The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I, too, thank the noble Lord, Lord Hodgson, who started this debate by setting out very clearly the paradox with which we are faced. On the one hand, he said that there are 2.7 million people who are entirely dependent on cash, and then he used a series of excellent examples, drawn from his own experience, that show the great benefit to be achieved by those who can make payment in other forms—in his examples, direct debit mandates.
The noble Lord, Lord Empey, drew on his experience from the excellent work of the Financial Exclusion Committee in your Lordships’ House, and talked about the need to secure access to banking services. The noble Baroness, Lady Bottomley, drew on her experience from her time with the Child Poverty Action Group, and made the hopeful point about the significant reduction there has been in the number of workless households in this country. The noble Lord, Lord Bird, gave positive examples from Lloyds Bank about the cost of credit, but talked about the impact of that on health and the need for people to have order and structure in their lives. I thought of his memorable maiden speech in this House, when he said, if I am correct, that the reason he was able to do so much to help the poor in this country, which he undoubtedly has, was because he did not have a sentimental bone in his body about poverty. That is not a contradiction. Indeed, it is important that we look correctly at those people we are seeking to help. The noble Lord, Lord Sharkey, talked about another level of exclusion, particularly digital exclusion, and the 4 million people who have never used the internet. The noble Lord, Lord Davies, talked about how uncertainty of income flow can exacerbate the disadvantage that people feel.
I will set out briefly what the Government are doing in these important areas and then come to some of the questions that have been raised. When it comes to tackling poverty in general, a key element was acknowledged by the noble Lord, Lord Davies. I assure the House that the Government are focused on lifting people out of poverty. Indeed, the proportion of people in absolute poverty both before and after taking into account housing costs is now at a record low. Additionally, real disposable household income per person is above its pre-crisis peak and is 3.4% higher than at the start of 2010. We know that over 3 million more people are in work, and that there have been improvements in the national living wage, and of course we have seen a rise in the tax thresholds.
That said, I appreciate the concerns which have been expressed around the isolation felt by people who are unfamiliar with the digital payment services that are becoming ever more prevalent. We know that 8.4% of adults have never used the internet—instead of a percentage, we were given an absolute number by the noble Lord, Lord Sharkey—while many more people are missing out on the opportunities that the digital world offers, from online banking to easier access to direct debit payments. We want to make sure that everyone can access all the benefits of digital banking. To that end, the Government are actively committed to tackling the root causes of digital and financial exclusion. The digital strategy, which was published last year, committed the Government to enabling people in every part of society and irrespective of age, gender, ethnicity or socioeconomic status to access the opportunities of the internet. That point was brought out by my noble friend Lady Bottomley when she used the illustration of students searching the internet for travel fares. Many apps can provide those services, but if you are digitally excluded, clearly you are not going to be able to take advantage of those deals.
The Government have now established the Digital Skills Partnership, which will bring together stakeholders from the private, public and charitable sectors in a joint effort to help people increase their digital skill levels. This will build on the free digital skills training opportunities that our corporate partners have pledged as part of the digital strategy. Some 4 million training opportunities were pledged, with 2 million having already been delivered.
Similarly, reducing financial exclusion is a key government priority. After the noble Lord, Lord Empey, and his committee had done their work we created the Financial Inclusion Policy Forum, which was referred to by my noble friend Lady Bottomley. It met for the first time in March and is due to meet again soon. This is driving better co-ordination across the sector. Government Ministers, regulators, industry and consumer groups are working together through the forum to ensure that people, regardless of their background or income, have access to useful and affordable financial products and services. For example, the forum recognised that a key challenge is tackling the issue of a lack of access to affordable credit. A sub-group of forum members has been established to look at how that work can be taken forward.
The noble Lord, Lord Bird, referred to his Creditworthiness Assessment Bill. I often pay tribute to him because in the course of the Bill, without the legislation actually making it on to the statute book, he managed to get £2 million out of the Treasury for the rent recognition challenge, which has been launched as a way of coming up with innovative solutions to precisely the challenges that his Bill identifies.
The Government recognise that people are increasingly moving away from cash and towards digital payments, as my noble friend Lord Hodgson set out. While the Government support these developments, we also recognise the continuing importance of cash, especially to the more vulnerable members of society. For those people who depend on cash today and in the future, we will need to ensure that that access is continued. An individual reliant on cash will be penalised if they can access cash only at an ATM which charges for cash withdrawal. That is why the point made about the LINK system is so important and I shall come back to it when I respond to the questions. The UK has today one of the most extensive free-to-use ATM networks in the world. Around 80% of the ATM network is free to use and 97% of all ATM transactions are conducted through free-to-use ATMs. The Government continue to work with industry and the regulators to ensure that widespread free access to cash is maintained.
I turn now to some of the important questions raised in the debate. My noble friend Lady Bottomley asked specifically about the LINK programme and its availability. In January 2018, LINK announced that it would enhance its financial inclusion programme to include all ATMs that are a kilometre or further from the next free-to-use ATM. The Government have been engaging and will continue to engage with regulators and industry, including LINK, to ensure that widespread free access to cash is maintained. The noble Lord, Lord Bird, talked about people paying for high-cost credit. The Government welcome the FCA’s update and its proposal to cap the cost of the rent-to-own programmes that have been introduced. It is important that these measures are effective and the Government will continue to work with the FCA to ensure that all customers are treated fairly.
The noble Lord, Lord Empey, talked about the closure of bank branches. While of course that is a commercial decision, I know that the Economic Secretary to the Treasury, John Glen, recently visited several small and remote communities in Scotland to experience at first hand what they were going through as the result of a lack of access to banking services. That is why the Government support the industry’s access to banking standard, which sets out the steps that banks must follow when they decide to close a branch, including giving at least 12 weeks’ notice and providing information on how customers can make alternative arrangements. Moreover, we have the post office banking framework agreement set up with 28 high-street banks. This enables 99% of personal banking and 95% of small business customers to carry out their everyday banking at one of the Post Office’s 11,500-plus branches.
The noble Lord, Lord Sharkey, talked about improving the incomes of the poorest. The statistics he used on real household incomes are those on which we should focus, and are the reason that we supported the national living wage. The lowest-paid, those in the fifth percentile, saw their wages grow by almost 7% above inflation between April 2015 and April 2017. Over 1 million people, the lowest earners, have been taken out of income tax altogether since 2015.
The noble Baroness, Lady Bottomley, asked about access to credit and gave the example of Wonga. The Government are committed to facilitating sustainable financial services to give consumers greater choice in accessing credit. This includes support for the credit union sector, which provides an accessible alternative to high-cost credit. In the Autumn Budget, the Government announced their intention to help the sector expand by increasing the number of potential members of credit unions from 2 million to 3 million. The call for evidence has been issued and is now closed. The helpful note on this I received from colleagues simply says that a formal response will be made “in due course”, which I know is not going to add a great deal to the sum of human knowledge, but it recognises that we have taken this subject seriously, we are calling on the evidence and are reviewing it as we speak.
The noble Lord, Lord Sharkey, also asked about maintaining access to LINK ATMs. I have given that answer in response to the question from the noble Baroness, Lady Bottomley, on the same point.
The noble Lord, Lord Davies, talked about the use of food banks. We recognise this and are constantly reviewing research carried out by organisations including the Trussell Trust to add to our understanding of food-bank use, and will consider requirements to add further to the evidence base. Food banks are not unique to the United Kingdom but are an international phenomenon and an important element of our society. They are a civil-society response to people in need and we ought to recognise that, but also redouble our efforts to ensure that people do not have to access their services as far as possible.
The Government recognise the profound impact that the rapid rise in digital payments is having on our country, with which the noble Lord, Lord Hodgson, began our debate. As technology plays an ever-greater role in our lives, we recognise that the Government must support innovation and make the most of new technology, while ensuring that no one is left behind. That is the importance of cash. As I hope I have made clear to noble Lords today, the Government are working with industry and regulators to ensure that all members of our society benefit from the potential of digitalisation and that cash continues to be accessible to all who rely on it, and in that sense this continues to be a country that works for everyone.