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Tackling Financial Exclusion (Financial Exclusion Report)

Volume 787: debated on Monday 18 December 2017

Motion to Take Note

Moved by

That this House takes note of the Report from the Select Committee on Financial Exclusion Tackling Financial Exclusion: A country that works for everyone? (Session 2016-17, HL Paper 132).

My Lords, it is a pleasure and a privilege to lead this debate, as it was to chair the Lords Select Committee on Financial Exclusion, a committee proposed initially by my noble friend Lord Kirkwood. The committee published its report just before Easter with a raft of recommendations calling on the Government, the Financial Conduct Authority and the banks to give much greater priority to tackling financial exclusion and ensuring that vulnerable customers were getting a fairer deal. It has felt like a long wait for a government response to the report and for this debate, but I hope it has given all concerned a chance to think seriously about what needs to be done.

I place on record my thanks to my fellow committee members for all their hard work. I consider myself very fortunate to have worked with such a highly committed, engaged, constructive and knowledgeable group of Peers from all Benches. Our discussions were marked by a strong sense of social justice and shared endeavour. We were hugely assisted by all those who provided written and oral evidence—we had 101 submissions of written evidence and 52 witnesses giving oral evidence—and by the very high-quality advice that we received from Professor Karen Rowlingson of the University of Birmingham, who served as a specialist adviser to the committee.

We benefited greatly from two excellent visits, one to Coventry and one to Toynbee Hall. On both occasions we met individuals with first-hand experience of financial exclusion and a range of agencies that provide help and support in this field. I particularly thank the staff of Toynbee Hall, Coventry City Council and Coventry Citizens Advice, who made this possible. Of course none of this could have happened without the truly outstanding support that we receive from the committee secretariat. I want to mention by name our committee clerk, Matt Smith, our policy analyst, Nathan Lechler, and our committee assistant, James Thomas. We in this House are fortunate indeed to have such talented and committed staff who work so hard.

I am proud of the report that we produced. I pay particular tribute to those who produced the easy-read version, which I gather is now considered a model of its type. I was also very pleased by the reception that the report received from both the sector and the media. The extensive media coverage was entirely positive and there was no criticism of the report or any of its recommendations. That suggests that we tapped into a wellspring of support, and I place on record my thanks to Owen Williams, the head of press and media, for his support here.

So what exactly is financial exclusion and why does it matter? Simply put, it is when people, particularly the poorest, cannot get access to fairly priced basic financial services that most people—certainly in this Chamber—take for granted, and are forced to rely on extortionately priced and often substandard financial products. The committee felt that it was deeply ironic that, while the UK is considered a world leader in financial services, some 1.7 million people do not have a bank account, some 8 million people are experiencing problem debt and 40% of the working-age population has less than £100 in savings—that is, no buffer to help deal with any unexpected emergencies.

Uppermost in the committee’s thoughts was the unpalatable fact that the poor pay more, which is often called the poverty premium. Currently the poor pay more for a range of services, from heating their homes to accessing credit, contributing to a vicious circle that can drive people ever deeper into debt. The situation is made worse by the growing number of bank closures, with 53% of UK bank branches closing between 1989 and 2016, a far steeper decline than in many parts of Europe, and the growing number of people who say they are having real difficulty managing their personal finances daily as the cost of living rises while wages stagnate.

So the problem was clear to see. I shall outline briefly some of the report’s recommendations in four key areas and then comment on the Government’s response. I know other committee members will pick up on the other critical areas that I do not have time to cover, particularly financial education, welfare reform, debt advice and financial technology.

The first area I shall focus on is leadership from government and proactive regulation. The evidence that the Select Committee received made it abundantly clear that the lack of a strong lead from government and a coherent strategy to tackle financial exclusion had been at the heart of the problem. Witnesses, including from the Financial Inclusion Commission, consistently lamented the winding up of the Financial Inclusion Taskforce in 2011 as leading to a lack of central government leadership, co-ordination and momentum. Thus, the committee recommended that the Government should appoint a clearly designated Minister for financial inclusion, who should publish a government strategy addressing financial exclusion and make an annual progress report to Parliament, including reporting on high street bank closures and the take-up of basic bank accounts.

We felt that this emphasis needed to be matched by the Financial Conduct Authority, which, in recent years, has introduced a much-needed and successful cap on payday lending. This is why we recommended that the Government should expand the remit of the FCA to include a statutory duty to promote financial inclusion. We also recommended that the FCA be obliged to establish new rules requiring banks and other financial services providers to have a duty of care towards their customers. Taken together, we felt that these measures could transform the delivery of financial services for vulnerable customers.

The second area is financial exclusion and vulnerable groups. It became clear to us that some groups, particularly the elderly, those living with a disability and those suffering from mental health problems, were particularly ill served by the current system. We heard that one-third of people over the age of 80 had either never used a cash machine or preferred to avoid using one and that 93% of those over 80 did not use internet banking. For these people, the ever-increasing rate of closure of physical bank branches is a major cause for concern.

We recognised the two-way relationship between financial exclusion and mental health, and received some compelling evidence on what could be done about it. We recommended that the Government, the FCA and financial services sector should work together to develop and introduce a wider range of control options for those customers experiencing mental health problems—for example, allowing potentially vulnerable consumers voluntarily to opt in to features such as 24-hour delays before processing large transactions, bank accounts with partial third-party control or nudge-type notifications of changes in spending patterns.

It is more than 20 years since the Disability Discrimination Act was passed, introducing the concept of reasonable adjustment into UK law. Banks have had a long time to get it right when it comes to making reasonable adjustments to serve disabled customers. Sadly, we heard far too many examples of failure on the part of banks to tailor their services effectively and appropriately. These included repeatedly contacting deaf customers by telephone and sending written PIN numbers to blind customers instead of using Braille.

As a committee, we considered that to be totally unacceptable, and recommended that the Government, the FCA and the British Banking Association carry out a review of reasonable adjustment practices for disabled customers. I must say that I found the Government’s response particularly disappointing in this regard. I ask the Minister—indeed, I plead with him—to think again.

Thirdly, on access to financial services, in recent years, the number of unbanked people has started to increase again. Too often, we heard that banks were not being proactive in offering basic bank accounts to those customers who were suited to them, or that these accounts were not advertised or promoted properly. Some banks working hard in this area clearly felt that other banks were not pulling their weight. Thus, we recommended that the Government require banks to promote basic bank accounts effectively and take steps to ensure that the burden of providing such accounts, which are clearly loss-making to the banks, is shared more equally.

Barely a week seems to pass without further news of bank branches being closed, and now, also, of ATM closures. This trend is of real concern for those people and groups who rely on physical access to banks or prefer the reassurance of face-to-face communication and dealing directly with bank staff to online banking. The elderly and some of those living with disabilities are at high risk here: we were told that 42% of disabled people are not online, while 37% of retired people are not regular internet users.

Indeed, many of the letters I received immediately after the report was published were from older people or people in rural communities who felt simply abandoned by their bank and were asking why more collaborative measures could not be taken to ensure that there was at least one physical banking presence—perhaps located at a shop, a post office or a community centre—in each town. This would of course involve banks working together to ensure that there was at least one physical banking presence, perhaps located in a shop, post office or community centre, in each town. This would of course involve banks working together, but surely this should not be beyond the wit of man—or, indeed, woman. We were also struck by the sheer scale of the Post Office network which, at 11,600 branches, has more outlets than all the high street banks combined. What is more, the Post Office can offer banking services to 99% of UK current account customers. That is not well known, and we believe that the Government, banks and post offices need to do more to raise public awareness of these services. I was very pleased to have a very constructive meeting with the chief executive of the Post Office in the summer.

Fourthly, an area of particular concern to the committee was the high-cost credit market. In 2015, the FCA introduced new regulations to tackle some of the most egregious practices by placing a cap on both daily interest rates and total interest charges and fees for payday lenders, which were a marked success. But the committee felt strongly that these new rules were too limited in scope and should equally apply to other forms of high-cost credit. In particular, the committee called for urgent action to introduce new controls on rent-to-own products and unauthorised bank overdraft fees. In both instances, the committee received evidence of quite eye-wateringly high interest rates being charged to vulnerable people, forcing them further into financial difficulty. In some cases, it was nothing short of extortionate.

I am pleased that, since the report was published, the FCA, through its own review of high-cost credit, as well as maintaining the payday cap at its current level, is now looking at fundamental reform of unauthorised overdrafts and has the rent-to-own sector very clearly in its sights. I strongly commend the action taken by the FCA on 1 November to order BrightHouse, Britain’s biggest rent-to-own retailer, to repay £14.8 million to nearly 250,000 of its customers. It was extraordinary that there was no mention of this strong action, of which I thoroughly approve, in the Government’s response, which was published a week later. I also commend the stronger focus that the FCA has placed recently on consumer vulnerability and its occasional paper on the ageing population. I was extremely grateful for the very constructive meeting that I had with the chief executive in November.

I now wish to turn to the government response more generally. After a long wait, I cannot pretend that I was anything other than rather disappointed by the tone of the Government’s response. To me, it lacked a sense of urgency and ambition. It contained a longish list of things that the Government were doing anyway and failed to engage directly with a significant number of the issues raised and recommendations in the report. I have done a quick tally and, of the report’s 22 recommendations, four have been implemented, four partially implemented, and 14 not implemented. Perhaps I should be satisfied by that but, given the cross-party consensus achieved in the committee and favourable reception that the report received externally for being reasonable, insightful but largely uncontroversial, I had hoped that the Government would have taken the recommendations a bit more seriously.

I welcome, of course, the creation of a new DWP Minister with financial inclusion in the title, but I was slightly perplexed by how that Minister could take on the stronger leadership and co-ordination role that the Select Committee argued for, particularly when the government response makes it clear that the Treasury Select Committee will take the lead on co-ordination of government-wide policy in this area. Perhaps the Minister will be able to clarify on that point. That said, I look forward to meeting one or both of them, if they can spare the time to see me.

Secondly, I very much welcome the new financial inclusion policy forum, which will,

“enable ministers to take a strategic, cross-government approach on action to improve financial inclusion”.

Could the Minister please say when the body will first meet, how often it will meet, what its membership will be, how the voice of financially excluded people will be heard and whether its agenda and minutes will be published? Most crucially of all, will the policy forum be responsible for producing a cross-government strategy document and an annual report to Parliament, as we recommended?

Finally, I was disappointed that the two recommendations relating specifically to the remit and regulatory powers of the FCA were not greeted more enthusiastically. With the Government’s recent very welcome decision during the passage of the Financial Guidance and Claims Bill to include vulnerability within the stated objectives of the new single financial guidance body, would they consider rethinking whether it would not now make sense to include similar words specifically within the remit of the FCA to bring the two in line? That would be a most welcome step, as would introducing a duty of care, which would make a real difference to the support that vulnerable consumers receive from their banks, particularly, for example, those with cancer.

In conclusion, there is much to do to build a financial services system that works fairly for everyone and helps to tackle rather than exacerbate inequalities. On many occasions, this Government have said that they want a country and system that works for all, not just the well off. So do I, and despite the government response I still hope that the Government share our view that the current level of financial exclusion is unacceptable and our sense of urgency to do something about it. The victims of the current system are often the most vulnerable—the elderly, the poor and those living with a disability. At this time of good will, let us demonstrate in this debate and by the actions that we take that we truly care. I beg to move.

I pick up the point made by the noble Baroness about this time of goodwill. At this time of the year—Christmas, Hanukkah, Winter Veil or whatever one wants to call it—a lot of people try to help those who are excluded in society from all sorts of activities. So I congratulate the committee on the clarity of the in-depth analysis that it has carried out.

I do not know how many noble Lords were in the Chamber earlier when the noble Lord, Lord McFall, as Senior Deputy Speaker, talked about the need for much greater understanding of the work of the Select Committees. A lot of people stood up and said that that was absolutely right, and there needed to be more missioning—going out and telling people about the excellent work that the Select Committees do. I say “hear, hear” to that, and there are some satisfied nods around the Chamber from committee members. But I sometimes wonder whether a bit of missioning within your Lordships’ House might not also be a good idea from the Select Committee. On the speakers list there are 10 speakers who are members of the committee, who will doubtless tell us all what an excellent report they have contributed to—and only four as-it-were immigrant Back-Bench people who are not on the committee. So there is a lot to be said for that, just as there is a lot to be said for the vision of my right honourable friend the Prime Minister for a shared society, which I strongly support.

Having said all that, may I get in my retaliation first? It is always much easier to define than to solve—and, with respect, to find practical tools for change. I say that as someone who works in the financial world, in the City of London, as declared. Whenever there is a problem, whether it is financial exclusion or anything else, in your Lordships’ House two ideas always pop up—let us have a Minister for it, to stop it or extend it or change it, and, secondly, let us put better education about it in the national curriculum. Those are absolutely standard suggestions from most Select Committees about their proposals.

On the first, only last week there was a call for a new Minister for Loneliness in a report by a commission following the tragic death of the late Jo Cox, to deal with that sometimes devastating problem for too many people. And so on, up the headwaters of recent political times, to calls in the past under both parties to have Ministers for Children’s Play or whatever. I do not think that having a Minister designated to do stuff necessarily always sorts stuff out. I well remember the noble Lord, Lord Giddens, making a plea in your Lordships’ House for greater attention to happiness. I think that he may have called for a Minister for Happiness —and perhaps indeed he was the Minister for Happiness, or at least the tsar in charge of happiness. I cannot remember. But I do not think that it is an easy solution.

On the second point that always pops up—the need for better education—of course financial education is a good thing and it would be daft not to have it. But I think that there would be a collective groan in the staffrooms of our schools, which already have a difficult enough task in dealing with a crowded curriculum, if there was another ad hoc, sudden insertion into the work that they have to do. I do not think that jamming stuff into the curriculum solves anything very much.

I congratulate the committee on the depth of its analysis, and also on not calling for large sums of new money to be spent. That is a very important point: many problems can be solved without new budgetary extensions. People such as us, in positions of responsibility, have to recognise that we have a role—whether large or small—in improving financial inclusion. Her Majesty’s Government are, for sure, extremely important in this—but so are local authorities, NGOs, the charitable sector, in which my daughter works, churches and the rest, including local communities. Last Thursday, I was discussing this with someone with whom I work in the City and whose opinions I value. She told me of the problems facing her parents in Worcestershire who have a very long journey to a bank. They are fortunate, however, to have a sub-post office still in their village—but most sub-post offices cannot provide the sort of financial services that the excluded or those on the margins find so difficult to reach.

In our nearest market town, in the West Country, it is not to a sub-post office but to the local Crown post office that we turn. Three years ago there were three small bank branches: Lloyds, HSBC and NatWest. They have all gone, but the local post office has stepped into the breach, providing excellent banking services and foreign exchange facilities to trade in euros and dollars. When people go in to make a transaction it also has the commodity which is vital in all rural areas: the latest gossip.

Not so far away from us there has been a bit of a fight-back. Four banks in Glastonbury shut within a two-year period, but Nationwide was lured to go back. It is an exciting place to be for all sorts of reasons, but perhaps not for banking. The leader of the local campaigners who got Nationwide back—and well done to them—said:

“There are many customers, particularly the elderly and those on low incomes, who do not and often cannot bank online”.

Not every town is so lucky, nor big enough, like the village in Worcestershire where my colleague’s parents live. They cannot get financial help in their local sub-post office.

One Minister might be able to help in this area, particularly one in the Department for Business, Energy, and Industrial Strategy who has in her portfolio both small businesses and post offices. Can more be done with imagination and encouragement by central government to get more internet facilities to provide better banking-like services in these smaller sub-post offices? That would do so much to help with financial inclusion.

However, financial exclusion is not going to be solved by having more bank branches. It was there all those years ago in the golden age when we seemed to have bank branches everywhere. Why is that? Some geographers, cleverly mapping the characteristics, find some correlation with geographical exclusion founded on relative remoteness. People in some rural areas near us are not only without the luxury of a bus a day; they only get a bus chugging into the local town one day a week. If you overlay a map of that sort of isolation onto a map of the areas Ofcom has just identified as having an 80% failure to get 4G services, the correlation is there all over again.

It is particularly important that rural people are not forgotten in the issue of financial inclusion. They are more likely to be isolated and to suffer from financial exclusion. There are a number of ministries, and no end of interministerial and cabinet committees, as well as the Cabinet Office, which are full of talented young civil servants who can help to bring these different strands together. That is a better way forward than having a Minister devoted to the task—because, unless you have a budget and power, you cannot do much.

My Lords, it is a pleasure to follow the noble Lord, Lord Patten, and to participate in this debate. I offer my congratulations to the noble Baroness, Lady Tyler of Enfield, for her skilful chairing of the committee and to the formidable committee staff that she drew around her. They produced the comprehensive report before us today. If my copy of it appears a little dog-eared, it is because it became a useful reference document for our recent deliberations on the Financial Guidance and Claims Bill, now heading for the other place. That Bill responds very much to issues of financial exclusion, financial guidance and capability and advice services, as well as debt advice. It was significantly changed, and improved, on a cross-party basis during its passage through the Lords, so we can claim some authorship of its outturn.

Rather than being a measure which just stitches together three existing advice operations, TPAS, MAS, and Pension Wise—I will refer to it as SFGB—it has objectives to improve the ability of members of the public to make informed financial decisions, and to support the provision of information, guidance and advice. It has a consumer protection function, which includes the obligation of SFGB to pass consumer casework to the FCA where there is a suspicion of unprofessional conduct, harassment or misleading approaches. It also requires the monitoring of cold calling on consumer protection as a prelude to a ban. We know that most financial scams, particularly for pensions, start with a cold call, so this is very important.

Of particular significance in the debt space is the inclusion in the Bill of provisions which should lead to a debt respite scheme. Both the Government and ourselves had proposals on this as manifesto commitments at the last election. The purpose is to help individuals in debt and their creditors devise a realistic plan for the repayment of debt and offer protection from charges and enforcement action in the meantime. Given soaring levels of household debt, this should be introduced as soon as possible. We know that the rise of some types of debt can be strongly associated with changes in government legislation and this is not limited to universal credit. The localisation of the Social Fund, now local welfare assistance, was a matter on which our committee expressed particular concern. In its former guise, this provided a vital safety net, facilitating grants and interest-free loans to people on very low incomes who were living through particular financial pinch points. The development of diverse eligibility criteria, some with residence criteria—a problem for those fleeing domestic violence—has created a postcode lottery. The consequences are predictable: increased use of food banks; increased reliance on unaffordable short-term credit. Our report expressed concern about future funding for this area but beyond that went no further than recommending that government disseminate best practice. On reflection we might have done more.

Council tax support schemes have followed a similar pattern of being localised and having local authority funding cut, so more and more councils have had to restrict their schemes. Hence council tax arrears have moved up the debt league. Evidence suggests varying practice in collection arrangements, made worse by the demise of local debt advice. A select committee report highlighted consistent evidence about the negative impact of reforms to the social security system, especially the introduction of universal credit as a replacement for a bundle of other income-related benefits, together with the tightening of the conditionality and sanctions regime. Hardship and debt were being exacerbated in particular by the payment of universal credit monthly in arrears, by a waiting period for new claimants, by bundling rent support and by making this generally available to tenants.

Noble Lords will doubtless be aware that the Government have announced the abolition of waiting days, increased advances to 100% now repayable over 12 months, and introduced transitional payments for those previously receiving housing benefit. It was a committee recommendation that the seven-day waiting period be scrapped. This is, of course, to be welcomed but it does not solve the problem. Its year one cost of some £300 million should be seen in the context of billions of cuts past and ongoing to the social security system. We called in our report for greater flexibility around universal credit payments and a faster rollout of trusted partner arrangements.

The report also addresses issues arising from the application of sanctions, and evidence as to their effectiveness. We heard harrowing evidence about the contribution they make to financial exclusion, where individuals sanctioned look to all options to survive, including reducing payments for priority expenditure such as rent, gas and council tax. A number of witnesses drew our attention to their impact on vulnerable individuals, including those with mental health problems. Our report has not elicited any government response to justify the effectiveness of sanctions, which will doubtless continue to cause misery and hardship to hundreds of thousands of fellow citizens.

The report records that we have seen no comprehensive research on the cumulative impact of the Welfare Reform Act 2012, and what flowed from it, and recommended that the Government conduct a detailed comprehensive cumulative impact study on how changes to social security policy might have affected financial well-being and inclusion, and how they may have contributed to debt, arrears and growth of high-cost lending. The government response prays in aid the assessments produced at Budget time and the Improving Lives: Helping Workless Families recent publication, but this was part of the Government’s moving away from the use of income data—relative or absolute—and does not really meet the analysis the committee was seeking.

Financial exclusion is, as our report makes clear, multifaceted, but we heard views about its relationship with poverty and the poverty premium, of which we have just heard. That is the additional cost incurred by individuals who have to transact in the most expensive way—high-cost credit, pay-as-you-go mobile phones et cetera. If we look at these matters through the poverty lens, we should be alarmed at what is happening. After declines in poverty—child poverty—over 20 years, we now see it rising and the reasons are very clear: cuts in benefit, tax credit and universal credit, for those both in and out of work, inflation on the rise and employment now falling. There is much still coming down the track: freezing of working-age benefits, the two-child policy and more. As CPAG demonstrates, by 2020 we expect some £27 billion less on social security spending than a decade earlier. That is a difficult backdrop against which to combat financial exclusion and is a challenge to the Minister with his new responsibilities. However, I think this report should remain a significant contribution to that endeavour. The process has produced a wealth of information and experience from those whose daily lives involve operating at the sharp end.

My Lords, I rise very briefly on two counts. First, as a member, I must thank the noble Baroness, Lady Tyler, for chairing and guiding the Select Committee so excellently. Secondly, I want to underline what I see as three particularly important issues with which the committee grappled.

My first issue is the decline in the number of branch banks available in the United Kingdom. Since 1988, over half the branch banks have closed. For obvious reasons, bank closures have a greater effect in rural areas than elsewhere, but the recently announced axing of a large number of branches across the board will have an immediate and destructive effect on financial exclusion. The banks—here I must declare an interest as an ex-employee of Barclays—seem sometimes so submerged in their own problems that they forget that they are a service industry, and that online banking is not a substitute for the human factor. There is no proper substitute, especially for those with limited technical skills, for the helpful human voice, or, if possible, the human face, with whom to converse, to discuss difficulties and, if necessary, to cry for help.

Secondly, I mention the lack of financial education in schools. While in Scotland, Wales and Northern Ireland, financial exclusion has been in the curriculum for some time, in England there is still no requirement for primary schools to include financial education as part of their teaching. Furthermore, nearly two-thirds of state secondary schools, being non-maintained, are under no obligation at all to teach financial education. These omissions should surely be corrected as soon as possible.

Thirdly, I mention universal credit. Time and again, the committee was struck by the frustrations experienced by potential users of the system. I realise, of course, that recently some adjustments have been made which should improve matters, but the users of this scheme to whom I spoke were frequently frustrated by the difficulty, or even impossibility, of discussing their problems with a human being rather than a computer. Again I say, there is no substitute for human contact in matters financial. I very much hope that these and other suggestions made by the committee will be acted upon without undue delay, and that the many diverse organisations, including the Government, trying to bring about improvement are united and successful in their efforts.

My Lords, it was a pleasure to be a member of the Select Committee so excellently chaired by the noble Baroness, Lady Tyler of Enfield. I must also thank all the staff, advisers and clerks who enabled us to pursue such a positive route through the committee’s inquiry. Most of the 22 recommendations are still to be considered and taken on by the Government. What are the Minister’s thoughts on the 14 recommendations still to be covered in the government response?

I shall limit my comments to the three Ds of duty of care, data and digital and technology. It seemed pretty clear throughout our inquiry that duty of care would be an eminently good thing for all financial services and financial institutions to adopt. We received significant evidence on this, not least from Macmillan Cancer Support. Even if people consider a duty of care only for purely selfish reasons—given that one in two of us is likely to face a cancer diagnosis in our lives, there is a 50:50 chance that we will act just in our self-interest—obviously, we should go far beyond that. It makes sense for both customer and service provider to understand how this duty of care should work. I pay tribute to Macmillan Cancer Support for the brief it gave to the committee. I also pay tribute to those who discussed this point on the Financial Guidance and Claims Bill, which has just gone through the House. Macmillan Cancer Support clearly demonstrates how a modern, lean, effective charity should operate, not just in giving sensational care to people at some of the most delicate, painful times in their lives but in understanding the total life experience of people who receive a cancer diagnosis.

I tabled an amendment on duty of care to the Financial Guidance and Claims Bill in Committee and on Report. However, the Government were not minded to accept it. In the light of that, I ask the Minister: if nothing is to be done on this point until after Brexit, particularly from the FCA’s point of view, what do the Government intend to do in the interim to address this fundamental point of duty of care to all customers? This takes financial institutions back to the purpose for which they were established. That purpose was based on a relationship. We need to bring that into how financial services will operate in the future. We have an opportunity to do so through the data now available and what it is now possible to do with data. We should use it not just to enable policymakers and institutions to understand people’s predicament when they find themselves at the sharp end of financial exclusion and assist them, but use it in a predictive and granular way to enable individuals themselves to grip their own data and understand on a minute-by-minute, second-by-second basis, if they wish, how their actions impact on that data. That takes us to the digital opportunity. In this situation, finance technology—fintech—is all predicated on that data. What could that do in terms of the issues of the unbanked?

We know that if people are enabled to get online and have an online bank account, they can save £500 to £700 a year, which is not an insubstantial sum. There are significant products and businesses out there, such as MyCard, dopay and Pockit, to name but three involved in this space. Other noble Lords have already alluded to how the connection between financial and digital exclusion is key to understanding this. It is all well and good to have potential solutions online, but if people are not online, see no reason to be, and have understandable care and concern about going online, no solution will ever come from that, even though huge cost savings are to be made from those online solutions.

Financial literacy is incredibly important. On the point made by my noble friend Lord Patten, he is quite right that there should not be an inexorable dumping of more and more responsibilities on our fantastic teachers. However—I am prepared to get into a discussion—for financial literacy at all levels to go into the curriculum I would be prepared to look at what we could take out in a nightclub-style one-in, one-out approach. Without financial literacy, you can teach a heck of a lot to young people which will never have any positive impact because of the detrimental effects of finding yourself at the wrong end of financial exclusion.

As has already been mentioned, bank branches are gone. We need to consider what more can be done in the community. With the Open Banking initiative, there is the potential to have clusters of fintech businesses based in the community so that people cannot only interact online but can have that physical presence and, on the point made by the noble Lord, Lord Fellowes, they can meet people face-to-face to discuss financial matters. If the right encouragement is given and it is made possible for chatbots to be put in place, people may be able to have conversations with them which may be more comfortable, and it may be possible for more questions to be asked through that means than through more traditional approaches.

Fintech is not the totality of the solution but it contains many of the solutions. What is phenomenally encouraging—we see it through the Tech City initiative—is that so many of the young people who are founding fintech companies are doing so to address so many elements of financial exclusion. They do so not as charity, as CSR or as a “nice to have”, but because it is in their DNA and they can drive fantastic business models of these issues, which, all too often, traditional financial institutions have just been able to not engage with and ignore.

A potential golden thread runs through fintech, where cost can be taken out, customer experience and service can be put in and, crucially, financial inclusion can flow through that route. Probably the most pernicious of all elements in all our work on the committee and beyond is: how can it be that in the fifth-richest economy on the planet, those who all too often have the least are forced to pay the most for their financial services?

I spare a fourth D—a slight detour, which I must take in this discussion. It is impossible to consider these issues without taking some time to talk about gambling and the impact that that currently has on our community and society. Just look at the number of gambling institutions on high streets in lower socio-economic areas compared to the leafy suburbs. I ask the Minister a specific question: when will the Government take clear, definitive action on FOBTs? I know that we have a consultation, but with fixed-odds betting terminals you can lose £100 every 20 seconds—£300 in a minute. Spin number one: there goes the rent; spin number two: there goes your food; spin number three: there goes your hope.

That and more was the purpose of undertaking the Select Committee report on financial exclusion. It was a joy to serve alongside noble Lords and, as I say, to have the excellent chairmanship of the noble Baroness, Lady Tyler of Enfield. To conclude on a specific point, I encourage all fintechs to look at—as they already do—every possible way to get involved, to come up with innovative, cost-effective, empowering, enabling solutions to financial exclusion. Can the Minister ensure that the Government do everything in their power to enable that flourishing fintech sector to continue to boom, not just now but through and beyond Brexit?

My Lords, I join other colleagues in thanking our chair, the noble Baroness, Lady Tyler, for her consistent and enthusiastic chairmanship over many months. It was a pleasure to work with her and other members of the committee. We were also exceptionally well serviced by our clerks and special advisers, who were exceptional before, during and after the publication of our report.

When the noble Baroness referred in her introduction to the Government’s response, she was diplomatic. I am exceptionally disappointed by the Government’s response on a number of issues. I understand entirely and fully accept the point the noble Lord, Lord Patten, made; you cannot have a Minister for everything. However, given the statistics provided to the committee, which show that 40% of the population do not have £100 and 1.7 million do not have a bank account, and all the other statistics, it is not particularly unreasonable to have a person watching. We rural-proof policies and proof policies for a whole range of things, and I cannot see any reason why we do not look at this particular aspect. It is one of the most fundamental things in front of us.

I will refer to a few specific points which I raised with the committee. However, before I go on to that, the comments that have just been made on gambling need to be taken exceptionally seriously. During the committee’s deliberations, we were provided with evidence about advertising for gambling being shown at 2 or 3 am. We know from evidence provided to us that the companies have a clear mathematical process of identifying who is watching and what their vulnerabilities will be. I had an ad hoc conversation with a friend who knew somebody who worked in the industry, who said that they had it down to a fine art. They knew who was watching, at precisely what time, and what buttons they needed to press. It baffles me that we allow these people to have free rein. I am not in favour of a nanny state, but we control things on television and have a watershed, and we know that a lot of people who are watching at these ungodly hours may have mental health issues. All this evidence was provided to us, and it is time that the Government took this seriously.

Recommendation 21 deals with the question of where people’s rent is paid. I believe that, in theory, universal credit is a great thing. However, as we know, the implementation is not going terribly well. We have had some improvements over the last period, since the committee reported, but it is important that, if housing benefit is for rent—to keep a roof over people’s heads—it should be paid directly to the person who owns the property. What is the point? Are we saying, “We’ll make people learn and we’ll teach them to be responsible with their own money”? I get all that, but the reality is that a percentage of people are vulnerable and not responsible, and so we have to go through this whole process of appointing people to chase after them—a whole industry of people going around, banging on doors and pestering people for money. Why are we doing this? What is gained by any of it? The rent should be paid to the person to whom it is due and then it is done. We do not have to have all these bailiffs and heavies.

We also know that many people living on estates suffer from various addictions, which leads to the roof over their heads being taken away. People gather like vultures because they know the day and the hour when the money will be sent to a person and they are on the doorstep to collect it. Why are we doing this? It would be far simpler to pay the rent to the landlord, as we do in Northern Ireland, and then we would not have any of these issues.

Perhaps I may deal with one other thing, which I mention quite often, and that is credit unions. In Northern Ireland we have considerable experience of credit unions. The Government’s response to our recommendation on that is puzzling. We simply said:

“Government funding provided to the sector should take the form of repayable, long-term investment capital rather than grant funding for ongoing expenses”.

The Government’s response is that,

“the government does not intend to provide revenue support to credit unions”.

We do not want them to provide revenue support to credit unions; our recommendation is not to do that. The recommendation is to supply repayable long-term investment capital. It is a kind of Aunt Sally argument to say in response to a proposal that we have made, “We’re not going to do this and it’s against government policy”. We are not asking people to provide revenue support for credit unions—quite the reverse—but we believe that credit unions should be able to offer a greater array of products to people. People’s experience is that credit unions are responsible lenders.

I wish to make an overarching point in conclusion. With London allegedly being the financial capital of the world, I am baffled that we cannot produce products to minimise the poverty premium that people have to pay—and there are clear examples of that. Surely it makes sense for some time and effort to be expended by the brains in the square mile on seeing what can be done to encourage others to make it easier and less expensive for people on those levels of income to live. I am quite sure that if effort were put into this, it would be found that the brains are there to provide the products, without forcing or shaming people into doing so. That is why a duty of care has been referred to. We all have a duty of care to our staff, the NHS has a duty of care to its patients and education providers have a duty of care to their pupils. Why should the financial sector not have a duty of care to its customers?