As a House of Lords hearing revisits the work of the Financial Exclusion Select Committee I consider how my proposed amendments to the Financial Services Bill can deliver the change we still need to see. Financial services should enable and empower, and I want us all to have:
“the ability to manage day to day financial transactions, meet expenses, manage a loss of earnings and avoid or reduce problem debt.”
Definition of financial inclusion from Select Committee on Financial Exclusion Report, Tackling financial exclusion: A country that works for everyone? Report of Session 2016-17 – published 25 March 2017 – HL Paper 132
I had the privilege of serving on the House of Lords Select Committee on Financial Exclusion from 2016-2017. We were tasked with considering financial exclusion and access to mainstream financial services and our work resulted in twenty-two recommendations to the government.
Number one on that list of recommendations was that the government should appoint a clearly designated Minister for Financial Inclusion. Just three months later the government appointed Guy Opperman as the UK’s first Minister for Financial Inclusion. Rather like buses we now also have John Glen, economic secretary to the Treasury, responsible for financial services including financial inclusion. As Guy Opperman said during the session; two ministries – in this case the Department for Work and Pensions (DWP) and the Treasury – working together to drive forward policy is both “unique” and “exceptionally difficult”.
The siloed nature of government departments is well-known. I have often observed the way it causes barriers to policy implementation and reflected on just how rare the London 2012 Games were as an illustration of a truly successful cross departmental project. It is a testament to both Minister’s commitment to the financial inclusion agenda that they have managed to work with “one concerted voice” in the three and a half years they have worked together on this. They have published six detailed reports under the Financial Inclusion Policy Forum and ask us to judge them on the contents of those reports. I commend the Ministers on what has been achieved, not least with the Money and Pensions Service, a significant team making a significant difference. We can all agree on this – as did the experts also giving evidence during the session.
Problems, however, remain. The Financial Conduct Authority’s (FCA) financial lives survey found that Covid-19 has had a profound impact on peoples financial situations. Between March and October 2020, the number of people with low financial resilience increased by 3.5 million, from 10.7 million to 14.2 million. Those with low financial resilience now account for a quarter (27%) of adults. And while exact figures of those financially excluded are hotly contested – possibly around 3 million – as Martin Lewis pointed out the precise figure is not as significant as the fact that this is a “shedload” of people struggling financially, excluded from basic financial services; bank accounts, savings, pensions. As Martin said this access is – or should be – the “bedrock of citizenship”. Being financially excluded is not only devastating for the individuals involved but also puts a great burden on the welfare state. It should matter to us all.
Other, significant, areas of consensus were the need for: an overarching strategy; a statutory duty regarding financial inclusion and power for the regulators to enforce it. The provision of some financial services in some circumstances will not be commercially viable – we cannot expect commercial organisations to act unless a statutory duty is imposed. A legal obligation on banks could also help with the current ‘financial asymmetry’ between banks and consumers. We should be looking to make it better for people to understand the financial services and products available and as easy as possible to access and use them. The pandemic has accelerated moves to digital payments and online banking and, whilst positive in some ways, this does exacerbate the risks to those who depend on cash. Natalie Ceeney, who chaired a review on access to cash, reiterated that, unless steps are taken, we could lose the nations cash infrastructure within a year.
My amendments to the financial services bill have been designed to address these issues. Starting with access to cash I have proposed a review on cashback without purchase – something that should now be possible if we are no longer subject to EU payment services regulations and would offer a valuable alternative source of cash without charge. I have also proposed amendments that would make important steps towards the statutory duty on financial inclusion – adding the duty to both the FCA and the Bank of England’s Financial Policy Committee. Many of my other amendments are designed to address the problems raised by Martin Lewis during the session such as the horrendous situation faced by mortgage prisoners, the scammers preying on people in debt and at their most vulnerable by impersonating legitimate debt advice charities and services and of course the need for much more and much better financial education. Kudos to all Martin Lewis has done in this space but it was one of our report recommendations and it clearly remains an urgent need. It was the one issue that fell somewhat outside the remit of the bill – although my amendment regarding the provision of debt advice was an attempt to draw attention to the importance of and need for financial education.
We have now concluded committee stage of the Financial Services Bill in the Lords and my sincere hope is that before we reach report stage the government will seriously consider the intention behind all my amendments and think about the need to act to ensure financial inclusion. We know the government is committed to this but as Natalie said, “nice words are not action”. Please support my amendments and encourage the government to act on this most important human, citizen right to be financially included.
Two Ministers for the price of one! Economic Secretary to the Treasury, John Glen MP and Minister for Financial Inclusion, Guy Opperman MP discuss progress so far:
A ‘potpourri’ of problems: Martin Lewis gives feedback on the good, as well as the various problems still facing us.
“You cannot survive without basic banking”, Natalie Ceeney making the case for a statutory financial inclusion duty – and power for the regulators.
Update: Chris co-hosted an event focussed on financial inclusion and organised by Open Banking Excellence: Open Data to Include us All, June 2021