Government is also committed to tackling financial exclusion, and some of the key announcements in its "Financial inclusion: an action plan for 2008-11", ³⁸ published in December 2007, include Scotland.

The Scottish Household Survey asks several key questions that are used to measure progress against financial inclusion targets. For example, it collects information on how households are coping financially, the number of households without a bank or building society account and the number of households without any savings or investments.

This chapter begins with a general overview of income in Scotland as a starting point for looking at several different elements of financial inclusion. ³⁹ These include the prevalence of savings and investments, bank and building society accounts, the use of credit in Scotland and whether households are covered by home contents insurance. The extent to which the uptake of financial services varies across key groups is explored, with a particular focus on those households with low incomes and in deprived areas. Affordable and accessible childcare is important for financial inclusion as it enables parents to work. It is also a major area of household expenditure for households with children. For this reason, at the end of the chapter types of childcare used and their associated costs are also explored.

INCOME

Table 6.1 and Table 6.2 show net annual household incomes in Scotland by type of household and level of area deprivation. ⁴⁰ Overall, one in five (21%) households have a net annual income of £10,000 or less while two in five (41%) have an income of £15,000 or less. Single pensioner, single parent and single adult households were the most likely to fall into this latter income range (85%, 55% and 58% respectively). At the other end of the scale only 10% of households in Scotland have a net annual income of more than £40,000.

TABLE 6.1: NET ANNUAL HOUSEHOLD INCOME BY HOUSEHOLD TYPE
Column percentages, 2007 data

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

Unsurprisingly, Table 6.2 illustrates that people living in deprived areas are considerably more likely to have an income of less than £15,000 than those living in other parts of Scotland (62% compared with 38%).

TABLE 6.2: NET ANNUAL HOUSEHOLD INCOME BY SCOTTISH INDEX OF MULTIPLE DEPRIVATION
Column percentages, 2007 data

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

Savings and investments

Table 6.3 shows that a large proportion of households in Scotland do not have any savings or investments (41%), with those in the two lowest income categories the least likely to have any savings (37% compared with a national average of 52%). Furthermore, only 21% of single parent households have savings and investments (Table 6.4).

TABLE 6.3: WHETHER RESPONDENT OR PARTNER HAS ANY SAVINGS OR INVESTMENTS BY NET ANNUAL HOUSEHOLD INCOME
Column percentages, 2007 data

Includes all adults for whom household income is known or has been imputed.
Household income in the SHS is that of the highest income householder and their partner only.
From January to May 2007 this question was asked of all the sample. From June 2007 it was asked of three quarters of the sample.

TABLE 6.4: WHETHER RESPONDENT OR PARTNER HAS ANY SAVINGS OR INVESTMENTS BY HOUSEHOLD TYPE
Column percentages, 2007 data

From January to May 2007 this question was asked of all the sample. From June 2007 it was asked of three quarters of the sample.

Around half (52%) of all households say that they are managing very well or quite well financially, whilst 38% 'get by alright.' Another 4% don't manage very well, 5% have some financial difficulties and 1% report being in 'deep financial trouble.' Unsurprisingly, a higher proportion of those households with no savings or investments report having financial difficulties or 'deep financial trouble' (11% compared with only 1% of those with savings or investments) (Table 6.5).

TABLE 6.5: HOW THE HOUSEHOLD IS MANAGING FINANCIALLY THIS YEAR BY WHETHER RESPONDENT OR PARTNER HAS ANY SAVINGS OR INVESTMENTS
Column percentages, 2007 data

From January to May 2007 the question on how household was managing financially was asked of all the sample. From June 2007 it was asked of half of the sample.

Banking

The Scottish Household Survey has asked about bank or building society accounts annually since 1999. As Figure 6.1 shows, the proportion of households where neither the respondent nor their partner had a bank or building society account has seen a gradual decrease over the past nine years, falling from 12% in 1999 to 5% in 2005 and remaining stable since.

FIGURE 6.1: WHETHER RESPONDENT OR PARTNER HAS A BANK OR BUILDING SOCIETY ACCOUNT BY YEAR

1999-2007 data
Households (base:11,423)

There is a clear pattern between lack of a bank or building society account and levels of income and deprivation (Table 6.6 and Table 6.7). Those in the two lowest income categories were the most likely to not have a bank or building society account (11% and 12% respectively), the corresponding proportion was around just 1% for those with household incomes above £20,000. A similar pattern exists with area deprivation - 15% of households in the 15% most deprived areas did not have a bank or building society account compared with only 3% in the rest of Scotland.

TABLE 6.6: WHETHER RESPONDENT OR PARTNER HAS A BANK OR BUILDING SOCIETY ACCOUNT BY NET ANNUAL HOUSEHOLD INCOME
Column percentages, 2007 data

* Includes all adults for whom household income is known or has been imputed.
Household income in the SHS is that of the highest income householder and their partner only.
From June 2007, the question on bank or building society accounts was asked of three quarters of the sample. From January to May 2007, it was asked of all the sample.

TABLE 6.7: WHETHER RESPONDENT OR PARTNER HAS A BANK OR BUILDING SOCIETY ACCOUNT BY SCOTTISH INDEX OF MULTIPLE DEPRIVATION
Column percentages, 2007 data

From June 2007, the question was asked of three quarters of the sample. From January to May 2007, it was asked of all the sample.

USE OF CREDIT

The SHS asks about people's use of credit for two purposes: to purchase goods and to borrow money. Around two-thirds of households (63%) say they had used some form of credit to purchase goods in the past year, with credit cards being the most common form used (53% of households). Purchasing goods via credit is more common among householders aged 25 to 59 than with other age groups (Table 6.8).

TABLE 6.8: USE OF CREDIT TO PURCHASE GOODS BY GENDER AND AGE
Column percentages, 2007 data

Columns add up to more than 100% due to multiple response.
From June 2007, this question was asked of three quarters of the sample. From January to May 2007, it was asked of all the sample.

As Table 6.9 shows, the proportion of people who purchase goods via credit increases with household income. Over half (55%) of households with incomes of £6,000 or less do not use any form of credit, compared with only 6% of those with an income exceeding £40,000.

TABLE 6.9: USE OF CREDIT TO PURCHASE GOODS BY NET ANNUAL HOUSEHOLD INCOME
Column percentages, 2007 data

Columns add up to more than 100% due to multiple response.
* Includes all adults for whom household income is known or has been imputed.
Household income in the SHS is that of the highest income householder and their partner only.
From June 2007, this question was asked of three quarters of the sample. From January to May 2007, it was asked of all the sample.

Purchasing goods via credit is also far less prevalent in households in deprived areas of Scotland (Table 6.10). Of those households in the 15% most deprived areas over half (53%) do not use any form of credit to purchase goods, compared with only 29% in the rest of Scotland. This is likely to reflect the fact that those in stronger financial positions are generally more able to access credit than those with whose finances are less secure.

TABLE 6.10: USE OF CREDIT TO PURCHASE GOODS BY SCOTTISH INDEX OF MULTIPLE DEPRIVATION
Column percentages, 2007 data

Columns add up to more than 100% due to multiple response.
From June 2007, this question was asked of three quarters of the sample. From January to May 2007, it was asked of all the sample.

As illustrated in Table 6.11, single pensioner, single parent and single adult households were the least likely to use any form of credit to purchase goods.

TABLE 6.11: USE OF CREDIT TO PURCHASE GOODS BY HOUSEHOLD TYPE
Column percentages, 2007 data

Columns add up to more than 100% due to multiple response.
From June 2007, this question was asked of three quarters of the sample. From January to May 2007, it was asked of all the sample.

Borrowing money via credit is a less common occurrence than purchasing goods with it. Around three in ten (29%) households had used credit to borrow money in the past 12 months, with the most common method being a bank overdraft (12%). Once again there is a clear pattern between the use of credit to borrow money and household income. Of those with a household income of less than £6,000 only 19% had used credit to borrow money in the past 12 months, compared with 37% of those with a household income of more than £40,000 (Table 6.12).

TABLE 6.12: USE OF CREDIT TO BORROW MONEY IN THE PAST 12 MONTHS BY NET ANNUAL HOUSEHOLD INCOME
Column percentages, 2007 data

Columns add up to more than 100% due to multiple response.
* Includes all adults for whom household income is known or has been imputed.
Household income in the SHS is that of the highest income householder and their partner only.
From June 2007, this question was asked of three quarters of the sample. From January to May 2007, it was asked of all the sample.

Table 6.13 shows that the pattern with deprivation was less pronounced - 32% of those in the most deprived areas had used credit to borrow money in the past 12 months, compared with 29% in the rest of Scotland. However, some key differences in the nature of credit used are evident, for example households in the 15% most deprived areas were more likely to have used a Social Fund loan (7%) than those in the rest of Scotland (1%). Furthermore, as Table 6.7 showed, 15% of people in the most deprived areas do not have a bank account so many of the kinds of credit asked about - either for purchasing goods or for borrowing money - will not have been available to this most financially excluded group.

TABLE 6.13: USE OF CREDIT TO BORROW MONEY IN THE PAST 12 MONTHS BY SCOTTISH INDEX OF MULTIPLE DEPRIVATION
Column percentages, 2007 data

Columns add up to more than 100% due to multiple response
From June 2007, this question was asked of three quarters of the sample. From January to May 2007, it was asked of all the sample.

HOUSEHOLD INSURANCE

Whether a household has home contents insurance is another useful indicator of a household's financial security and its ability to recover from the kinds of incidents that are covered by such insurance. Table 6.14 shows that while 82% of all households in Scotland are covered by home contents insurance, there is a large gulf between owner occupiers (96% of whom have home contents insurance) and those in the social rented or private rented sectors (54% and 50% respectively).

TABLE 6.14: WHETHER HOUSEHOLD HAS HOME CONTENTS INSURANCE BY TENURE*
Column percentages, 2007 data

* Revised October 2008

From June 2007, this question was asked of half the sample. From January to May 2007, it was asked of all the sample.

CHILDCARE

The Parents Access and Demand for Childcare ⁴¹ and Growing Up in Scotland ⁴² surveys provide very detailed information on childcare. However, due to its importance as a major item of household expenditure, and as a key factor that enables parents to work, the Scottish Household Survey asks parents of children aged 15 or under what forms of childcare they have used in the past year. Parents who mentioned more than one type, other than any provided by a household member, were also asked to say what their main form of childcare had been in the previous year. Table 6.15 presents the main forms of childcare used by urban rural classification. The most common types mentioned were a parent or other adult in the household (45%), followed by grandparents (22%). The most common formal provider across all urban rural categories was a nursery, either local authority (5%) or private (5%). There were few notable or consistent differences across the urban rural categories, although use of local authority nurseries was lower in remote rural areas (1%) than in any other type of area (where it ranged between 3% and 8%).

TABLE 6.15: MAIN FORM OF CHILDCARE USED BY URBAN/RURAL CLASSIFICATION
Column percentages, 2007 data

Households that mentioned using a form of childcare other than that provided by a household member in the past year were asked how much they had paid for childcare in the preceding week. A large proportion had not actually paid for any (60%) while a further 14% had not needed any. This is unsurprising; the previous table showed that grandparents were the most common form of childcare used other than household members and they are often used in lieu of paid childcare. Some forms of formal childcare are not paid for by parents - for example, local authority nurseries guarantee a certain number of free hours per year for 3 and 4 year olds. Also, some of the types mentioned were seasonal or intermittent so might not happen to have been used in the past week (e.g. before or after school care or a friend). Table 6.16 shows that households with the highest incomes were the most likely to have paid for childcare in the past week, and that expenditure on childcare increases as household income increases. For example, 13% of households with an income of £40,000 or more spent more than £75 in the past week on childcare compared with between 2% and 5% of households with incomes up to £25,001-£30,000, and 9% of those with incomes of £30,001 to £40,000.

TABLE 6.16: AMOUNT PAID FOR CHILDCARE BY NET ANNUAL HOUSEHOLD INCOME
Column percentages, 2007 data

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

Table 6.17 highlights the fact that, understandably, both the use of childcare, and its expense, is associated with children's age. Parents of children aged 3 and under were more likely than parents of older children to have paid for childcare in the past week, and to have paid the most for it.

TABLE 6.17: AMOUNT PAID FOR CHILDCARE BY AGE OF CHILD
Column percentages, 2007 data

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