Motion to Take Note (Continued)
My Lords, as we resume the debate on Tackling Financial Exclusion: A Country that Works for Everyone?, there can be no more poignant reminder of the issues raised in the committee’s report and the seriousness with which we need to take its challenge. As the Bishop of Kensington said in the service just mentioned by the noble Lord, Lord Bourne, we can be too wrapped up in our own interests and prosperity, but we might just now turn outwards towards each other—a society known for listening, compassion and love.
As noble Lords have heard, the Select Committee did a lot of listening and we know that finance affects every person in the land, from the poorest to the richest. Our knowledge and appreciation of the many interventions, whether the basic bank account promotion, the control of payday lending or the encouragement of education in personal and household budgeting, has increased. Our imagination has also been stimulated and sometimes appalled by the testimony of those not included in the ordinary money transactions most of the population take for granted. In her introductory remarks, the noble Baroness, Lady Tyler, mentioned some of the statistics that back that up.
We are on a journey. There have been some achievements, going back as far as the government strategy of 2004, the taskforce of 2005 and the commission that reported in 2015. The present Government’s response to the committee’s findings is also welcome, if, as the Minister will have already realised, some of us think it has been a bit too mild. There is a long way to go towards full financial inclusion, the lack of which, in a mature economy, illustrates starkly the relationship between poverty and power, between the person and the policy, between the micro and the macro, and the breathtaking inequalities in income, housing, health and education already mentioned by several speakers this evening.
I draw noble Lords’ attention to just a few of the many recommendations in this complex subject that have already been referred to in the debate so far, from chapter 7, “Credit and Borrowing” and chapter 8, “Welfare Reform”. The sharp reduction in payday lending by regulatory action made us face up to the ease with which it is possible to fall into unmanageable debt. Other reasons have also been mentioned tonight, including gambling. Other high-cost credit areas, again referred to by the noble Baroness, Lady Tyler, being reviewed by the Financial Conduct Authority, should also be considered for regulation, as in recommendation 16. What is the timetable for the Financial Conduct Authority policy review on further interventions, mentioned in the government response at paragraph 5.41? At the same time, further support for the affordable credit industry should be provided, with, as we have heard, investment capital rather than grant or revenue funding. This, if supported, could be directed especially at credit unions such as the effective but underfunded Advance Credit Union at Erdington in my own diocese. What specific targets would the Government support for this ambition, as in paragraph 5.50? Alongside the well-needed, well-designed support there also need to be light-touch fees and regulatory regimes appropriate for these small and medium-sized financial enterprises.
The fruit of these recommendations, if we needed any incentive, will be seen in the removal or reduction of the poverty premium and, beyond that, the possibility of people beginning to save for the first time in their lives. Chapter 8, “Welfare Reform” deals with how the ordinary ambitions of people trying to participate responsibly in the economy have been hindered by the implementation of the worthy ideals of universal credit. Here, we recommended the abolition of the seven-day waiting period and flexibility in the frequency of payments. I note the Government’s optimism in paragraphs 5.51 to 5.55, but we have to realise that the tragic consequences of the failure of tightly managed household budgets are seen at food banks and places of welcome all over the country. Those applying for universal credit are being given impressive support by the Just Finance Foundation and Just Finance Black Country, by the Good Things Foundation, supported by Lloyds Banking Group, by Christians Against Poverty with its debt centres, four of which are in Birmingham, and by other money advice centres.
These actions and most of the issues raised in the committee’s report are well documented close to the people; for example, in my own area by the Birmingham Financial Inclusion Partnership, which I commend to the Minister. By way of general requests, in addition to the challenge to the Government to attend to the 14 other recommendations that have not so far been tackled, will the Minister recognise and commit to the need for the continuous, top-level leadership from government mentioned by the noble Baroness, Lady Tyler, in focusing on the multiple remedies to reduce financial exclusion? I know various people have been named tonight as being responsible, but this matter is so complex and serious for the welfare and inclusion of the whole population in our successful economy that it needs the very highest level of attention and a report back to this House.
Will the Minister give further support to those local authorities that have well worked out but underresourced strategies for reducing financial exclusion? Thirdly, will he recognise and give vigorous support to the role of the NGO, charity and faith sectors in meeting personal needs, both for practical, life-saving assistance and sustainable money advice? In the minute left to me, I express the hope that in future we may take time to reflect at the macro level on the bigger question of the meaning and uses of money and to examine our own assumptions about the systems we operate. In a city where Winterval, if I may mention this to the noble Lord, Lord Patten, has been abolished in favour of religious traditions from all backgrounds, perhaps we might, at this end of term, look to the vulnerable baby with an unmarried, teenage mother and a compassionate foster father, who had the attention of rich philosophers, poor shepherds, powerful governors, a reluctant innkeeper and even joyful angels; a baby who grew up to teach that crumbs from the table were not enough and that nothing less than a much larger table, at which all could share the feast, would do.
My Lords, I add my thanks to the noble Baroness, Lady Tyler of Enfield, for her excellent and skilful chairing of our committee. I also thank our clerk, Matthew Smith, and committee assistant, James Thomas, together with our policy analysts, Cathryn Auplish and Nathan Lechler, for their sterling assistance. As the committee’s report covers such a wide area, it is sensible in the time available to restrict my detailed comments to two chapters of the report that, having worked in the City, I found particularly interesting; namely those on access to financial services and financial exclusion, credit and borrowing.
Before that, I want to highlight a few successes where, following our report, the Government have taken action. The first, recommendation 1, has seen the appointment of a Minister for Pensions and Financial Inclusion, Guy Opperman, based in the DWP. Recommendation 2 has been also partly implemented,
“that the Government should set out a clear strategy for improving financial inclusion in the UK”.
I welcome the fact that the Government have committed to setting up a new financial inclusion policy forum. This will be chaired by the new Minister for Financial Inclusion and the Economic Secretary to the Treasury and include other Ministers and representatives of financial service regulators. It will meet twice a year.
Recommendation 8 has also been implemented. This recommended that,
“the Government and regulators should work together to develop an approach to promote further innovations in the provision of online and mobile banking services to older people”.
In response, the Government referred to the institution of the FCA’s weekend events, bringing financial services firms and technology firms together to work on and find innovative solutions to these problems.
Recommendation 9 has also been implemented. This recommended that,
“the Government should work with the financial services industry and the FCA to develop and introduce a wider range of ‘control options’ for those customers who may experience mental health problems”.
This has been moved forward by the FCA, which held a weekend seminar in March, in tandem with the Money and Mental Health Policy Institute, to address ways in which fintech could create tools to help people with fluctuating mental health conditions.
A major recommendation, number 19, has been implemented. As other noble Lords have said, we criticised the seven-day waiting period at the start of a universal credit claim. In the November Budget I was glad to see the Chancellor commit to removing the seven-day waiting period. However, I am disappointed that the Government have not implemented recommendation 20, which asked for,
“greater flexibility in the frequency of Universal Credit payments in England and Wales so that … payments can be made twice-monthly, as will be possible in Scotland and Northern Ireland”.
I was first made conscious of the problems with universal credit implementation, having being unaware of them when the legislation went through this House, when our committee visited Toynbee Hall in the East End of London. We met claimants who made all too clear their distress and suffering caused by the delays in payment, and it was a very moving experience.
Overall, like other noble Lords, I feel disappointed about how few of our recommendations have been accepted by the Government, particularly with regard to financial education at primary school stage, bank account charges and the Post Office, the last two of which I shall come on to.
In the rest of my speech, I will focus first on access to financial services, covered in chapter 6 of our report. A major theme of the evidence we received was that many people are financially excluded because they are unable to access the standard banking system. An alarming figure stands out that there are 1.5 million unbanked adults in the UK. A very helpful solution to this could be the basic bank account. Noble Lords may not be aware that banks are obliged to offer this to customers. It is a simplified form of current account, providing direct debit facilities, a debit card, access to cash machines and over-the-counter banking. It is impossible to go overdrawn on a basic bank account and therefore impossible to receive overdraft charges. Hence—surprise, surprise—banks do not publicise them well as they do not make as much money out of them as normal current accounts.
Opening a basic bank account can prove surprisingly difficult. Citizens Advice York highlighted,
“a number of examples which suggested that branch staff were sometimes misinterpreting rules and eligibility criteria for the accounts”.
I can back this up with an example from Hampshire, where I live, where two Hungarian employees wanted to open bank accounts. Despite the fact that they both had national insurance numbers and a P60 each for their wages with their address on it, they were turned down by my bank, Barclays, in Petersfield because they did not have a utility bill in their name for the house where they live. This was not surprising as they are living with us. Another excuse Barclays used was that they had not been living here for three years and did not have a credit history in the UK. Of course, credit history is irrelevant with a basic bank account as overdrafts are not allowed. Finally, Barclays said that because one of the couple could not speak English—the other is quite fluent—she would not be able to fill in the customer satisfaction survey. At that point they gave up with Barclays, went down the road, and finally got a basic bank account with Santander, but even that took two and a half hours to set up.
All of this does not quite square with Barclays’ evidence to the committee. It said:
“The basic bank account is a key component of financial inclusion … Ensuring that all banking participants are party to that … is important; otherwise you have people going into the branch of a bank that they think would be great for them and they are told, ‘Sorry, you’re not someone we want to bank. Can you go down the road and be supported by someone else?’ That is not a good outcome”.
As can be seen from the example I gave, identification remains a key problem. In the banks’ defence, the tension between the need to prevent money laundering and the needs of the financially excluded was highlighted repeatedly by bank witnesses. More creativity needs to be allowed with regard to identification. In paragraph 214 of our report, we say:
“The Committee welcomes and encourages the use of Universal Credit letters as identity verification for bank accounts. We are encouraged by the announcement from the Economic Secretary to the Treasury that banks are to accept these as standard procedure”.
Therefore, I fully support the committee’s recommendation 12 of an annual report, which,
“should contain updates on the rollout of electronic identification for bank accounts—particularly in regard to the success of bringing previously unbanked people into the banking system. The annual report should also provide an update on the level of acceptance by banks of Universal Credit and other non-standard but legally sufficient identity documentation”.
Another very important section of this chapter sets out a greater role for the Post Office. Our recommendation, which I believe is important, was that,
“the Government work proactively with the Post Office and banks to fund and launch an extensive public information campaign on the banking services that are available through Post Office branches. The Government—as sole shareholder in Post Office Ltd—should also ensure that the Post Office provides adequate training for staff at branches within retail outlets, so that they can carry out banking services for customers with confidence and competence”.
In the chapter on financial exclusion, credit and borrowing, four parts of the sector were considered by our inquiry: unarranged current account overdrafts; high-cost short-term credit, which includes payday loans and short-term high street loans; home credit, which involves providing relatively small short-term loans to consumers on lower-than-average incomes; and, finally, rent to own, where a company sells consumer goods and provides the credit products that enable people to buy them.
First, on unarranged overdrafts, we recommended that,
“regulations to limit and manage the negative impact of unarranged overdraft charges should be introduced. The potential for such regulations should be assessed as part of the ongoing FCA review into high-cost credit”.
The Government’s response—to refer the matter to the FCA—is only partially satisfactory. Action needs to be taken now. A bank charge of £30 a time for going into overdraft is far too high, as for someone on the minimum wage it takes four hours to earn back the money.
The next two parts, we broadly concluded, have been more successfully controlled through recent FCA regulation. It is the final part, the rent-to-buy sector, where further controls are necessary. As other noble Lords have said, the store chain BrightHouse is one of the major culprits in this regard. According to a Guardian article of August 2017, it was charging customers up to £1,560 for a washing machine when exactly the same model could be bought elsewhere for £599. BrightHouse is the dominant player in the sector, together with PerfectHome and the online retailer, Buy As You View. Our recommendation 16 states:
“We recommend that the Government provide all necessary assistance, includinglegislation where needed, to further combat financial exclusion caused or exacerbated by high-cost credit … Regulations should be put in place in other parts of the high-cost credit sector, particularly the rent-to-own sector”.
I am sure this recommendation helped encourage the FCA when in October this year it ordered BrightHouse to repay nearly £15 million to 249,000 customers, stating that it had not behaved as a responsible lender. This is after Buy As You View went into liquidation in September, after repaying nearly £1 million to 59,000 customers who had been unfairly treated. Recent results from PerfectHome show the company making a major loss. Clearly, the sector is not having things its own way so much any more, but regulation is still needed.
Overall, I am pleased that the Government have accepted some of our recommendations—but not enough. Their response to our report, considering it came out in March, has been far too slow. We need to keep pressure up on the FCA in particular to provide further active responses to our report.
My Lords, as an “immigrant” contributor to the debate I congratulate the committee on its report and its recognition of the link between financial exclusion and poverty. Echoing a number of committee members, I will focus my remarks on issues raised by the chapter on so-called welfare reform, starting with universal credit. In opening the Budget Statement debate, the Minister acknowledged “genuine concerns” about UC’s “operational delivery”—but I am afraid that the problems with UC point to more fundamental design flaws that need to be solved if UC is to work for claimants, many of whom are likely to be among the sizeable minority considered by the FCA to have low financial resilience.
The abolition of the waiting days and introduction of a housing benefit run-on period is of course welcome, but it still leaves a five-week waiting period for the main UC, mitigated only partially by repayable advance payments. The version of the Budget speech circulated to the media stated that reducing the delay at the end of the first-month assessment period,
“would mean compromising the principle of payments … made on the same day of the month … which is very important for claimants in managing their budgets”.
But do we know from claimants themselves whether that is more important than, say, a shorter wait or having a more flexible payment system than the very inflexible one created by monthly payments and assessments, in which a whole month’s entitlement is based on the claimant’s non-financial circumstances on a single day each month? Damien Hinds claimed that,
“monthly is the more sensible pattern”.—[Official Report, Commons, 5/12/17; col. 1001.]
But I am not sure how much sense it makes to claimants or how it is conducive to smooth budgeting.
In her UC debate, my noble friend Lady Hollis of Heigham observed that the aim is,
“to moralise some of the most marginal in society into behaving like middle-class salaried professionals resilient with savings”.—[Official Report, 16/11/17; col. 2129.]
In arguing that monthly payments mirror work, Ministers refuse to acknowledge that this is not the world of work typically experienced by claimants. Nearly three-fifths of those who moved from paid work onto UC had been paid fortnightly or weekly, according to the Resolution Foundation. The foundation criticised “unnecessarily poor policy choices”, flowing in part,
“from misguided attempts at concentrating on altering human behaviour rather than supporting people in need”.
In the past, I think Conservatives might have denounced such misguided attempts as social engineering.
As we have heard, the Northern Irish and Scottish Administrations have listened to the concerns about monthly payments. Also in Scotland, couples may opt for split payments without fuss. The payment of UC into one account could undermine the financial resilience and capability of some women, especially those subjected to domestic violence, even where payment is into a joint account, as research shows that joint accounts provide no guarantee that the money reaches individual partners. It is disappointing that the Government rejected the recommendation of the Joint Committee on Human Rights—I was a member at the time—that the DWP should use UC rollout to test different payment arrangements to protect women’s financial autonomy. It is also disappointing that they appear to have rejected proposals, including for a safe interim payment, submitted by Policy in Practice—run by one of UC’s architects. This would have speeded up the first payment and enabled fortnightly payments without the potential difficulties raised by Ministers. Even if the majority of claimants prove to be comfortable with monthly payments, as the Minister argued in a recent debate on debt, what about the minority who are not?
The Government’s response to the committee lays great emphasis on alternative payment arrangements, but these are at the discretion of the UC agent or work coach. I do not find very convincing the argument that this is more effective than giving claimants the right to more frequent payments because it strengthens the relationship with work coaches. As it is, those who struggle will be labelled poor budgeters even if they were previously very efficient budgeters. They will be offered help with budgeting, requiring a whole new edifice of support.
This brings me to universal support, which was mentioned in the committee’s report. In its evidence to the Work and Pensions Committee, Citizens Advice listed a catalogue of problems. They included: variable delivery because of a lack of published minimum standards, often resulting in over-restrictive scope; ineffective referral mechanisms; and a lack of co-ordination. An updated framework was promised for autumn 2014 but has still not appeared. A local authority source advised me of fears that DWP is drawing conclusions about the level of support needs based largely on the experience of UC Live, which has involved the claimant cohort least likely to have such needs. In the debt debate, I asked the Minister to ask DWP to provide us with a report on how universal support was working—but answer came there none. May I now repeat the request, noting that similar questions in the UC debate also went unanswered?
Not only does universal support appear inadequate to the task but, as predicted in your Lordships’ House, the replacement of the Social Fund by discretionary local welfare assistance schemes, without any ring-fenced funding, has meant that in many areas it is no longer an alternative source of support because many authorities have closed or significantly cut back their schemes. According to the Centre for Responsible Credit, this is leaving some people facing destitution for lengthy periods of time.
While acknowledging examples of good practice, the committee rightly expressed concern about the funding outlook. Shelter and the Longleigh Foundation point out that since specific central funding for the schemes was ended last year, councils,
“have to find the necessary funding from within their existing, and shrinking, budgets”.
They warn that,
“there is absolutely no other emergency fund that is flexible enough to help people in financial crisis and prevent, or relieve, homelessness”.
Yet when I and others voiced such concerns in Oral Questions last Monday, there was an absolute refusal to acknowledge the seriousness of what was happening and to respond to requests for an evaluation of the impact of the changes. How can a Government who extol the importance of responsibility be so irresponsible as to wash their hands of all responsibility for the outcome of this reform?
Finally, the Government’s response to the committee’s call for,
“a detailed, comprehensive cumulative impact study”,
of how social security changes,
“might have adversely affected financial wellbeing and inclusion”,
is woefully inadequate. If the Women’s Budget Group and the Equality and Human Rights Commission can carry out such analyses, why cannot the Government, who have the ultimate responsibility for the impact of their legislation on the well-being of their citizens?
Perhaps the answer lies in the sobering picture painted by these independent studies, which show the negative impacts analysed by gender, disability and ethnicity as well as income. This was summed up by the EHRC, which said:
“Poorest hit hardest by tax, social security and public spending reforms”.
With a cumulative total of £27 billion or more in social security cuts due to have taken effect by the end of the decade, I fear that the outlook is an endless bleak midwinter, marked by more financial exclusion, hardship and debt.
My Lords, I add my thanks to the noble Baroness, Lady Tyler, for her excellent leadership of our committee, and to the staff who supported her.
We sometimes think that financial exclusion is important but that it is a subject like many others. It is not. It is really important, as important as the security of our population or their health and education. Why? Because it concerns every individual in the country —not that they are all excluded but because of their financial capability.
Perhaps it is easier to define financial capability, which is what we are trying to get. The MFO, the Microfinance Opportunities, defined it thus:
“Financial capability is the combination of attitude, knowledge, skills, and self-efficacy needed to make and exercise money management decisions that best fit the circumstances of one’s life, within an enabling environment”.
Not everybody needs to know how to invest in the City of London; we all have our own worlds that we need to know more about.
The Government have made some minor advances and were in a constructive mood during debate on the Financial Guidance and Claims Bill. I am sorry that they were perhaps not so constructive in their response to us, which has not been very positive. They sometimes seem to support our view but do not quite go the whole way into implementing recommendations.
I turn to financial education or, better put, the teaching of financial capability. The MFO defines it as:
“Financial education equips people with knowledge and skills, and strengthens their attitudes and belief in themselves to make and exercise informed, confident and timely money management decisions”,
in their own lives. So it is a lot more than just facts and figures; it is about people’s social belief and their belief in themselves that they can do things.
When we look at the statistics, one or two of which we have heard, we see that one in six struggle to read a simple bank statement, 17 million cannot manage their own budget and only 26% of postgraduates are happy that they can manage their own money. To put it another way, that means that 74% of our most highly educated people in this country do not believe that they are capable of managing their own budget or that they have had the training to do so. It is not surprising that we have a problem.
The FCA’s Financial Lives Survey 2017 backs up everything we say. It is all there. In the past few days, the Education Policy Institute has indicated that in mathematics,
“England has one of the largest gaps between the highest and lowest performing”,
out of all developed nations. I am very glad to say that England does not include Northern Ireland because we come out higher than that.
If you look at the Daily Mail—which I do because it is in the Library, although some may say you should not—its headline today is “Middle Class Pension Crisis”. Three paragraphs down it says:
“The Department for Work and Pensions says”—
so it is not me and it is not even the Daily Mail—
“12 million people are not saving enough – despite more than half of them earning at least £34,500 a year”.
So we are not talking just about those on the minimum wage; we are talking about graduates, well-educated people who have gone into jobs, and there they are.
At the bottom of all this must be financial education, or lack of it. It has to be. We recommended more financial education in school. The noble Lord, Lord Patten, who sat next to me, said that he was not sure that schools could actually do all that. However, it is not me who is saying it; it is the Government who, in response to our questions, are going to justify what they are doing. They will, we can be sure, be quite good at batting it away.
However, the Government had every chance in the Financial Guidance and Claims Bill to put in schools. In relation to the single financial guidance body, Clause 3(9) sets out:
“The strategic function is to develop and co-ordinate a national strategy to improve … the provision of financial education to children and young people”.
There was an amendment to put schools into that. First, I must ask the Minister why they did not allow schools to go into that. Secondly, as they did not allow schools to go into it, where does he believe that financial education is going to take place? Is it going to take place over the weekend when people are going to cinemas? Is it going to take place after hours when they are doing other things? Who is going to do this financial education that they talk about, and where? Therefore, why did they not allow schools to go into it?
On one or two of the recommendations and on recommendation 6, which is all about education, the Government tell us that there is a new mathematics curriculum. As I have just said, the institute of whatever it was definitely does not believe that has had much result and, after all, mathematics must be at the very bottom of financial capability—if you cannot add two and two, you are not going to able to do any of the rest.
The Minister may go to paragraph 5.13 of the Government’s response and say:
“In 2014, for the first time, financial literacy was made statutory”.
We have heard that only 35% of schools come under this curriculum guidance. The response then goes on to justify the Government’s position:
“A number of schools also include the teaching of financial education in their Personal, Social, Health and Economic Education … provision”.
In my speech during the debate on this during the passage of the Bill, I said:
“Financial education lies within PSHE subjects but they are not statutory … Time devoted to PSHE has been reduced by 32% since 2011 because it is non-statutory”.
When people were asked why there was so little time for it, the answer was:
“We only have 20 minutes, and if we don’t do something on sexual exploitation or online safety”,—[Official Report, 24/10/17; col. 914.]
so they cannot do it.
The next thing that the Minister will probably say is that Ofsted really covers all this and is pretty good at it. The Government’s response states:
“Inspectors also look for evidence that, where relevant, English, mathematics and other skills necessary for pupils to function as economically active members of British society”.
However, this is what I said about Ofsted:
“Adrian Lyons said that Ofsted produces a state-of-the-nation education report. Our chairman, the noble Baroness, Lady Tyler, asked … ‘how much was there on financial education in the last one?’ … Mr Lyons’s answer was: …‘I do not know the answer to that, but I would be surprised if there was any, to be honest’”.—[Official Report, 24/10/17; col. 914.]
Ofsted says that it finds it difficult to mark things unless it has marks and there are investigations into it, but it only has to give extra marks if this subject is covered.
I seriously believe that the Government are not coping with this in education. The figures and statistics are outrageous for a country as developed as ours. Quite frankly, the reasons given in the response to our recommendations are simply very inadequate and wishy-washy, and they wander around without getting to the point.
My Lords, it was a pleasure to serve under the chairmanship of the noble Baroness, Lady Tyler of Enfield, and I too pay tribute to the excellent leadership she gave the committee—which also received, as we have already heard, superb support from the committee clerk, his team and the committee’s advisers.
I want to focus my remarks on two specific recommendations of the report. First, recommendation 5 calls for the introduction of a requirement for the Financial Conduct Authority—the FCA—to make rules setting out a reasonable duty of care for financial services providers to exercise towards their customers. As my noble friend Lord Holmes of Richmond, who made an excellent speech, and other noble Lords have already mentioned, the Select Committee believes that such a duty will promote responsible behaviour on the part of business and support sound financial decision-making by customers.
In their response to the committee’s report, the Government highlighted that the FCA has committed to publishing a discussion paper on the introduction of a duty of care and suggested that this was a sufficient next step. The problem, as has already been said, is that the discussion paper—which would only, in the FCA’s own words, “start a dialogue”—is not due to be published until after the UK’s withdrawal from the EU. I therefore wonder whether my noble friend the Minister can explain why we need to wait until after Brexit given that the Financial Guidance and Claims Bill, now in the other place, offers a timely opportunity to make the necessary amendments to the Financial Services and Markets Act 2000. Moreover, will he say what he thinks “after Brexit” actually means? Is that March 2019 or March 2021, after the two-year transition period? Most importantly, quite apart from the fact that a duty of care amendment would secure better outcomes for consumers in general, what is his view of the justification for the unnecessary and, some would say, unacceptable delay to customers affected by cancer accessing better support at their time of greatest need?
I should declare an interest of sorts. I was privileged to work at Macmillan Cancer Support 15 or so years ago. Never did I imagine that I would have the privilege of speaking in support of that amazing charity as a Member of your Lordships’ House, but I am proud to do so today, and to support the one in two people who, by 2020, as we have already heard, will get that illness in their lifetime. Alongside the physical and emotional impacts, cancer brings with it a real risk of financial hardship: four out of five people with cancer are, on average, £570 a month worse off as a result of their diagnosis.
As providers of mortgages and other financial products, banks have an unrivalled ability to support people affected by this financial impact; yet notwithstanding some progress, there is still a lack of consistency across the sector, and people still do not know what to expect from their bank. Macmillan research found that only one in nine people with cancer had even told their bank about their diagnosis, and of those who did tell their bank, almost one-quarter were dissatisfied with the support they received. If banks and building societies had a legal duty of care towards their customers, it would give people with cancer confidence to disclose their diagnosis, knowing that they could trust their bank to act in their best interests. For banks, this would mean being ready to respond to their customers’ needs and designing the vital products and services that would help people manage their finances while ill.
Macmillan is very concerned that unless the Government legislate for the duty of care now, the issue will be delayed indefinitely. Sadly, as so many of us know all too well, cancer takes no account of such delays. When cancer strikes, the need is now. The Government and the FCA need to recognise that and act now, not in some far-off future.
I turn briefly to recommendation 10 and the duty to make reasonable adjustments—which too often, incredibly, is still not being met. As we have already heard, the committee called for a review, to be published within 18 months of the report’s publication, of reasonable adjustment practices for disabled people, to identify areas of good and bad practice so that improvements can be made. That needs to be followed, the committee said, by a timetable with clear target dates for the delivery of improvements, along with their monitoring and implementation within the lifetime of this Parliament.
Here is an opportunity for the Government to champion the disabled consumer and disability equality in general. Yet, sadly, they seem to decline to lead or to set the pace. I have to ask what message this sends to disabled people. The FCA does not appear that bothered either. A word search of its consumer approach document, published only last month, generated one reference to disability, and none to reasonable adjustments. So although the practical problems which disabled consumers like me face are highlighted in the committee’s report, the full extent of the cultural problem we still encounter is actually highlighted by its omission from the FCA document itself. Ultimately, this comes down to enforcement. Put simply, enforceability and disability are inextricably linked: the duty’s enforceability is essential to enabling a person with a disability to access services which a non-disabled person takes for granted. Yet our power to enforce has gradually been eroded. This needs to be reversed.
Cumulative impact assessments are apparently all the rage, and in conclusion I have one of my own, although it is unfortunately not that positive. I fear that the cumulative impact of the Government’s passivity on disability equality is storing up problems which as well as being unnecessary, are completely avoidable—if only they would take a lead and put disability equality back on their agenda. In order for a commitment to building a country that works for everyone to be credible, it must include everyone, whether they are affected by cancer or by disability. I hope very much that Ministers will use the coming recess to reflect on how this can be done in a strategic and concerted way across government, as a matter of urgency.
My Lords, as another of the immigrants identified by my noble friend Lord Patten, I commend the report of the Select Committee on Financial Exclusion under the sterling chairmanship of the noble Baroness, Lady Tyler.
I am pleased that the Government have decided to accept some of the excellent recommendations—they have appointed a new Minister for Financial Inclusion, and I congratulate them on measures included in the Financial Guidance and Claims Bill. I echo the words of the noble Lord, Lord McKenzie, who explained the importance of the amendments added by this House, and I also say what a pleasure it was to work with the DWP Ministers and noble Lords on all sides of the House to improve protection for vulnerable or highly indebted citizens. I look forward to further possible additions in the other place, such as on cold calling and perhaps a duty of care. With the worrying rise in household indebtedness, it is more important than ever to help the public understand financial management and also to improve the financial resilience of the population. Debt worries can have negative implications for workplace performance and productivity, and financial worries can damage or exacerbate existing issues with mental health.
It is estimated that 17.5 million working hours a year are lost as workers take time off due to financial stress. As we head towards a period where interest rates are likely to rise from current exceptionally low levels, and where the economy may be unsettled by Brexit uncertainties, action is urgent. I hope we will see a consumer-focused approach to improving this financial resilience. In this connection, I also hope that we will see more initiatives that use workplace payroll to help people merge their debts and reduce the interest rate payable, as well as allowing them a more secure repayment programme. I declare an interest as an adviser to a social enterprise helping workers in many large organisations to reduce their debt interest costs and manage them more efficiently.
I certainly agree that it is welcome that banks should promote basic bank accounts, but I remain concerned about the important issues highlighted by my noble friend Lord Northbrook and about continuing bank branch closures. The loss of local branches particularly disadvantages those who are disabled or elderly, if they cannot manage telephone or online banking. I am pleased they will be able to use post offices, but we need to monitor this situation carefully to ensure that vulnerable individuals are not excluded as banks continue to pursue cost-cutting agendas.
On the topic of older people, too often their needs are overlooked by mainstream financial services providers. I welcome the Financial Conduct Authority’s work on vulnerable consumers and developing a strategy for the ageing population. However, I hope this strategy will urgently include helping people to prepare for later-life care. There is no prefunding or financial planning for future long-term care needs at national, local or individual level, and no incentives to help families to save for care costs. Financial exclusion in later life will be badly affected by the failure to prepare for potential care needs. The inadequacies of the current social care system are well documented.
There are many aspects to this debate and the excellent Select Committee report, many of which have been thoroughly covered by other noble Lords, so I have chosen to highlight some that are relevant specifically to financial exclusion in connection with pensions. As auto-enrolment extends pension coverage to millions more workers across the country, it is vital to improve the understanding of and engagement with workplace pensions and other financial matters. I hope the Government will consider making workplace financial education a key component of the auto-enrolment programme so that all workers are better equipped to look after their finances. I realise the new financial guidance body may have some input here. However, I believe we may be missing an opportunity to improve financial education and inclusion while millions of workers are being nudged into pension saving. The opportunity is there for the taking.
In connection with auto-enrolment, there is an important issue that I must once again raise in your Lordships’ House, and hope that other noble Lords may join me in pressing for urgent action. This relates to the lowest-paid workers who are being automatically enrolled in, or opting to join, workplace schemes. Most workers do not understand pensions; indeed, many of the smallest employers setting up pension schemes for their staff also know little about the subject. This has resulted in a major injustice that has so far been all but ignored by the Government, regulators and the pensions industry. Low earners, mostly women, are losing money because of a particular type of pensions administration arrangement called net pay. All workers earning over £11,500 who are basic rate taxpayers pay £8 of their earnings and automatically receive £10 into their pension, as the scheme adds the extra £2 for them. This is the 25% bonus that results from basic rate tax relief. However, any worker earning below £11,500 in a net-pay scheme cannot get the £2 that they are entitled to under pensions law; they have to pay a full £10 for every £10 going into their pension. If their employer uses a scheme with a different administration system called relief at source, these low earners only have to pay £8 to get the £10 in their pension. In other words, with these net-pay schemes the lowest earners are forced to pay 25% more for their pensions—a classic example of financial exclusion where the poor pay more.
I have asked numerous Written Parliamentary Questions and raised this issue in several debates in this House, yet Ministers seem unwilling to address this injustice. Employers often know nothing about the issue; the workers themselves probably have no idea and, even if they did, there is nothing they could do about it as the employer chooses their scheme; and the pension providers do not normally warn the employer or the worker that their scheme is not suitable for those earning less than £11,500. Providers are not obliged to pay the low earners—mostly female—this extra money, although a couple have decided to do so. The Treasury has refused to allow schemes to reclaim the money on behalf of the low earners. Even the new master trust assurance framework, supposedly the regulator’s endorsement of a high-quality master trust, can operate a net-pay system and take on low-paid workers without having to compensate them for this lost money. This would not happen if people understood pensions or if providers were required to explain things clearly. However, the current regulatory oversight is compounding problems for low earners, failing to protect them and thus leaving them financially excluded. This is a classic example of how the complexity of our system and a lack of consumer focus is causing financial exclusion, and will mean that the lowest earners have less disposable income for their general spending. The duty of care highlighted by my noble friends Lord Holmes and Lord Shinkwin extends to the Government and the regulators, not just providers.
The noble Viscount, Lord Brookeborough, eloquently explained the importance of financial education in schools, but there is an equally important issue that is often overlooked. The FCA has a duty to ensure that people understand financial products, and the new financial guidance body will also have a remit to include this. However, we must not assume that just giving people information and disclosure will improve financial inclusion. Indeed, I argue that the current financial services industry approach is almost guaranteed to exclude most consumers even if they understand finance because the reams of paperwork that they receive, full of jargon and impenetrable terms, written in language that may as well be Latin or Ancient Greek, is impossible for almost all ordinary people to understand. Even my friends with PhDs in scientific subjects are utterly baffled by pensions literature.
The regulatory approach designed to protect consumers is not working well enough. Just assuming that sending people disclosure and information about products and the choices they have will improve consumer outcomes is sadly misguided. Some of the problems stem from a lack of financial education in schools, and I am delighted that the Government intend to tackle this. However, most people in this country are beyond school age now and they need to know how to plan their finances. Whether in connection with managing debt, avoiding high-cost credit or making long-term investment decisions, the Government and the regulators must act now.
Improving financial inclusion will require urgent action across many areas. Helping vulnerable individuals, those with illnesses such as cancer and the wider population is an urgent task. I hope our new Minister for Financial Inclusion can make meaningful and timely improvements, perhaps even in the Financial Guidance and Claims Bill as it goes through the other place, as many other noble Lords have requested.
My Lords, it is a pleasure to follow the noble Baroness, Lady Altmann. She is an expert on pensions and she is right to draw attention to its important role in dealing with financial exclusion. Her speeches always repay careful rereading.
I declare an interest in that I am a continuing member of the Financial Inclusion Commission, which has been in operation for the past few years in this important area of social policy. I too acknowledge the skill and wisdom of my noble friend Lady Tyler and the way in which she steered the committee’s work. It was an excellent experience; it was the highlight of my week while it lasted, and I felt quite bereft once it had stopped. Whatever committee she chairs next, I shall certainly be applying to join.
The committee raised the profile of the issue that we are debating. There have been some expressions of disappointment at the Government’s response and, if I am honest, I shared that feeling when I read it, although it was quite long. However, I was not surprised because this is quite difficult territory.
We have to look to the future about how we are going to take the issue forward. I am going to spend a few minutes on the mechanics of what we are facing. It is true that the Government can say they have not been doing nothing and there has been some progress. I was encouraged when we had the election; reading between the lines of the Conservative manifesto, I believe if the Prime Minister had been left to her own devices we might have had more social justice. It is no accident that “A Country that Works for Everyone?” is the subtitle of our report; we were trying to work with the grain of government policy. The Prime Minister might have had more opportunity with a new incoming ministerial team. I think everyone understands that a lot of this business is eclipsed by our withdrawing from Europe but we must not ignore the domestic agenda, and in particular it would be a mistake to ignore this part of that agenda. I would argue that, as someone may have said earlier, a lot of the discontent that drives the emotional Brexit response is rooted in some of the problems that this report addresses.
I think that it was the noble Lord, Lord Patten, who said that we were getting high marks for not spending money. I would have liked to spend quite a bit of money, but we were very constrained. We were making reasonable suggestions that did not incur huge bills and were rooted in the evidence that we heard—the evidence is very powerful. I concur with colleagues on the committee who said that we were very well served by the staff and our advisers, but the stars for me were those who gave us and sent us evidence. The body of evidence left is, sadly, a year out of date now—as colleagues know, the dogs bark and the caravans move on rather quickly—but is more up to date than a lot of the assured ONS official statistics and is a goldmine for researchers, policymakers and, indeed, legislators who want to take the question forward.
I do not know whether the Minister has time to do this, but I would like to understand what the mechanics of some of these new elements will signify and how they work together. We have a new ministerial team, but there is a contradiction in attention. Guy Opperman is an excellent Member of Parliament for Hexham. He does very good work and is familiar with this territory, but he is looking after pensions as well which, as the noble Baroness, Lady Altmann, just explained, is a full-time job in its own right. How does he relate to Stephen Barclay? I do not know him nearly as well; he is Economic Secretary, but has about 17 responsibilities, most of them related to Brexit.
How do those of us on the committee who want to take a continuing interest in the subject focus our representations to ensure that we are on the right side of that dual responsibility offered to those two politicians? How does the policy forum fit into that? If it is merely a six-monthly meeting of stakeholders around a big oak table where they say what they think is wrong with the world, go home and come back in six months’ time, how useful will that be? If it is not that, what is the policy forum to be?
I think it was the noble Viscount, Lord Brookeborough, who mentioned what was done by the Financial Inclusion Task Force in 2005. It had a very small Treasury-based unit with three members of staff. Sir Brian Pomeroy was an experienced hand and a wise man. It made a real impact for next to nothing—this was not public expenditure resourcing that you would notice; it was a sensible amount of money. It made a big impact in increasing the number of basic bank accounts issued.
I am trying to work out how this new arrangement with a split responsibility at its ministerial head will work. There is the policy forum, the single financial guidance body, which is welcome, as are breathing spaces for debt, and the Financial Conduct Authority, which I think is beginning to play a responsible role and getting a much better feel for the issue. The noble Viscount, Lord Brookeborough, also mentioned the financial life survey by the FCA, Understanding the Financial Lives of UK Adults. It is an excellent survey and a valuable document, and it will, to its credit, make the data widely available. The survey is not about people who are just about managing, it is about people who are finding it just about impossible to stay financially afloat at every stage in life. So the FCA’s work will contribute, but there are gaps.
I point to two random examples that have come in front of me in the past few weeks. The Post Office current account has no online payment capability. That is a mandated feature of ordinary basic bank accounts, but it is not included in Post Office accounts. I am disappointed that we are not making more of the Post Office. It could be carrying a lot of the weight—the noble Lord, Lord Patten, made this important point—but it is not being given the chance to do that, or it is shying away from the responsibility. Either way, this is exactly the kind of gap that could be identified and dealt with if this new machinery were put in place and acting effectively.
Finally, the Financial Inclusion Commission produced a publication looking at improving access to household insurance, which stated that nearly 16 million adults who have some need for contents insurance have no insurance protection against fire, flood or burglary. Of that 16 million, 10.5 million are renters and two-thirds of those renters are potentially vulnerable. So there is another gap. I am getting a long look from the noble Baroness, Lady Goldie, who is the Whip, so I will stop now.
At the beginning of today’s sitting, the noble Lord, Lord McFall, the Senior Deputy Speaker, said that he was interested in taking committee reports forward. I hope that we can keep the community of interest that our colleagues on this ad hoc committee established during our sittings, maintain a constructive interest and monitor the future work done in government on this important public sector policy.
My Lords, I, too, thank the noble Baroness, Lady Tyler, and her committee for this excellent report, and add my thanks to those members of staff who supported it. It was a timely decision of the House to set up the committee. It is doubtful whether the Financial Guidance and Claims Bill would have got to the stage it has, preparing the way as it does for a new DWP Minister for financial inclusion, without the evidence and arguments presented in the report. A job well done—or was it?
Many noble Lords have commented on the length of time that it has taken the Government to respond to the report. It was clear that the work of the House on the Financial Guidance and Claims Bill would have been materially improved if the government response have been made available earlier in the Bill’s proceedings. Nevertheless, it is gratifying to learn that, of the 22 recommendations of the committee, four have already been implemented, with a further five partially implemented.
However, in my time today, I shall concentrate on the recommendations which the Government’s response indicates that they will not implement. Recommendations 3 and 12 concern annual reports on key indicators of financial inclusion. I wonder whether the Government have got this right. Why be so defensive about something which they are, at least in part, sorting out and making progress on? This is despite the fact that we have a new ministerial portfolio in an area that is of demonstrable interest to the wider public.
Recommendations 4 and 5 concern placing a duty of care on the FCA and financial inclusion being a key FCA objective. The question of duty of care has been debated time and again, and I would have thought that the Government would have made a better fist of it than they have in their current response. The FCA should have a duty of care to its consumers at the heart of its mission. It is simply not possible to achieve a good deal for consumers and protect those affected by financial exclusion by relying on a fair markets approach. In the case of payday lending, the FCA could operate only to reduce the number of companies making excessive profits and to cap the charges. What was required was a consumer detriment approach, which would have been to ban the usurious—very high —rates of interest that those companies were charging.
Recommendation 6 states that financial education should be added to the primary school curriculum. The case made in the report for a rethink about how we educate our children in the financial workings of our world is powerful and convincing, but it has been turned down flat. Frankly, there could be no better way of introducing children to mathematics, and particularly numeracy, than money. Can the Minister explain what discussions and negotiations have been carried out on this recommendation and fill out for us the reasons why DfE colleagues were unconvinced? It was good of the noble Viscount, Lord Brookeborough, to speak on this point, and I thought that his description of the Government’s response as “wishy-washy” was very much to the point.
Recommendation 10 concerns reasonable adjustment practices for disabled customers. The FCA’s Our Future Approach to Consumers document from November 2017 contains a good deal of discussion on the issue of vulnerability. However, the document makes very little reference to the particular problems experienced by disabled people. The Minister will be aware of the changes that have been put into the Financial Guidance and Claims Bill on the issue of services to vulnerable people. Does he think that the response to this recommendation meets the high standards that should apply?
Recommendation 11 concerns promoting basic bank accounts appropriately and effectively. Can the Minister explain why the Government are willing the ends of this policy but not the means? Is this not a simple regulatory issue? If not, what is the real problem? The noble Lord, Lord Northbrook, spoke on this matter and illustrated that Barclays—surprise, surprise—had miserably failed yet again in its duties. I was delighted to hear the noble Lord commending more regulation and controls. He joins my club on that matter.
Recommendation 14 concerns ensuring that non-digital access to social security benefits and other services remains possible. The response does not engage with issues such as universal credit phone lines not being free and the strong discouragement against applying for benefits offline.
Recommendation 21 is that tenants in receipt of universal credit should be allowed to decide for themselves whether their housing costs should be paid to them or direct to their landlord. The response notes that it is to be made quicker for registered social landlords to apply for a managed payment. However, there is no movement on the issue of empowering claimants. Indeed, the Government make it clear that they do not see managed payments to landlords as a permanent solution for any claimant if possible.
Recommendation 22 concerns a detailed, comprehensive cumulative impact study of how changes in social security policy resulting from the Welfare Reform Act 2012 might have adversely affected financial well-being and inclusion. The Government decline to begin any single comprehensive study of the impact of all welfare reform measures on financial well-being. My noble friend Lord McKenzie and others have made very strong representations in this debate about the lack of positive responses to their well-evidenced and well-argued concerns about the universal credit programme. Some movement was achieved in the Budget but it is clearly not enough. We look forward to the Minister’s response to these disappointing responses to the recommendations of the committee.
Finally, recommendations 17 and 18 concern widening credit union products and deepening financial support for them. The Government have said that they do not intend to provide revenue support to credit unions. They go on to say that they will consider grant funding only in relation to specific outcomes. Credit unions are one of the few places where financially stretched consumers can get access to credit without having to go to payday lenders or worse. In Ireland, virtually every village or town has a number of credit unions, which provide the bulk of necessary unsecured lending on a sustainable basis. Why are we not able to get this movement onto a sustainable basis and get it to grow to its potential? Why is no direct engagement with the arguments put forward in the report?
To paraphrase the curate, the Government’s response is good in parts. But let us go back to the basics—a point made by the noble Baroness, Lady Tyler, right at the beginning of this debate. This is about the poor and about how the poor are made to pay more. In his speech the noble Lord, Lord Patten, made the point —perhaps the only point I agreed with—that the recommendations in this report would cost very little money. Why cannot the Government, who have done so much to make the poor poorer, do more, as this report recommends, to help the poor, the old, the unconnected and the disabled to pay less? Please, Government, will you do more to help the poor to pay less?
My Lords, I join other noble Lords in paying tribute to the noble Baroness, Lady Tyler, for how she introduced the debate and join in the wide praise that she received from across the House for how she conducted the committee. The remark of the noble Lord, Lord Kirkwood, that it was a highlight of the week and that it was sad when it ended stands in stark contrast to my recollection of sitting on some committees in your Lordships’ House. I, too, look forward to the next one the noble Baroness will chair.
I say at the outset that we take this report extremely seriously. It was well researched, there was some incredibly important evidence in it, and it was well presented. That was a very important element. It has been a very important part of the Government’s strategy.
The noble Lord, Lord Tunnicliffe, was notable in using the curate’s egg argument about our response. Before I turn to some of the areas that he focused on, in which we have not done very well, for recollection, refreshment and the record let me just say what we have done. We have announced the financial inclusion policy forum; I shall come to more details on that later. We have the Minister for Financial Inclusion, Guy Opperman, who has been recognised for the work he has done. We announced changes in the Budget to universal credit totalling some £1.5 billion. We have introduced the Financial Guidance and Claims Bill, which my noble friend Lord Young took through this House with characteristic skill. He managed to ensure that, in the best traditions, it left in better shape than it arrived. It also left with the commitment to breathing space for debt, introduced at Third Reading. The Financial Conduct Authority has produced its Financial Lives Survey; financial inclusion is a key part of our digital strategy; and the FCA has taken robust action on rent-to-own schemes. We have introduced the rent recognition challenge, encouraging fintech firms to address the issue of credit histories for those who rent properties, as opposed to those who have mortgages. These are in addition to basic bank accounts and payday lending caps, which I will come to later. It is a vast agenda to cover in the short time available to me.
The breadth of the challenges of financial inclusion and financial capability is significant. The noble Baroness, Lady Tyler, spoke about the elderly; my noble friend Lord Patten spoke about geographic exclusion. The noble Lord, Lord McKenzie, spoke about debt; the noble Lord, Lord Fellowes, spoke about rural bank networks. My noble friend Lord Holmes spoke about digital inclusion; the noble Lord, Lord Empey, spoke about gambling and addiction. The right reverend Prelate the Bishop of Birmingham spoke about the role of faith communities in responding to it. My noble friend Lord Northbrook spoke about mental health; the noble Baroness, Lady Lister, spoke about domestic violence and universal credit. The noble Viscount, Lord Brookeborough, spoke about the difference between capability and inclusion and the importance of education; my noble friend Lord Shinkwin spoke about cancer support. My noble friend Lady Altmann spoke about pensions and the noble Lord, Lord Kirkwood, mentioned insurance. The noble Lord, Lord Tunnicliffe, referred to general vulnerability. I will try to make as much progress as I can on that agenda in the time available and seek to address the specific points raised by noble Lords.
In their response to financial inclusion, Her Majesty’s Government use the World Bank’s definition, which is,
“financial inclusion means that individuals, regardless of their background or income, have access to useful and affordable financial services”.
To the contrary, financial exclusion means that individuals lack that access. When we consider this definition, it follows that the Government’s policy regarding financial inclusion must be focused on ensuring that there is an appropriate supply of useful and affordable financial services and products. The Government therefore work closely with the industry regulator, the Financial Conduct Authority, to ensure that appropriate action is taken when the market fails to supply such services and products.
Government policy on financial capability is distinct from the inclusivity agenda, as the noble Viscount, Lord Brookeborough, mentioned, and is focused on ensuring that appropriate information, guidance and advice is available so that members of the public are empowered to make decisions appropriate for them. This is a role that the new single financial guidance body is designed to address and I am pleased that the Financial Guidance and Claims Bill, which will put that new body in place, has progressed through this place and into the House of Commons.
The Government have aimed to boost inclusion and ensure the widest possible access to fee-free basic bank accounts. The nine largest personal current account providers are now legally required to offer these to customers who are unbanked or ineligible for a bank’s standard current account. The noble Lord, Lord Holmes, mentioned the importance of online savings. The Treasury publishes data on basic bank accounts annually to show how the market is developing. Last year’s data showed that there are now over 4 million fee-free basic bank accounts.
Another extremely important pillar of financial inclusion is addressing affordable credit. The Government have been active in ensuring that a functioning consumer credit market and a well-run regulatory regime are maintained by transferring supervision of the consumer credit market to the Financial Conduct Authority and legislating to require it to introduce a cap on the cost of payday loans, a fact recognised by the right reverend Prelate the Bishop of Birmingham and the noble Baroness, Lady Tyler, in her introduction. It is worth pausing to remember that that cap has had an immediate effect. There were 4.2 million payday loans approved in the first six months of 2014. In the first six months of 2015, after the cap was introduced, that had reduced to 1.18 million. That means that 760,000 borrowers have been able to save some £150 million per year, money that has gone back into the pockets of the poorest in our society. A feedback statement published by the FCA in July has found the cap to be successful and it will consult on further interventions in spring 2018.
Finally, the Government are encouraging innovations in financial technology to promote financial inclusion. A recent example is Fintech for All, a nationwide competition launched in September 2017. Two winners were announced at an awards ceremony held on 15 November. The noble Lord, Lord Empey, is right about the incredible wealth of expertise that we have in the City of London, just a few miles from this place. That expertise in fintech is also found in other major financial centres around the UK, such as Edinburgh, Leeds, Newcastle, Manchester and Birmingham. The noble Baroness, Lady Tyler, referred to the technology involved in bank accounts and particularly whether, rather than reducing vulnerability, it might lead to further vulnerability and potential exclusion for the elderly, those in rural communities where broadband and internet access is not as great, and people with disabilities. We need to keep a focus on that area.
The noble Viscount, Lord Brookeborough, predicted all the answers which I might give on education. My heart sank as he ran through them all, because it was exactly what was in my speech—so I hesitate to reiterate it. However, I put on the record that the new national curriculum in England, taught from September 2014, made financial literacy statutory for the first time for 11 to16 year-olds. However, to improve financial education we need to look to other organisations beyond what is provided in the school curriculum. A wide group of organisations can have a role to play. Various community organisations and families have a responsibility in this area as well. The right reverend Prelate also referred to the excellent work of organisations such as Christians Against Poverty, with which I have had some contact, and the role that they play in education. If it is all about inclusion, it stands to reason that none of us is free from the responsibility to engage with this matter and ensure that people get the education they need. That is why the Government have ensured that financial education for children and young people remains a focus of the new single financial guidance body, with the aim of bringing together funders and providers of initiatives across the UK to maximize impact.
The Select Committee has made a number of recommendations on access to welfare, including the abolition of the seven-day waiting period at the start of universal credit. The noble Baroness, Lady Lister, and the noble Lords, Lord McKenzie and Lord Empey, all welcomed this as far as it went—I accept that—and acknowledged that it was a step in the direction for which they have diligently argued for some time. The comprehensive, wide-ranging package, worth £1.5 billion, will ensure that claimants of the benefit get more money sooner, while retaining the principle of which the noble Lord, Lord Empey, spoke in favour.
The noble Baroness, Lady Tyler, spoke about the importance of leadership. As regards our response to the committee’s proposal on the Financial Inclusion Policy Forum, this initiative was designed to drive better co-ordination and engagement across government and with the sector to address the problem of financial exclusion. The forum’s objective is to bring together Ministers in government departments with a remit to promote financial inclusion, regulators, especially the FCA, and key stakeholders working in their own capacity to address financial exclusion. It will be jointly chaired by the Economic Secretary and the Minister for Pensions and Financial Inclusion and support government leadership and collaboration with the sector, report on initiatives by both government and regulators, and monitor progress. I take the point made by the noble Lord, Lord Kirkwood, who wondered how that choreography might work. Across government there is a general feeling that interministerial groups work particularly well in getting not just Ministers but officials together to make sure that they work in a constructive way going forward. My noble friend Lord Patten said that it was not just central government that was key to this; he mentioned the importance of local government as actors in this regard.
We were pleased with the unanimous support that the financial forum initiative received. I would like to mention in particular the support of the independent Financial Inclusion Commission, which stated that the forum is,
“a further indication that the government is taking the issue of financial exclusion seriously”,
and that it has,
“a vital role to play in making this a country that works for everyone”.
That struck a chord with not only the noble Lord, Lord Kirkwood, but, I guess, in Downing Street as well. We welcome this endorsement and look forward to the forum being set up in the first quarter of 2018. Further details about its membership and the date of its first meeting will be published soon.
I turn to some of the specific questions raised in the time I have available. The noble Baroness, Lady Tyler, and my noble friends Lord Holmes and Lord Shinkwin asked about the adjustment practices for disabled consumers. The FCA’s handbook requires firms to identify particularly vulnerable customers and to deal with them appropriately. In addition, like all service providers, banks and building societies are bound under the Equality Act 2010 to make reasonable adjustments, where necessary, to the way in which they deliver their services.
The noble Baroness, Lady Tyler, asked when the forum would meet, and whether the minutes would be published. The forum will meet every six months. It will bring together regulators and Ministers in government departments with a remit to discuss and promote financial inclusion. More details on the membership of the forum will follow early in the new year. The agenda will be published and we will make decisions on what happens with the minutes and make announcements on that in due course.
The noble Lord, Lord Empey, asked about Recommendation 21, which was about payment of housing benefit direct to landlords. We have listened to the concerns and will look to make it easier to set up and manage payments to landlords under universal credit. New guidance will be issued to staff to ensure that claimants in the private rented sector who have managed payments to landlords for their legacy housing benefit are offered this option when they join universal credit.
My noble friends Lord Shinkwin and Lord Holmes referred to the duty of care, as did my noble friend Lady Altmann. The Government recognise that there are very different views on the merits of introducing a duty of care for financial service providers and, as with any policy, we want to ensure that these are carefully considered and taken into account. The Government believe that the Financial Conduct Authority, as the UK’s independent conduct regulator for the financial services industry, is best placed to evaluate the merits of a duty of care for financial service providers. In this context we welcome the Financial Conduct Authority’s commitment to publish a discussion paper on the subject.
On access to banking, which was raised by my noble friends Lord Fellowes and Lord Patten, decisions on opening and closing branches and agencies are taken by the management team of each bank on a commercial basis and government does not interfere in these decisions. However, earlier this year the UK’s bank and building societies and the Post Office reached a new agreement which means that 99% of personal customers and 95% of business customers can do their day-to-day banking in post offices—be they sub-post offices or Crown post offices. At the Budget, the Economic Secretary to the Treasury also wrote to the Post Office and, through UK Finance, the banking industry, to ask them to raise wider awareness of these Post Office banking services.
The noble Lord, Lord Empey, referred to credit unions. I note his suggestion that the Government be supportive of increasing the level of long-term investment capital into credit unions. As set out in the Government’s response, long-term investment capital is important for all businesses, including credit unions, to help them to maximise their potential. However, as credit unions are in principle self-capitalising institutions, the Government do not intend to lend directly to credit unions. The Government welcome private sector involvement in this area: for example, Lloyds Banking Group has a scheme that offers funding to help credit unions to improve their capital position.
The right reverend Prelate the Bishop of Birmingham wanted us to recognise the important contribution that charitable organisations make in tackling exclusion, and I am happy to do that. I can give one example, of LifeSavers, which works with local credit unions to help savings clubs in schools. The initiative, developed by the most reverend Primate the Archbishop of Canterbury and Young Enterprise to start savings discussions in primary schools—which I am sure the noble Viscount, Lord Brookeborough, will welcome—introduces the benefits of savings at a very early age. The Government have contributed £600,000 to this initiative.
As regards the timetable for the Financial Conduct Authority’s publication of its recommendations under the high-cost credit review, the FCA published a feedback statement in July 2017 which showed that the cap on payday loans has been successful. Consumers now pay less. In respect of the high-cost credit market, it identified specific concerns in rent to own, home-collected credit and catalogue credit, and identified issues in arranged and unarranged overdrafts. Having investigated the issues, the FCA will consult on any necessary intervention in spring 2018.
I am conscious that I am out of time and that there are many other issues. With the permission of your Lordships, I will review the official record of the debate and, if I have failed to respond on any matters, I shall write accordingly. However, I hope that the noble Baroness, Lady Tyler, might recognise that, while we have not gone all the way to the destination which she and her committee set out, we have taken some important first steps along that road to financial inclusion for everyone.
My Lords, I am very grateful to the Minister for his response and I will briefly pick up a couple of points. First, I thank everyone who has spoken in this excellent debate—both those who served on the committee and those who did not. As befits the subject matter, the debate has been wide ranging and extremely well informed. I am very grateful to those who raised issues that we did not address in the report. I was going to summarise a few of the issues raised but the noble Lord, Lord Bates, did it so well that I do not need to do so.
I feel somewhat more reassured by the Minister’s response than I was by the formal written response. Perhaps it is a matter of tone, but the Minister managed, as ever, to convey an appropriate sense of urgency and seriousness regarding the report—something that, frankly, seemed lacking in the written response. He said one thing that I shall hang on to. I think I am right that he said that the Government are taking the report seriously and that it will be an important part of their thinking in preparing their own strategy. I am pleased about that. I very much look forward to seeing the strategy when it is published, as I hope it will be. I hope that it will give the Government another opportunity to go around the block and to look again at the 14 other recommendations that they have not been able to accept so far. I hope that there will be an annual report to Parliament after the strategy is published and that that will give us in this Chamber another opportunity to look at this very important issue.
I intend to follow up assiduously in this area. Meeting Ministers, whether in this Chamber or in the other place, will always be very welcome. I look forward to further debates on this vital issue, which, as the right reverend Prelate the Bishop of Birmingham said, is inextricably linked with the poverty and breath-taking inequalities that currently blight the lives of many of our fellow citizens.