Jeremy Quin (Horsham) (Con)
I am grateful for the opportunity to raise the crucial subject of financial inclusion and the single financial guidance body. It has been more than two years since financial inclusion was considered by the House, in a Westminster Hall debate secured by my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd). He applied for the debate to draw Members’ attention to the invaluable work conducted by the Financial Inclusion Commission, the cross-party body on which he served. I have since had the honour of succeeding him in that role. The last two years have seen the publication of an excellent House of Lords Select Committee report into this issue.
We are approaching the halfway point to 2020 by when the commission still hopes to see a step change in financial inclusion. The commission’s report covered a wide range of recommendations and demanded that, by 2020, every adult should have access to objective and understandable advice on credit, debt, savings and pensions. Among other objectives, it also called for a specific Minister to take the lead on financial inclusion and financial capability. I am delighted that a Minister with just those responsibilities will respond to this debate, and I know that his task is to break down silos across the Government on this important issue. I congratulate the original authors of the commission’s report on achieving that objective, and I also congratulate the Minister. I know that he is deeply committed to this area and, as a former director of a credit union myself and the chairman of the all-party parliamentary group on credit unions, I recognise a kindred spirit given his extensive work supporting credit unions in his constituency.
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
It is a fair to say that the work of the Financial Inclusion Commission—I have met many of its members—needs to be recognised. In relation to credit unions, it is right that we pay tribute to the work that my hon. Friend has done. Does he agree that we should laud the fact that credit unions now have 1.29 million members, that their members and loans have doubled since 2006, and that their deposits and assets have trebled? With respect, he is following on from the great work of my hon. Friends the Members for Worcester (Mr Walker) and for South Ribble (Seema Kennedy), who were outstanding chairs of the all-party group before him.
Jeremy Quin
I am most grateful to the Minister. He raises a valuable point about credit unions, although they are not the focus of this debate. I do not wish to push my luck, but I hope we will have another opportunity to discuss them in the future.
The Minister is right about the progress that has been made since 2006. The increase from 2% to 3% in the interest rate allowed for credit unions has helped to make them more sustainable. It has permitted higher dividends, while ensuring that credit unions’ borrowing rates are very competitive. Without wishing to go all Gilbert and Sullivan, there is something apt in making the punishment address the root of the crime, so I am delighted that funds recovered from convicted loan sharks will, from next year, help to pay for incentives for credit union membership in the communities on which loan sharks prey.
A financially inclusive system is one that is fit for purpose for all in society, regardless of their economic status. It is one in which individuals can participate fully and not face punitive restrictions in the financial products that they can access. It is also a system in which measures are taken to help to prevent people from falling into a downward spiral of financial hardship.
Every constituency MP knows the scale of the issues. There are approximately 1.5 million unbanked adults in the UK. According to Citizens Advice research, 13.5 million adults have difficulty managing money and making financial decisions. The ONS found that in the first quarter of this year only 2% of income was put aside as savings. The savings of those who do have them are often woefully insufficient to deal with life’s inevitable financial pressures—because of the breakdown of a washing machine or a car needed for work—through to more fundamental losses of income. The requirement for credit is therefore a given.
Financial exclusion can be further exacerbated by factors such as the high cost of credit and pay-as-you-go services. The commission estimated this poverty premium to be a cost of £1,300 a year to our poorest families. In the meantime, many from across the income spectrum lack good financial guidance at a time when the range and complexity of financial products has never been greater, and the need to make the right long-term decisions, in the light of increasing longevity, has never been more acute.
Financial inclusion is a huge topic, but the House will be pleased to hear that I intend to focus this debate on education, information and guidance. I was the a director of a credit union before entering this place, so I knew our sense of frustration—indeed, I am afraid, our sense of failure—at not being anywhere near as effective as we felt we should have been at persuading those in need of credit to use our cheaper community rates rather than accessing high-cost and high-risk lending.
The battle to ensure financial awareness has to start very early. I welcome the fact that the new national curriculum has made financial literacy statutory for the first time as part of citizenship education for 11 to 16-year-olds. I also recognise that improvements in basic maths, alongside the excellent results we have seen recently in literacy, are fundamental. However, I am afraid that focusing on secondary level may be too late. A report by the Money Advice Service found that financial habits are largely formed by the age of seven. Worryingly, a separate study by the Gambling Commission found that nearly half a million children as young as 11 are gambling weekly.
All we can do to increase financial literacy among children at primary school should be encouraged, and much can be done incrementally. I am aware that educational cartoons have been produced in Singapore and elsewhere to teach the basics of financial literacy at the very earliest ages. Simply having a single teacher in a school with the knowledge and understanding of how to teach financial literacy, who can act as a focus for provision inside that school, can be critical.
Any Member of this place knows how bewildering financial information can be to consumers. We all, in common with every citizens advice bureau in the country, are aware of the dreaded presentation at advice surgeries of a carrier bag full of financial information, much of which will be highly complex. We need to harness modern technology to help to provide our citizens with clear information about their financial position so that we help them to make educated judgments. Nowhere is this more apparent or more pressing than on pensions. All too many people suffer the scandal of lost pensions, while countless others are unaware of their post-retirement financial position until it is too late. I certainly know of examples of lost pensions from my own constituency.
It was a real pleasure to serve on the Work and Pensions Committee in the last Parliament. Our first report after I became a member of that Committee was “Pension freedom guidance and advice”, which highlighted the critical importance of the pensions dashboard for explaining clearly to consumers what they can expect and to ensure that they do not lose out.
I am delighted by the fresh impetus that the Minister has given the pensions dashboard. Bringing together data from 64 million pension pots is ambitious but necessary. Providing a single accurate and comprehensive source of pensions knowledge will be immensely useful to help to facilitate financial capability and retirement planning. I appreciate how complex a process this is and I have no wish to break the back of any camel. However, when the system is up and running, I want the concept to be extended to clarify for consumers with savings products, a mortgage or debts the full extent of their financial position, thereby helping them to plan accordingly.
On guidance, I welcome what is outlined in the Financial Guidance and Claims Bill and the Government’s plans, which have broad cross-party support, to create a single financial guidance body. This, too, is in keeping with the recommendations of the Financial Inclusion Commission’s report, and it has been welcomed by Which?, Citizens Advice and Age UK.
A lot of great work is conducted at a community level—I particularly draw hon. Members’ attention to the valuable work conducted by the Horsham debt advice service—but the scale of this issue requires support on a national level. I have witnessed at first hand the excellent work carried out by the Money Advice Service, the Pensions Advisory Service and Pension Wise. They are all superb in their different ways, but I am certain that a single body will provide a more effective means by which to impart co-ordinated and consistent guidance.
I am at one with Citizens Advice in seeing three aspects of the Financial Guidance and Claims Bill as particularly positive: the new body will support only advice that is free at the point of use and is independent; it has an objective of targeting help at those most in need; and it has a remit to support joined-up services and to fill gaps, not to duplicate current provision. I am only too aware of the other pressures on time in this Chamber, but I look forward to the Bill’s Second Reading in this place as soon as possible.
One of the Bill’s provisions begins the process of implementing the Conservative manifesto commitment to provide a debt respite scheme. Under the terms of the Bill, the Secretary of State must, within three months of the establishment of the body, seek its advice on the establishment of such a scheme. That will be an early test, and one to which a great number of us look forward to the SFGB and the Government rising.
This will be but one early example of the body’s strategic function to support and co-ordinate the development of a national strategy to improve financial capability. The SFGB will have to rise to the challenge outlined in research by Which?, which shows that only 36% of consumers use Government advisory bodies as an information source about their financial options.
Advertising and effective resourcing are key to ensuring high uptake, particularly among the groups who would benefit most from accessibility. Financial exclusion disproportionately affects lone parents, single pensioners and the long-term sick and disabled, and the active recruitment of those people requires the effective use of Government funding.
I would also like pensions guidance made much more widely available. Without wishing to be indelicate, Madam Deputy Speaker, I can say that the services of Pension Wise, determined by age as they were, are available to our excellent Minister, but not, alas, to his excellent Parliamentary Private Secretary and nor, surprisingly, to myself. The younger the age range, the more effective this service will be.
I finish where I began. The SFGB will have a role in advancing financial inclusion, as will the new financial inclusion policy forum, which will be co-chaired by the Minister and the Economic Secretary. Especially at a point when the interest rate cycle is turning, financial inclusion is of critical importance. I welcome the moves by the Government that are under way, but I welcome still more the further reforms that I look forward to the Minister progressing.
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
It is a great pleasure to speak on behalf of the Government on the key issue of financial inclusion and the single financial guidance body, which we hope to bring before the House in the new year.
I thank my hon. Friend the Member for Horsham (Jeremy Quin) for calling the debate and for the contribution he made as a step-in member of the Financial Inclusion Commission, following in the footsteps of my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd). It is fair to say at the outset that I am deeply grateful to the commission’s authors, and I have met many of them, including Sir Sherard Cowper-Coles, who has been of great assistance to me in the five months I have been doing this job. He is part of the reason why we have a financial inclusion Minister at this stage.
It is an exciting time to be doing this job, in circumstances where we have over 8.5 million people automatically enrolled in a workplace pension and where we have the Financial Guidance and Claims Bill coming forward—it completed its passage through the House of Lords on 23 November, and it will come to this House in the new year. We are driving forward the points raised by my hon. Friend, whether on the pensions dashboard or the mid-life MOT.
I am particularly passionate about the need to address people’s financial inclusion and capability. If I may briefly digress and talk about my personal circumstances, I co-founded a local community bank in my constituency, in the north-east. Our community bank was launched in November 2015 by the Archbishop of York, John Sentamu. It was specifically tasked with trying to compete payday lenders out of business, as asked for by the Archbishop of Canterbury, Justin Welby. It has a small staff and an incredible team of local volunteers. It is fully accredited, with significant amounts of money deposited, and it makes low-cost loans to those who need them most.
I am no longer personally involved, because my ministerial role prevents me from doing so, but I do, as a Minister, want it to be my mission to champion such locally led positive solutions and to evangelise for savings and pensions. I pay tribute to all the staff who have helped so much in that institution.
The second institution I think it fair to thank is the Lords Committee that prepared a very detailed report in the 2016-17 Parliament on tackling financial exclusion. That was responded to by the Government recently. I pay tribute to the work the Committee has done addressing this issue. I also pay tribute to the Money Advice Service, the Pensions Advisory Service, Pension Wise and all their staff, because we would not be where we are today without their efforts. However, more particularly, those three organisations are particularly enthused by the opportunities that lie ahead with the single financial guidance body to address the issue we are all so keen to tackle: financial inclusion.
We are working very closely across the Government on this. It is sometimes argued—not, I accept, under this Government in any way whatsoever—that we exist in silos and that Departments do not necessarily speak to each other. I am particularly encouraged that the Economic Secretary to the Treasury and Ministers in other Departments are equally committed to addressing financial inclusion, and that we have a forum coming together to be co-chaired by the Treasury and the Department for Work and Pensions. That shows that we are jointly addressing this key issue.
We need to provide people with access to the tools and services that they need to plan their lives and to avoid the unnecessary costs that come with financial exclusion. It is also important, however, that people are confident that the financial system itself will work for them—that there is responsible capitalism, that they will be protected from practices that are a threat to their finances and that they can make financial decisions themselves that are appropriate throughout their lives. The single financial guidance body will be the key addresser of financial capability in the United Kingdom. We realise that not enough people know how to manage their money effectively. This body will ensure that those people, especially those who are struggling, are easily able to access free and impartial guidance to help them to make more effective decisions about their pensions and their money and to seek advice on their debt.
There has been widespread support for the measures contained in the Bill, which passed on a cross-party basis in the House of Lords after significant amendment and improvement. It is a credit to the Houses of Parliament that a Bill that started out as 19 clauses emerged from the House of Lords with 31 clauses, considerably amended but with great support from individual peers on all sides, as was borne out by Lord Stevenson noting that the Bill was strengthened
“not because of any particular line or argument in a political or wider sense but because…as a result, the lives of people right around this country would be improved.”—[Official Report, House of Lords, 21 November 2017; Vol. 787, c. 83.]
Jeremy Quin
I am grateful to the Minister for quoting Lord Stevenson, another member of the Financial Inclusion Commission, but I would like to bring my hon. Friend back to the importance of ensuring that this financial advice reaches those who need it most. I referred, for example, to the disabled, lone parents and single pensioners. It will be absolutely critical, as we measure the success of this body going forward, that it does reach the hardest-to-reach people who need its support the most.
Guy Opperman
It is interesting that my hon. Friend raises that point, because it was specifically addressed by their lordships in some detail. He will be aware that the new financial guidance body will simplify the existing public financial guidance landscape, making it easier for all people to access information and guidance.
Let me briefly address the statutory objectives and functions, because I think that that will reassure my hon. Friend on the point about those in society who are vulnerable. The single financial guidance body will have a number of statutory objectives: to improve the ability of people to make informed financial decisions; to support the provision of information, money and pensions guidance and debt advice in areas where it is specifically lacking; to ensure that information, guidance and debt advice is clear, cost-effective and not duplicated elsewhere; to ensure that information, guidance and debt advice is available to those most in need, particularly people in vulnerable circumstances; and to work with devolved authorities.
I stress that the chief executives of the three organisations—Michelle Cracknell, Jamey Johnson and Charles Counsell—all agree that bringing these organisations together and harnessing the product of the whole will enable specific opportunities to address this point. That is particularly appropriate given that one of the functions of the body is not only the protection of individuals as consumers but a strategic approach to ensure that this guidance is there. I hope that my hon. Friend is reassured that that is something that we massively support.
My hon. Friend raised financial education. The strategy behind the creation of the guidance body is to develop evidence that clearly shows which projects are successful and which are not. The Government want the body to prove what helps people to make better financial decisions throughout their lives, and then to deploy that understanding actively in its efforts in the area and share the knowledge as part of best practice.
The Government want the body to maximise the positive impact of financial education for children and young people, so that they are better prepared. We definitely see the guidance body taking forward the issue that my hon. Friend raises, to ensure that children are better prepared for financial challenges at any age. That strategic function is underpinned by the premise that, although Government bodies, industries, charitable functions and the voluntary sector are already doing excellent work, if they work together the impact will be that much greater.
I want to take the opportunity to celebrate the LifeSavers project, which I am pleased to say exists in my constituency. The organisation provides at primary level exactly the sort of thing that my hon. Friend described. The community bank of which I was a part is the provider of six LifeSavers programmes, which are supported by the Church of England and Virgin Money. There is literally a bank in the school, educating children about the importance of finance, loans, deposits and long-term saving, which is the way ahead.
A large number of schools are part of that project, and we are evaluating its impact. It is Treasury-supported to a limited degree. I have visited participating schools, such as Hexham East First School in my constituency, and the difference that the programme makes is off the charts. My hon. Friend will be aware that my right hon. Friend the Chancellor has provided a great deal more money for maths education, more maths teachers and support across the curriculum to ensure that that key point is addressed on an ongoing basis.
Briefly, I will mention other areas of the Bill that address some of the points that my hon. Friend raised. I believe that we all accept that problem debt is an issue for too many people. The Conservative party manifesto set out the commitment that the Government would adopt a breathing space scheme, to allow someone in serious problem debt to apply for legal protection from further interest charges and enforcement action for a period of up to six weeks. The Financial Guidance and Claims Bill will enable the Government to introduce such a scheme.
The breathing space scheme builds on the local work of organisations such as those that my hon. Friend mentioned in Horsham. It sounds as though they are approaching the matter in an interesting way. The Bill will build on the existing work of the Financial Conduct Authority, which has instituted rules. Also relevant is the fact that in October, the Treasury published a call for evidence on breathing space, and evidence is still being taken on the best and most appropriate way forward. My hon. Friend the Economic Secretary to the Treasury, officials and I have met the people behind the operation of the scheme in Scotland, which has already introduced a debt respite scheme and breathing space scheme.
The key to inclusion is access to engagement with savings and pensions. Surely, the game-changer on that over the past five years is the development of auto-enrolment, as part of a cross-party approach down many years. It is one of the unseen success stories of successive Governments, and it has engaged individual consumers and members of the public to an astonishing degree and reversed generations of decline in savings and pensions. The statistics bear some contemplation. We are about to approach the point at which 9 million people are auto-enrolled in a workplace pension. Hundreds of thousands of individual employers have signed up to the scheme, and it has not only totally stopped the rot in relation to pensions but reversed a long-term decline.
We are conducting an auto-enrolment review to assess where we are with the programme, and we will be considering a number of key areas. Those include the existing coverage, how to achieve the right balance between enabling as many people as possible to save and ensuring that it makes economic sense for them to be included, how we can improve engagement and how to strengthen the evidence base around contributions to support future decisions on contribution rates. I will report the findings to Parliament before the end of the year. We hope that the review will provide a clear sense of direction as part of the ongoing conversation.
I want briefly to talk about the pensions dashboard, which is an important part of the conversation about how we can better use technology. Just as the private sector has reformed the travel industry, insurance and so many other business, such that we now go online to access information, so we believe that the same will bring pensions into the digital age. The dashboard is an opportunity to give people access to their pensions data in a clear and simple form by bringing together savings information in one place online. It is an opportunity to give more people a sense of ownership and control over their pensions. This is a complex process, but I look forward to a massive meeting of stakeholders on Monday, to which hon. Members are most definitely invited. The good news is that the Department for Work and Pensions is taking this forward. We are utterly committed to the ongoing feasibility study and believe that by placing consumers at the heart of our approach, the Government, working closely of course with industry, regulators and other interested parties—notably, consumer organisations —can achieve the goal of such accessibility.
I want to make a brief final point about the mid-life MOT. It has struck me in this job that although we address individual issues, in relation to our health and our ongoing status quo as human beings—my GP regularly, and rightly, contacts me with ways to improve my health—we do not address our finances in a similar way. The concept of the mid-life MOT, as pioneered by John Cridland in his outstanding state pension review, published earlier this year, could enable us to better encourage and support people in preparing for later life and retirement in a holistic way. I encourage all private sector companies, through their human resources departments, to conduct mid-life MOTs— organisations such as Aviva are leading the way—and I certainly hope that the public sector will address those points as well. We believe that it is unquestionably a promising idea worth detailed scrutiny. Individual workers or employers could be provided with holistic advice and guidance to prepare for the gradual transition to retirement—whether at 45, 47 or 50—and it is something that the Government should be progressing.
It is often asked what brings us into politics. Social justice and financial inclusion are among the things that brought me into politics. When talk about the achievements of this Government and the coalition since my hon. Friend and my colleagues at my side—my hon. Friends the Members for Calder Valley (Craig Whittaker) and for North Devon (Peter Heaton-Jones)—first entered the House of Commons, and when we talk about extending free childcare, improving schools results, introducing the national living wage, creating 3 million jobs, reducing income inequality and record high household incomes, we should remember that they are not just statistics, but steps towards tackling injustice and spreading opportunity. I believe passionately that the Bill will enable us to tackle financial inclusion. I welcome the work of those who have taken us this far on the journey, but I also welcome the opportunity to report to the House on the progress we have made and the opportunities that lie ahead to tackle this fundamental issue of social justice.
Question put and agreed to.