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Banking and Lending Services

Volume 454: debated on Thursday 7 December 2006

4. What steps he is taking to ensure that benefit claimants and people on low incomes have ready access to regulated banking and loans services. (104885)

The Government’s goal is to halve the number of people without access to a bank account. We have established a £120 million financial inclusion fund and an independent financial inclusion taskforce, which has recently reported to me that we are making good progress towards that goal. I can tell the House today that we have appointed two new members of the taskforce: Bridget McIntyre, the UK chief executive of Royal and Sun Alliance, and Danielle Walker Palmour, director of the Friends Provident Foundation.

The Farepak disaster has thrown a spotlight on the financial barriers and debt burdens faced by the poorest people in this country. How is the Treasury using this opportunity to promote the good work of organisations like credit unions and to warn against loan sharks and doorstep lenders?

My hon. Friend is quite right to highlight the important role that credit unions can play. It is important that we crack down on loan sharks as we learn lessons from the terrible Farepak debacle. As she knows, we are putting £36 million into supporting credit unions for low-income lending. In addition, there are two pilot schemes—one of which I visited in Birmingham last Friday—for cracking down on illegal loan sharks. Over the past year or two, the Birmingham team has helped 1,000 victims and wiped out more than £1 million worth of debt. A team in Glasgow is doing the same work. We have put £1.2 million aside to continue those pilots for a further year and to extend them to Sheffield, Liverpool and west Yorkshire. The Government are determined to crack down on loan sharks and to make available the resources to do so.

I fully support the hon. Member for North-East Derbyshire (Natascha Engel), who put an important question, but in addition to ensuring that people on low incomes have access to resources should not the Government be doing more to prevent the financial services industry, particularly banks and credit card companies, from bombarding people to borrow money for irresponsible purposes? Can we do more to regulate those organisations to prevent them from tempting people on low incomes?

As the hon. Gentleman knows, the Office of Fair Trading is responsible for such regulation. As a result of the Farepak problems, a review of the regulatory framework of such schemes is under way. The Department of Trade and Industry is also holding an investigation into the particulars of the case. In addition, we at the Treasury have asked Brian Pomeroy to carry out a review for us of the debt implications of hamper schemes and savings clubs. I have asked him to look into who uses hamper schemes, which are often poor value for money, why they opt for such schemes rather than mainstream financial services products, and in the light of that, to consider whether the savings needs and debts of those groups can be better met by mainstream financial services providers; and to consider what we can do to promote consumer awareness in that area. I hope that the hon. Gentleman can see that we are acting to try to make sure that we learn the right lessons from the problems of recent weeks.

As the Minister is aware, the Treasury Committee has recently produced three reports on financial inclusion and I thank him for his ready co-operation with us. The main conclusion of those reports is that the poor pay more for their credit, and as 3 million people still have no access whatever to bank accounts there is still a mountain to climb. The Committee looked at one good aspect—the savings gateway, which, with matched pound for pound contributions from the Government, helps people on low incomes who do not benefit from tax relief. Will my hon. Friend ensure that the savings gateway pilot is encouraged throughout the country to help people on low incomes to save?

I am grateful to my right hon. Friend; he and his Committee have played an important leadership role on those matters in recent months and we are studying his report in detail. He raises some particular issues about cheque clearing and generic advice, on which we are already acting. I hope that the review that I have asked Brian Pomeroy to carry out will tell us precisely what more we need to do to make sure that our savings mechanisms for low-income savers work well. I very much look forward to the report the Committee will soon produce on access to automated teller machines in low income areas. I know that my right hon. Friend has done important work on that subject and I hope that we shall be able to welcome the conclusions of the report. I can assure him that we are giving close consideration to all the issues he raises in his reports and we shall respond in the new year.