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Banks: Unbanked and Underbanked

Volume 771: debated on Monday 11 April 2016


Asked by

To ask Her Majesty’s Government what steps they are intending to take to address the issue of the unbanked and underbanked in the United Kingdom.

My Lords, improving access to banking services is central to the Government’s agenda. This is why the nine largest personal current account providers in the UK already offer basic bank accounts that are truly fee-free. Basic bank accounts help people who are unbanked or who may be ineligible for a standard current account to access basic banking services. In addition, the nine banks will be legally required to offer basic bank accounts from September 2016.

My Lords, on an individual basis this is about empowerment; on a business basis, this is about unleashing currently frustrated economic growth. What will the Government do to ensure that the unbanked and underbanked are a priority across Whitehall, and will they do everything they can to benefit from all that digital and FinTech offer?

My Lords, the Government committed in the Budget this year to publish basic bank account market share data for the first time this autumn, which will show how the banks are meeting their commitments. This will enable government departments to look at how this is progressing and what more they can do. My noble friend is also right to highlight FinTech and the digital sector, as there are many opportunities for technology to support inclusion. I am pleased to say that my honourable friend the Economic Secretary to the Treasury today announced a package of measures to further support UK FinTech, and we will announce further measures in the not-too-distant future.

My Lords, as well as the unbanked and underbanked, could the Minister deal with the overbanked, where those extra banks are located in tax havens? When my noble friend Lord Dubs and I looked into this over 30 years ago, we found that the reason these banks are set up by individuals is because they have something to hide. It is all a question of secrecy. Will the Minister indicate what the Government now intend to do in relation to accounts in our overseas territories, and our home territories, which are not as transparent as they ought to be?

My Lords, I would be very happy to do that but do not want to steal my noble friend the Leader’s thunder at 6 pm or thereabouts. The fact is the Government are doing an awful lot on overseas territories and Crown dependencies. The noble Lord may shake his head, but I will leave it there because it is not the subject of the Question.

My Lords, as I am a bear of very little brain, could my noble friend explain to me what underbanked means?

My Lords, underbanked means those who do not have access to the full range of services: people who are unable to access bank accounts in the way that most of your Lordships can.

My Lords, this is an ongoing example of how the rich get richer and the poor get poorer. I am pleased that the question of what it means has been asked. The Financial Inclusion Commission found that the poverty premium—what it costs if you do not have a proper bank account—is something like £1,300 a year; that an estimated 2 million people took out high-cost loans in 2012 because, unlike us, they were unable to access any other form of credit; and that there is significant indebtedness among people who do not have adequate banking facilities. Can the Minister tell us how many people who have accessed these new, free accounts since they were launched in January will be eligible for universal credit, how many people who are entitled to universal credit still do not have an account and what steps the Government intend to take to ensure that all those who need an account to access funds will have one in time?

My Lords, I tried to say that the whole point is to ensure that everyone who needs access to a bank account can have one. As the noble Lord will know, in the Budget this year the Chancellor designated nine banks under the payment accounts regulations to ensure that they provide access to bank accounts. I do not have all the precise numbers that the noble Lord asked for, but the policy commands support around the House for the view that whether or not you are on universal credit, everyone should have access to the banking system. That is exactly what this has achieved.

My Lords, will the Minister comment on the place and role of credit unions in this whole purpose? The churches and many others see them as a vital part of bringing people into financial services. For me, in the north-east, I see that many people will still not go near a bank, but they will go to local community credit unions. Will the Government commit to further supporting that work?

The right reverend Prelate puts his finger on an important issue. The Government are improving access to credit, most notably by supporting the credit union sector. We have invested £38 million in that sector through the credit union expansion project. We have provided half a million pounds to help Armed Forces personnel access credit union services. We have raised the maximum interest rate that credit unions can charge, so that they can operate more sustainably, and we have provided £650,000 to fund the Archbishop of Canterbury’s Task Group on Affordable Credit and Savings.

My Lords, will the Minister include among those who are deemed to be underbanked Members of your Lordships’ House and, no doubt, of the other place, other elected representatives and their families, who are now subject to a great deal of scrutiny and, to some extent, restricted banking services as a result of being designated what I believe is called politically exposed persons?

There are good reasons why politicians come under scrutiny in their financial arrangements, but I do not know of any cases where Members of this House are unable to get a bank account, and they would certainly be eligible for a basic bank account.