Financial Exclusion (Liaison Committee Report)
Baroness Tyler of Enfield
That the Grand Committee takes note of the Report from the Liaison Committee Tackling Financial Exclusion: A country that works for everyone?: Follow-up report (10th Report, Session 2019–21, HL Paper 267).
Baroness Tyler of Enfield (LD)
My Lords, I am delighted to open this very timely debate on the Liaison Committee’s follow-up report on financial exclusion. Perhaps I should explain the use of the word “timely”. I am referring not to the fact that it is now over a year since the publication of that report and 11 months since the Government’s response, but rather to the extreme salience of financial inclusion and exclusion, given the unprecedented cost of living crisis which is affecting so many people so acutely. First, I declare my interests in the register, particular as a member of the Financial Inclusion Commission and as president of the Money Advice Trust.
Turning briefly to the history of the report, I reflect that it has had a long gestation period. The original Select Committee, which I had the honour to chair, reported in March 2017, with 22 wide-ranging recommendations calling on the Government, the Financial Conduct Authority and the banks to give much greater priority to tackling financial exclusion and ensuring that vulnerable customers were getting a fairer deal. When we debated the report alongside the Government’s response, in December 2017, I well recall expressing my disappointment with what I felt was a somewhat lacklustre and dispiriting response, particularly the rather dismal tally of recommendations that had been accepted. As we debate today the Liaison Committee’s follow-up report, published in June last year, and the Government’s response, I have to confess to a rather similar feeling.
I thank all the members of the original Select Committee and am absolutely delighted that the noble Lords, Lord Shinkwin and Lord Holmes, with all their commitment and expertise in this area, are both speaking today. I thank the Liaison Committee for conducting a follow-up inquiry. I think these follow-up inquiries are an excellent innovation, helping to ensure transparency and hold the Government to account on their response to Select Committee reports. Finally, I thank the excellent committee staff who assisted both the original Select Committee and with the follow-up report. I must particularly thank Lucy Molloy for her outstanding support.
The follow-up report contained 19 recommendations, covering such critical issues as access to cash, digital inclusion, basic bank accounts, bank branch and ATM closures, the role of the Post Office, control options, affordable credit, the Help to Save scheme, financial education, government leadership and the need for proactive regulation, and more besides. This demonstrates how multifaceted any serious attempt to tackle financial inclusion needs to be and why a strategic and co-ordinated approach among all the key players is vital. I will be able to focus on only a small number of these issues today, but before doing so I wish to reflect on the current state of financial inclusion in the UK.
I begin by acknowledging that there have been some positive steps, most particularly the inclusion in the Queen’s Speech of legislation to safeguard access to cash—albeit two years after it was first announced in the 2020 Budget. I strongly welcome this as a means of ensuring that the 5.4 million adults in the UK who rely on cash are financially included. Three years ago, the Access to Cash Review warned that Britain was
“sleepwalking into a cashless society.”
This has been exacerbated by Covid. As recent research from the RSA has shown, some 10 million people would struggle to cope in a cashless society and 48% of the population would find it problematic if there was no cash available.
I also recognise and welcome the steps the Government are taking, including the recent consultation, to bring “buy now, pay later” products within the scope of FCA regulation—a good example of the need for more proactive regulation. However, there was no specific mention of it in the Queen’s Speech and I would be grateful if the Minister could say exactly when the “buy now, pay later” regulation is expected to come into force.
With so many bank branches and ATMs closing, it is vital that other facilities—such as enhanced Post Office services or new shared banking services or hubs, based on the existing pilots—come on stream. The recent levelling up White Paper mentions bank closures in both rural and urban areas but contains no specific policy measures to address them, hence my disappointment that our recommendation that the Government formally review the powers available to the FCA to mitigate the negative effect of the closure of bank branches and free ATMs was rejected.
More government action is urgently needed to ensure that the rapid expansion of alternatives for people wishing to use face-to-face services, including community banking hubs and Post Office services, are available within a reasonable distance, taking account of public transport and accessibility needs. Indeed, I still have the words to the committee of the money advice expert Martin Lewis ringing in my ears:
“To answer your question whether it is socially responsible for banks to be closing branches in the middle of this, I never attribute social responsibility to banks; that it is something that banks need to do. They are there to make money for their shareholders. Surely, it is for regulators and politicians to make sure that, if we need them to keep the bank branches open, they do so.”
While we must protect access to cash, we also need effective action to support cash users who can do so to make the move to digital payments; this needs focused and co-ordinated work on digital inclusion, and I ask the Minister to set out what the Government are doing in that area.
Since our follow-up report in 2021, which reflected the massive impact that the pandemic had had on people’s financial resilience, the soaring costs of living, with prices now rising by 9% a year, have placed yet more pressure on the most financially vulnerable. Indeed, when we made our recommendations last year, the evidence suggested that 27 million adults in the UK—more than half the adult population—were financially vulnerable. It is clear that this has become more dire for millions of people across the country, with many now unable to afford basic food and heating.
Research from the Money Advice Trust shows that some people are already having to go without in order to try to get by financially. Specifically, the research shows that, in the past three months, 12% of UK adults —equivalent to 6.2 million people—had gone without heating, electricity or water due to the rising cost of living, 8% had gone without food, and 25% had used credit to pay for food or bills because they had no other way to pay for them. Given that some price rises have only just come in, and with the strong likelihood of worse to come, particularly with energy prices rising again in October, there is great concern that more people will fall into debt, particularly on household bills, or end up going without essentials.
Equally worrying is the poverty premium, which means that poor people still pay more for essential goods and services compared to those on higher incomes. The poverty premium costs the average low-income household £490 a year, meaning that low-income and vulnerable consumers still struggle to afford, have to pay extra for or are unable to access appropriate products and services such as utilities, insurance and credit.
The energy poverty premium is particularly acute. Research commissioned by Fair By Design found that being on the best energy prepayment meter tariff could still be £131 more expensive than the best online-only fixed tariff. This must end. For households living below or around the poverty line, it has been estimated that the elimination of the poverty premium could potentially release an extra £4 billion per year into the local communities and economies that need it the most. So I ask the Minister to explain what immediate action the Government are taking to help to alleviate the poverty premium.
I want to focus on the case set out clearly in chapter 3 of the report for more proactive leadership and regulation by the Government and the FCA. I am particularly disappointed that our recommendation for a statutory duty for financial inclusion for the FCA was not given more consideration. The financial services Bill that was announced in the Queen’s Speech is a once-in-a-generation opportunity to redesign financial services regulation to ensure that the regulator and the industry better serve the needs of customers. I strongly believe that this can be achieved only by giving the FCA a “must have regard” duty to financial inclusion, to ensure that it is both prioritised and enforced within the financial services sector.
I recognise that there are different views and different ideological approaches here, but I still have the words of so many of the eminent witnesses to the follow-up inquiry ringing in my ears. With the exception of Ministers, they were adamant that clear FCA objectives and a duty of care to customers were required to bridge the gap between the commercial interests of the financial services providers and the societal needs to achieve financial inclusion. As Natalie Ceeney, who chaired the Access to Cash Review, told the committee:
“the fundamental issue [is that] there are market segments that commercial models will never address. They are never going to be commercially viable to support the most vulnerable and the poorest.”
The sometimes glaring gap between social policy and regulatory policy—with the Government and the FCA pointing the finger at the other as being responsible for action—lies at the heart of many of our recommendations.
The new consumer duty, currently being consulted on by the FCA, as well as its consumer vulnerability guidance, will not address this as it deals with the experience of consumers who currently do have access to financial products and services, rather than the accessibility of those products for those currently totally excluded. The only way to ensure that low-income or vulnerable consumers can access essential products and services is to give the FCA a clear remit on financial inclusion.
Many of our witnesses lamented the lack of an overall financial inclusion strategy. While the deliberations of the Financial Inclusion Policy Forum clearly continue to be helpful, and the national financial well-being strategy produced by the Money and Pensions Service is welcome, our expert witnesses felt that they were no substitute for a strategy that could galvanise financial inclusion efforts at a national level, bring together the various strands of work across all sectors and monitor implementation. I agree.
I still strongly maintain that if such a strategy were presented to Parliament annually as a Command document, as we originally recommended, it would allow for proper scrutiny and parliamentary debate. Of course, the Government now produce an annual financial inclusion report, including, for the first time, forward plans and activities. I looked at the most recent report, published on 21 December 2021, and saw that the forward plans section comprised four whole paragraphs covering just over one side of paper. That is not a strategy.
To conclude, despite my disappointment at the lack of progress in key areas since we reported, I firmly believe that this is an issue whose time has come. I look forward to hearing the expert contributions of other noble Lords and the Government’s response. I beg to move.
Lord Holmes of Richmond (Con)
My Lords, it is a pleasure to take part in this debate and to follow the noble Baroness, Lady Tyler. I was also privileged to serve on the original committee. The noble Baroness said that it has been a while since the updated committee report. I am not saying that the first report on financial exclusion was done a long time ago, but I was a young man then. Things take time.
This afternoon, I shall focus on cash, debt, regulation and financial technology, hereafter referred to as fintech. As the noble Baroness, Lady Tyler, pointed out, it is positive that, in the upcoming financial services and markets Bill, we have the opportunity to see the Government’s commitment to the future of cash in the UK. Can the Minister tell me what is the Government’s intention for the acceptance of, as well as access to, cash? The difficulties around being able to access cash are one thing, but if there is no place to spend it, what is the purpose of cash? It loses its currency. So many places are going cashless. I do not single it out, but I saw earlier today that Center Parcs is cashless. As many families approach the Whitsun break, they will find that their cash has no currency there, as well as in many other venues around the country.
In last year’s Financial Services Bill, I was delighted that the Government accepted my amendment on cashback without a purchase. The purpose was largely to try to fill the gap where so many banks have stepped away, with closed branches and ATMs, to enable cash to get into the hands of consumers in the community. More than that, research published in December last year demonstrated that the vast majority of uses of cashback without a purchase had been for £20 and below. It serves a market that even ATMs had not really served prior to that point, so it was a very positive intervention.
As the noble Baroness, Lady Tyler, pointed out, it is critical for the Minister and for everybody to understand and appreciate that cash still matters. It matters materially to millions. They cannot just be shut out of economic and thus social activity or society itself. As the noble Baroness also pointed out, it would be helpful for the FCA, as the regulator, to adopt a key role when it comes to promoting and having regard to financial inclusion. Will the Government reconsider the role that the FCA can play in this space?
Similarly, so much of the regulatory approach looks to areas around enabling financial services, but it is also important to look at the whole question of debt. Does the Minister agree that it is high time that we regulated debt advice services, which are often not performing the purpose that we might imagine? Online particularly, they are taking money for debt advice off people who are already in financial dire straits. Whatever we may think about debt, its devastating impact cannot be overstated. Of those in debt, 400,000 contemplate suicide, and 100,000 attempt it.
I have always believed that financial technology—fintech—has a potentially transformational role to play when it comes to financial inclusion. In saying that, I declare my fintech and technology interests as set out in the register. For example, as we saw at the outset of the pandemic, Starling Bank, a new neobank, produced its Connected card to instantly, effectively and positively help those who were socially isolating at that stage and throughout the pandemic. Fintech offers the opportunity to reimagine risk and take a whole new view of credit, not to increase risk in lending activities but to reimagine and reassess it, crucially in real time, and to use that data positively to enable and financially include.
I believe that open banking and open finance can have an incredibly positive role for all consumers. They can bring people into financial inclusion if we get it right. To illustrate the problem briefly, let us imagine a payment app. It could be the best piece of financial technology ever created, yet if it is in the hands of somebody who does not have the digital skills to use that app, that payment is not being made. Similarly, if that app is in the hands of someone who does have the skills to use it but is in an area of low or no connectivity, that financial payment is not being made.
This underscores the multiple nature of what is required for financial inclusion and how it is inextricably linked with digital inclusion and financial education. A good example of where this comes together in a positive way is what GoHenry, an excellent fintech business, is doing in its tremendous work with financial education for young people through their teenage years.
The initial Select Committee report and the Liaison Committee’s follow-up report make the case clearly. There is much to be done if we are going to enable and deliver financial inclusion for everybody across the United Kingdom. It makes economic sense and it makes social and psychological sense because if we financially include, everybody benefits.
Lord Balfe (Con)
My Lords, I note that the noble Lord, Lord Davies, is not able to be with us, so the Committee get me. I thank the noble Baroness, Lady Tyler, for introducing the debate. I hope that I will not upset too many people by the time I finish speaking, but the most obvious point of the lot seems to me to be that one way of tackling financial exclusion is to give people more money. We can try all the sticking plasters in the world, but the fact is that a lot of people in society are struggling to get by, and their number seems to be going up. Their financial problems will not go away because the FCA passes a regulation. Having said that, there are, of course, many very useful things in here.
I gave up money when Covid arrived and our local shop put up a notice saying, “We no longer accept cash”. I said to the very nice Turkish gentleman who runs it, “Why is that?”. He said, “Because the coins could give me Covid”. I said, “I don’t think they could, but I am quite happy to use my debit card in here.” I then thought about it and decided that I do not need money. I can honestly say that I have not carried any money for well over two years—so I am useless to tramps, for instance.
When we look at access to cash, let us realise that the world is changing. I am old enough to remember the Daily Express launching the “Save our Sixpence” campaign. It did not get very far, and most people today do not know what a sixpence is. Time moves on, and we are using less and less cash. When I go into my local stores today, very few people appear to be paying with money—and I am talking about the local Co-op, not expensive stores in expensive locations. We have to realise that we are heading towards if not a cashless society then one where cash is less of a factor. I do not think that we should resist this. It is rather like cheques. I got my cheque book out the other day to write a cheque—incidentally to a Member of this House for one of the APPGs—and it was the first time I had used it for a year, and that was because the APPG did not know how to accept electronic payments. You can see that there is still some education needed, even in this House. The world is changing; that is the point I am making.
Part of digital inclusion has to be to put some effort into getting people, particularly of my generation, behind the computer. It is, of course, gradually catching on, and most of my friends transfer money electronically. It is also an education and class issue. We need more digital inclusion. I notice that all the schemes which were running around the time of the Labour Government —which my wife made quite a bit of money out of, incidentally—to teach the silver generation how to use a computer seem to have disappeared. They did some good—not a lot, but a certain amount. Their weakness was that, when the Government sent money to Cambridge City Council—a very good Labour Council, let me say—it looked very carefully and decided to put its money into local libraries in the poorest areas of Cambridge. This was 20 years ago, when I was much less competent with technology, so I thought I would slip down there; it was a bit much, but I went down to see. I drove down there and, lo and behold, the car park was full of Chelsea tractors, Mercedes-Benz and BMWs, as the middle class of Cambridge had pounced on the idea that there were free lessons to be got from the council in a very poor area. The one thing I did not notice was any people who looked particularly poor. When we are looking at digital inclusion programmes, we need to target them.
Similarly, I just say a word on basic bank accounts. They are an extremely good idea but one of the groups with the greatest difficulty with bank accounts that I have come across is people newly arrived in Britain. I do not just mean refugees on the shores of Dover, but also students. EU nationals used to have tremendous difficulties in opening bank accounts because they could not provide most of the documents; they did not have a council tax bill, utility bill or whatever. In a university town such as Cambridge, it was a major problem faced by many overseas people—and indeed still faced by many.
I have another one or two small points. I welcome the resolution to better regulate buy now, pay later. It is an anomaly. It has crept through, because it is a new idea that managed to get round all the regulation. Clearly, it is another form of credit and it should be subject to some rules, so I certainly welcome that. I hope that the Minister can tell us what the phrase in the government response means when, in answer to our point that
“This legislation should be brought forward without delay”,
it states:
“The Government will publicly consult on policy proposals, and will then bring forward secondary legislation … as soon as parliamentary time allows.”
Does the Minister have any estimate that he can give us? I notice that we have a little time spare in the Lords. We managed to get the Second Reading of a Bill through in about an hour and a half yesterday and I do not think that this one would take much longer.
I turn to my next point. I am interested to read about the no-interest loan pilot. I counsel the Government to be very careful. A no-interest loan is still a loan and will still go into that order of priorities, and the one who chases the softest gets the least. More years ago than I remember, I was involved in advising the system in Bangladesh, of all places, on setting up loans for the village co-operatives. The one abiding lesson that I came away with was that you needed to have community contribution and coherence. If you just gave a loan to an individual person, they tended to disappear or put it right down the scale; if you gave it to a community group—an identifiable source—you would find that the community would exert some moral pressure on it getting paid back.
I have one other point. Financial learning begins at home, of course. We all know that the first seven years of a child’s life is when most of it is shaped, and that includes their attitude to money and to parents and many other psychological things. I was brought up by a grandmother born in Victorian England. She had a very strict attitude to credit—she did admit that mortgages could exist but she did not go much further than that. She used to say, “If you can’t afford it, boy, save up for it. Don’t you borrow—all the banks will get your money.” I think she saw banks roughly as most people see terrorists; she was not very fond of banks. It is important that, through schooling and through parental education, we help to educate children about money. What they learn in those first 10 years they will probably carry through the rest of their lives.
Lord Sikka (Lab)
My Lords, I thank the Liaison Committee and all its members for the excellent report. It is a pleasure to follow the noble Lord, Lord Balfe, in this debate. I should just tell him that I applied for a credit card not so long ago. I put down that I am a retired pensioner and put in only my state pension amount. Very soon, a sign appeared saying that I was not eligible for a credit card, which was just a reminder to say, “You’re too old, you’re too poor, go away”. It is a form of financial exclusion encountered by many people every day.
A major cause of financial exclusion and any social exclusion is poverty, which is increasing but the Government are doing little to tackle it. Trickle-down economics does not work: the rich keep getting richer while normal people struggle to make ends meet. The Government’s tax policies are regressive, employment laws are not enforced—as clearly shown by the P&O Ferries case—workers’ share of GDP continues to decline, pensions are inadequate, benefits lag behind inflation and redistribution is not a government priority. Is it any surprise that we have financial exclusion, which is really the tip of an exclusionary iceberg?
Financial services have increasingly moved from brick and mortar buildings and humans to cyberspace. According to Ofcom, some 1.5 million people do not have access to the internet. Broadband is expensive and paying £30 to £40 a month is beyond the reach of many, especially now that they are facing a cost of living crisis. Even if people manage to buy a computer, the rate of obsolescence is increasing as operating systems rapidly change. It is hard to see how many of the poor can continue to replace their computers every four or five years.
Might the Government consider adopting the Labour policy of giving free broadband to everybody? I remember during Covid going to a supermarket and seeing some young schoolchildren outside, huddled around a tablet. I asked them what they were doing; they did not have broadband at home and this was the only way they could catch a signal. It was bitingly cold, but there they were. Maybe the Government should provide free iPads to the needy as well as free broadband, which is essential.
I will confine the rest of my comments to banks, which are a vital part of our social infrastructure. The branch network plays a major role in the provision of savings, borrowings, financial services and finance for businesses, SMEs and local entrepreneurs. However, the bank branch network has been shrinking at an accelerating rate. Many villages and districts no longer have a bank branch, and post offices are closing too. People are left without financial services. The closure of local branches is a major reason why some traders—as they told me for a research project I did—demand payment by credit or debit card. They do not want to hang on to cash overnight as it is simply not secure; in the absence of a bank branch, they do not want any cash, which means a lot of poor people cannot afford to buy their goods and services.
Why are we witnessing this disappearance of bank branches? There are many reasons, one of which is mergers and consolidations. Lloyds TSB, HBOS and Halifax combined to form Lloyds Banking Group; inevitably, many branches vanished as they were not going to compete against each other. Santander acquired Abbey National, Alliance & Leicester and Bradford & Bingley; once again, lots of branches had to close.
The merger and takeover policy has been informed primarily by the need to compete at the global level, rather than ending financial exclusion. The social consequences of those mergers do not appear to be considered at all. Banking executives have sought to increase the size of banks to justify their mega pay packets. Maintaining an effective and efficient branch network is not part of any of their performance-related pay algorithm—it does not come into it at all. The bank websites continue to tell us that they are socially responsible, but that does not come into it either. A programme of bank branch closures has been pursued to cut costs and increase profits, rather than do what is good for the community. SMEs are left without good financial and banking advice; bank managers, because there are no bank branches, have absolutely no idea what is happening in the local community—where they could invest better, or what kind of diamonds or winners they can pick.
Under FiSMA, the FCA is required to
“promote effective competition in the interests of consumers”.
The FCA website says that one of its duties is to
“make markets work well—for individuals, for business, large and small, and for the economy as a whole.”
It is hard to see how any of these duties are met by unrestrained bank branch closures. Branch closures result in exclusion. Many citizens, especially the elderly and low-income groups, do not have access to a good broadband connection or a computer. Some people are told to go to libraries—so I went to look at the libraries, where many of the computers appeared to be steam-powered, incredibly slow and utterly unsafe. Nobody should really be accessing their financial services and banking from the library computers—and about 20% of libraries have vanished since 2010. We had a banking crash, and what did the Government do? Did they punish the bankers? No, they shut libraries everywhere. I do not know what the link is, but that was their solution. So again we have a problem.
Those who have mobile phones may not have access to strong wi-fi signals. Trekking to another town is not an easy option for the elderly, infirm, women with small children and local entrepreneurs. People have said that they could not afford to go to another town, or that they are a one-man operation and it basically means that they have to shut down their business for an afternoon; they are really stuck. Branch closures are actually transferring costs from banks to people, in the form of transport, time, pollution, road congestion, search and cyber risks, and many more. It is not a costless thing for banks to do; all they are doing is to shuffle costs.
ATMs can dispense cash, but they are dependent on the vagaries of the banks’ IT systems. How many times have we read that those systems have failed? They also need to be replenished, and they always offer a very limited amount of cash. Again, that hinders many who are less well off. Even worse, I visited for this research project many poorer areas, and what did I find? Every ATM was charging a fee for withdrawal of cash, which is punishing people for poverty.
SME lending growth is restricted on average by 63% in areas where a bank branch closes, and where the last bank in town is closed the reduction in lending to banks was about 104%—a massive reduction. If people go to a bank branch in another town, they will do their shopping there and spend their money there, which means that their local town goes into a spiral of decline, because people are simply not shopping there at all.
I suggest that we need to put responsibilities on banks to do certain things. At the moment, banks rely on voluntary codes for closures. That is simply not acceptable. Stakeholders are consulted after a decision to close a branch has been made, but not before. I asked the bank to show me the financial calculations explaining why the local branch was being shut, and they said, “Oh, we can’t show you that.” If they had shown me, I could have unpicked the financial numbers quite easily and made an alternative case, but they were not willing to show me. People have hardly any notice, and basically human interest is not really taken into account. Banks should consult local customers first and show their financial numbers, explaining why a branch is being closed, and there should be an ombudsman to adjudicate on disputes. If a bank wants to shut down a branch, it should not be able just to get away with it.
We need a simple test: a bank must show that after the closure of a branch the local financial infrastructure is no worse off. If it is, the bank cannot close the branch; it can move it into a post office or a supermarket but it cannot simply walk away. Banks should have to pick up the costs. That fact is shown in the US Community Reinvestment Act 1977, which ought to be examined, as we can learn something from it.
Banks will not like that suggestion but I shall tell the Committee what we are doing for the banks, and I am asking for very little in return. We bail them out; we shower them with billions in quantitative easing; the public or the state acts as their lender of last resort; the Government provide the Financial Services Compensation Scheme; the Government send millions of customers to banks by ensuring that pensions and social security are paid through the banking system; and banks get their raw material, which is cash, almost free, while charging 40% interest on overdrafts. All I am saying is that banks need to give something back to the community. They should not be able to destroy local economies by simply closing local branches and walking away.
Lord Bilimoria (CB)
My Lords, the Liaison Committee follow-up report is called Tackling Financial Exclusion: A Country that Works for Everyone? The recommendations made in the original 2017 Select Committee report found that, four years on, financial exclusion is still highly prevalent in the UK—that is,
“the inability, difficulty or reluctance to access mainstream financial services, which, without intervention, can stimulate social exclusion, poverty and inequality.”
Particularly at risk are those on low incomes, those living in poverty, young people, older people, people with difficulty in accessing banks and those lacking digital access.
The committee found that, despite the UK being at the forefront of the global financial industry and a leader in the fields of financial services, technology, fintech and innovation, financial exclusion is still a significant problem, saying that
“a sizeable number of UK citizens lack access to even the most basic financial services, while still more are forced to rely on high-cost and suboptimal products which can prove damaging to their long-term financial health.”
We heard earlier about the role of the “poverty premium”, where poor people pay more, which exacerbates the effects of financial exclusion. We have heard from virtually every speaker about the closure of bank branches and the growing emphasis on digital services. In one way that is a good thing, but it also intensifies financial exclusion.
The committee has made lots of recommendations, calling on the Government, regulators and industry to help those experiencing these difficulties. The recommendations also focus on supporting the financial capabilities of future generations. For example, the report says that financial education should be added to the primary school curriculum. Will the Minister confirm whether that is happening?
The Government responded, of course, and made the distinction between financial inclusion and financial capability. The noble Baroness, Lady Tyler of Enfield, said that the response lacked a sense of urgency and ambition. Does the Minister agree that there is a lack of urgency and ambition? On that note, I thank the noble Baroness for leading this debate.
In April 2021, as we have heard, the Liaison Committee published a follow-up report examining the progress by the Government and key stakeholders. The date shows that it came in the midst of the pandemic, and the Covid-19 pandemic made it particularly important to not only understand but take action on tackling financial inclusion. The follow-up report found that, four years on, financial exclusion is still highly prevalent in the UK, exacerbated by the pandemic, with millions experiencing low financial resilience. That is an important point: financial resilience is the ability to cope financially when faced with a sudden fall in income or unavoidable expenditure. Of course, as has been mentioned earlier, we are living through this now with the cost of living crisis, which, again, is exacerbating the situation. We need inclusive financial services, leadership from government and proactive regulation, and of course there is now the Financial Inclusion Policy Forum.
We have heard lots about access to cash already, and the noble Lord, Lord Sikka, spoke about digital exclusion. During the pandemic, I saw that this was so sadly apparent. Take digital access for schoolchildren as an example. On the one hand there is the child in their own room in their own house, with fast wi-fi and their own laptop, with a school providing education, and where they did not miss a single class, not even a singing lesson or an art lesson. At the other extreme there is the child in a 10th-floor council flat, with no wi-fi and no laptop, missing out completely on their education. There were issues of digital access, digital poverty and digital literacy, and it was sad to see.
On the lack of skills, according to the noble Lord, Lord Sikka, 1.5 million people have no access to the internet. We are the sixth largest and one of the most advanced economies in the world; how can we have a situation like that? There should be 100% broadband coverage in the country. Have the Government urgently raised their ambition from 85% percent to 100% broadband coverage?
Basic bank accounts are an essential requirement. We have bank branch and ATM closures. We still need cash. There is the role of post offices, affordable credit, the Help to Save scheme, debt advice, financial education, control options, the FCA’s objective, the duty of care to customers, which we heard about, and the Government’s financial inclusion strategy.
The FCA responded to the committee’s follow-up report, saying
“there are themes that relate to areas we are actively working on”,
which included a financial inclusion objective, a duty of care, control options, affordable credit, bank branches and ATM closures, digital inclusion and access to cash. The Financial Inclusion Commission, which is an independent body, commented on the report and also spoke about the adoption of regulation for “buy now, pay later” products. On one hand, these give financial access; on the other hand, they can be very dangerous.
The Financial Inclusion Commission gave some facts: 12.5 million UK adults have little or no confidence in their ability to manage money; 22% of all adults in the UK have less than £100 in savings; one in five adults would not be able to cover more than one month of living expenses if they lost their source of income. Just imagine what is staring us in the face with the cost of living crisis at the moment. One million people in the UK do not have a bank account and 16% are borrowing to pay for essentials because they have run out of money.
The Money and Pensions Service’s excellent report, The UK Strategy for Financial Wellbeing 2020-2030, said that
“a financially healthy nation is good for individuals, communities, business and the economy.”
Its vision, according to the report, is
“Everyone making the most of their money and pensions.”
It suggested five ways to drive change at scale: financial foundations; a nation of savers; credit counts; better debt advice; and a future focus for all adults. It says that while financial well-being is good for individuals, communities, business and the economy, poor financial well-being affects tens of millions of people and is holding our country back. The report says that
“9m people often borrow to buy food or pay for bills.”
That figure has probably escalated hugely since then because of the cost of living crisis; does the Minister agree? The report also said that
“22m people say they don’t know enough to plan for their retirement. And 5.3m children do not get a meaningful financial education.”
OECD figures place the UK well down the rankings of G20 countries, behind France, Norway, China, Indonesia.
The MaPS states:
“Financial wellbeing is about feeling secure and in control. It is knowing that you can pay the bills today, can deal with the unexpected, and are on track for a healthy financial future. In short: confident and empowered.”
If this is the case, businesses also benefit, because if people do not fall behind on their bills and their payments businesses have healthier profits and cash flows and do not need to write off debts. People with good financial well-being will spend in a way that is sustainable, and the wider economy, of course, benefits as well.
In a recent survey when it produced this report, the MaPS found that 1.7 million people said that they had received debt advice. It estimated that a further 3.6 million people needed debt advice because they had regularly missed payments throughout the previous six months. On targeting the strategy at those most in need, of the 40 million people of working age, 22 million said that they do not know enough to plan their retirement: 66% of 18 to 24 year-olds; 64% of working-age women; 48% of those approaching retirement. These are stark figures. In addition, there are 12 million people aged 65 and above, among them 5.4 million aged 75 and above.
When we talk about financial exclusion we are talking about vulnerability. We are talking about people with physical and mental health issues, individual personal circumstances, age—as I outlined—financial crime and gender. We are also talking about tackling digital inclusion; some 11.9 million people do not have the basic digital skills for day-to-day life in the UK.
The noble Lord, Lord Holmes, spoke about fintech. The Kalifa Review of UK FinTech in 2021—led by my friend Ron Kalifa, a fellow Zoroastrian Parsi—talked about “Inclusion and Recovery”, and
“Supporting citizens and small businesses to access more, better and cheaper financial services—and doing so in a sustainable way to help ‘build back better’.”
The report recommends industry-wide coalitions on key issues such as financial inclusion. Does the Minister agree that there should be industry-wide coalitions?
I make one final point. Regardless of technology, people need to have the ability to speak to somebody. The branch in which I opened a bank account before I started at university does not exist anymore. The ability to walk in there and speak to someone does not exist. That is the case for so many people. It is so important that you can speak to somebody when you need to; we have to enable that access.
To conclude I will quote the Money and Pensions Service:
“a financially healthy nation is good for individuals, communities, businesses, and the economy. A successful strategy will need to influence a wider system of regulations, products, services and culture.”
Lord Shinkwin (Con)
My Lords, it is a pleasure to follow the noble Lord, Lord Bilimoria. I congratulate the noble Baroness, Lady Tyler of Enfield, on securing this important and, as she reminded us, timely debate. I am pleased to have this opportunity, despite the amount of time that has passed since the original committee issued its first report, to thank her for her continuing leadership on this issue, both as chair of the original ad hoc Select Committee—on which I was privileged to serve, with my noble friend Lord Holmes and others, when a new Member of your Lordships’ House—and in persuading the Liaison Committee that the issue we are considering today merited a follow-up inquiry and report.
The challenge of tackling financial exclusion is surely worthy not just of the work on which the noble Baroness has so ably led but of ongoing attention by the Government, the Financial Conduct Authority and the wider financial sector. For if there is one clear message that emerges from this report, and from what I am sorry to describe as a rather underwhelming response from the Government, it is that there is still a lot more to be done in this space, as my noble friend Lord Holmes of Richmond has already said.
As other noble Lords have also said, it is important to consider the current context of today’s debate. That context is rapidly worsening as the poorest in society, as the noble Lord, Lord Bilimoria said, in particular face massive cost of living pressures, which does not seem to be reflected in the Government’s response. I ask myself how best to describe the Government’s response. “Detached”, “sedate” and “academic” are words that come to mind, as do the terms “divorced from the wider context”, “no sense of urgency”, as the noble Baroness and the noble Lord, Lord Bilimoria, mentioned, and “a missed opportunity”.
As a committee, we were mindful of our chair’s helpful advice that our original recommendations should be measured and realistic. The recommendations in the follow-up report, which include reiterations of our original recommendations and some new recommendations, are consistent with that advice. Of course, the original and subsequent recommendations were made before rising inflation, interest rates, food prices and utility bills combined to such toxic effect, compounding the difficulties already faced by those who are financially excluded. Like others, I would have thought that that would make the recommendations even more pertinent; however, the Government’s response has disabused me of such logic.
At a time when Gus Alexiou, a journalist at Forbes who draws on his own lived experience of disability, writes of some disabled people worrying about not just how they will put food on the table but how they can afford to power the vital medical equipment necessary to keep them safe at home, the Government’s equivocal response to the report seems surprisingly counterintuitive. Mr Alexiou explains that the medical equipment includes ventilators, nebulisers, oxygen concentrators, feeding pumps, SAT machines, seizure alert mats, kidney dialysis machines and rising beds. According to the UK-based pan-disability Scope, there are currently 900,000 people with disabilities living in fuel poverty, which could rise to about 2.1 million in October if typical annual domestic bills reach their predicted figure of £3,000. I speak with some personal experience of the medical equipment he mentioned because I have had to use nebulisers and have relied on oxygen concentrators and I still bear the scars, literally, of having a PEG—a feeding pump—to keep me supplied with essential nutrients when I was unable to swallow for five months following neurosurgery some years ago. I have been there—I have worn the T-shirt, as it were—and that was without having to worry about any financial considerations because I was in hospital at the time and I was not financially excluded. Mr Alexiou concludes:
“What is far less difficult and actually, all too easy, is to get away with side-lining the suffering of millions of disabled people because you can be confident that everyone else just has too much on their plate and is busy looking the other way.”
Hard-hitting stuff maybe, but I suspect that it will resonate with a lot of disabled people, a lot of whom identify as financially excluded. I am not saying that this is deliberate, but I am saying that, ultimately, a key factor in the Government’s failure to seize the opportunity that responding to this report presents stems, I believe, from a lack of lived experience of financial exclusion and of disability at senior levels of the Government, the Treasury and the DWP. Otherwise—to pick just three examples of recommendations in the report that have already been touched on and that the Government have rejected—the Government would understand the importance of formally reviewing the powers available to the FCA to mitigate the negative effects of bank branch and free ATM closures; of expanding the remit of the FCA to include a statutory duty to promote financial inclusion as one of its key objectives; and of introducing a requirement for the FCA to make rules setting out a reasonable duty of care for financial services providers to exercise towards their customers. This would, of course, as has already been explained, be very different from the new consumer duty proposed by the FCA.
I think that the Government can do better than this. I hope that my noble friend the Minister will be able to show in his remarks that the Treasury, in particular, is willing to revisit the committee’s modest, measured proposals in the light of a rapidly deteriorating economic situation both globally and here in the UK. In my view, the Prime Minister has given fantastic leadership on Ukraine. That now needs to be replicated here at home with the cost of living measures to be announced imminently. I really hope that they will include measures to tackle financial exclusion, as outlined in these recommendations.
This report reflects well on your Lordships’ House. It is carefully considered and is testimony to the added value that your Lordships’ House brings to political debate. I close by once again thanking the noble Baroness, Lady Tyler of Enfield, for her leadership. I am sure that this is far from the final word that she and others will have on this issue.
Baroness Kramer (LD)
My Lords, I start with a couple of thanks, echoing the noble Lord, Lord Shinkwin, both to the Liaison Committee task force that worked on the original report and drove the follow-up report and to my noble friend Lady Tyler of Enfield for her leadership. I also think that we need to give an award today to the noble Lord, Lord Balfe, for the most radical solution that has been brought before us. It is one of those “the emperor has no clothes” moments: if you want people not to be financially excluded, make sure that they have enough money to be able to manage.
However, we all know that that is not the reality of the world that we live in today. Financial exclusion, as so many people have said, has become even more of a disadvantage with the cost of living soaring. Excluded people have even fewer tools for managing costs. The noble Lord, Lord Bilimoria, talked about the low financial resilience that so many people experience, but I was also very focused on the discussion by the noble Lord, Lord Shinkwin, of people with disability. They carry an absolutely undue burden that becomes far more acute in times like this, particularly people who are dependent on electricity, but even beyond that.
Others, including my noble friend Lady Tyler, have referred to the poverty premium, with examples of people on prepayment meters paying more for energy than those on direct debits, and by far. Finally, there is the process of claiming the Government’s £150 council tax reduction, which I think we will hear today is far more difficult for those on prepayment meters. We are in a very difficult and critical time.
I want to focus, though, on the issue of banking. Some 1.5 million people have no bank account and many more lack access to short-term affordable credit, with something like 2 million to 7 million people a year using high-cost credit—and within that group, as many as 66% could be classified as vulnerable. I have thought for many years that these people could be helped by better education and capability, by keeping bank branches open or by replacing them with community banking hubs—a project on which I will say a little more in a few minutes. But looking at a report from Barclays, I was stunned to see that it said that most people who do not have a bank account today have had one in the past. For many of these people the experience of a perilous fall into an overdraft, with its costs and fees, proved such a negative experience that they left banking altogether. Frankly, I do not know whether most people at the bottom end of the scale who find themselves in overdraft realise that, as bank customers, they are really paying for the costs of free in-credit banking for far better-off people. We have a real inequity in the banking system as it functions today.
It is also true that many people find it much easier to control their money when they rely exclusively on cash. It may not be the most effective or efficient way of managing payments but it allows them control. With cash disappearing, I am very glad that we now have an access-to-cash provision that will be engaged through the financial services and markets Bill. However, I share the concern of the noble Lord, Lord Holmes. It is not just the supply of cash that matters; it is whether or not entities will accept cash. Like him, when I went through my community I found so many places that now want only contactless payment, even for the smallest of purchases, and will no longer take cash. We have a far more complex problem here, unfortunately, than that which I suspect the financial services and markets Bill will tackle.
The answer I often hear is that fintech has a great deal to offer. I fully accept that fintechs have been springing up, providing mechanisms such as “jam-jars” to help people budget or using a broader set of factors in their credit judgments. But as so many have said—the noble Lords, Lord Sikka and Lord Holmes of Richmond, and others—this requires access to the internet, probably a smartphone and a confidence with technology, as described by the noble Lord, Lord Balfe, that does not exist in many of the excluded segments of the population. Even open banking offers a path only for those who have an existing financial product. The use of the internet as the key to financial access also carries the disadvantage that it makes impulse spending very easy and opens people up to pressure from irresponsible marketing. I hope that the Government have taken note of that from many of the civil society groups which have been tracking those kinds of behaviours.
Over and again, we have tried to find an answer by using the Post Office. Of course post offices are important, but I am frankly becoming completely disillusioned with their potential to provide more than very basic banking services. Community hubs are the latest idea: a shared banking services arrangement, with the Post Office actually providing the front counter. But as proposed, they will exist only where the banks have no branches and if those banks themselves actually agree. The banks should not be the decision-makers on whether a community hub should exist or not. As they are conceived now, community hubs continue the notion that financial inclusion is defined by access to a high street bank and the facilities it offers.
I find myself turning to routes that have worked well in other countries but never seem to have gathered sufficient momentum in the UK. The noble Lord, Lord Sikka, touched on this in a sense when he referred to the Community Reinvestment Act in the United States, which started out as a civil rights Act but evolved into a mechanism to create banking organisations dedicated to and set in their local community and which targeted services to it. Sometimes you find them in the form of credit unions and sometimes in the form of community banks, which are quite blended in the United States. Their great advantage is that they do not “put up with” disadvantaged or low-income people or see them as a way to perhaps offset fees from their better-off customers; they welcome these people as the core of their customer base and design services to meet their needs. The issue is achieving this at the scale and with the coverage required. That in turn means very significant investment.
Giving the FCA some powers—at the very least to have regard to financial inclusion—might help us drive towards a network of something like community banks and credit unions, which would meet some of this need. I would hope that it would make the FCA more proactive. However, frankly, after so many years of discussion I am pretty much out of patience and wonder whether the only way to achieve this is basically through legislation. I ask the Government to consider making it a condition for a banking licence for a bank above a certain size—in effect, the high street banks—to either provide effective services to the unbanked and underbanked sectors of the population or invest in an organisation that can, which is usually the preferred option in the United States.
When I was in the US, I saw really successful partnerships between the equivalents of the major high street banks and local community banks and credit unions. Ironically, they were really popular with the executives of the significant major banks. They would almost fight each other for the opportunity of having a day or two working at the community bank because it was a chance to interact with normal people. Big banks were able to provide very low-cost technical services, regulatory advice, human resources and all kinds of back-up for the relatively small local banks. The costs of running a community bank are much lower than those of trying to provide the same services out of the equivalent of a high street bank because they do not have the burden of trying to carry the high costs of the investment banking portion of an organisation or the very high exceptional salaries of so many senior bankers in the major banks.
Would-be entrepreneurs get to start businesses and go on to become significant clients of sponsoring major banks, and it becomes a route to opportunity. Even more importantly, in the United States you find that charities and civil society groups join the partnerships, providing a huge range of support and advice for individuals and helping the community bank target what it does so that it directly meets the needs of the clients that come in through its doors.
I feel that this has always been rejected in the UK because it does not have a “Made in Britain” stamp on it. In some ways, you could say it is picking up some of the roles of the old savings and loans, and perhaps of the branch banks we used to have long before the days of mergers and acquisitions. I ask the Government to get serious and look at this. We have talked and talked—I have been in webinar after webinar—and we are really making very little progress. Today’s economic crisis ought to underscore to us that this problem, above all, must be treated with urgency.
Lord Tunnicliffe (Lab)
My Lords, I congratulate the noble Baroness, Lady Tyler of Enfield, on securing this debate. It returns us to the topic of her committee’s 2017 report. This was, of course, supplemented by the Liaison Committee’s follow-up inquiry, which is the formal subject of this debate. I am grateful to both committees for their work in this important area, and to the noble Baroness, Lady Tyler, and the noble Lord, Lord Shinkwin, for their ongoing interest. I pay particular tribute to the noble Lord, Lord Holmes of Richmond, who has pursued many of these issues tirelessly across different Bills. He enjoyed some success on the matter of cashback during last Session’s Financial Services Bill. I suspect that we will revisit some of his other amendments when the financial services and markets Bill is brought forward.
Five years have passed since the publication of the original committee report. Tackling financial exclusion is a long-term project; we cannot expect every aspect of that challenge to be addressed in a few years, and there can be no doubt that the pandemic slowed progress. However, it is regrettable that solving many of these problems remains as urgent in 2022 as in 2017. Thankfully, in recent times, we have seen some innovative approaches from financial institutions to improve financial inclusion.
During an Oral Question on 22 March, I cited a joint project between HSBC, Shelter and other homelessness charities to ensure that certain individuals with no fixed address can access basic banking services. These kinds of initiatives are hugely important, helping people to break the cycle which prevents them claiming social security or holding down a job. Welcome as these schemes are, they can only ever benefit a relatively small proportion of those who find themselves excluded from the financial system. What we really need, and what I hope the financial services and markets Bill will finally offer, is a coherent, joined-up approach to financial inclusion. That means the Treasury taking responsibility where that is appropriate to empower the regulators if they are lacking the right tools to act.
The Government recently published a summary of responses to their access to cash consultation. That document also outlined in brief terms how they intend to use the forthcoming Bill to preserve cash for those who want to continue using it. We broadly welcome the intent, but I hope that the Minister will use today’s debate to signal how the Treasury intends to act in other areas. For example, even if access to cash is preserved, what about protecting access to physical bank branches? Research from Which? published in April warned that almost half of the UK’s bank branches have disappeared. Those that remain are increasingly offering reduced services or closing earlier in the day. This is by no means a new phenomenon, so why have the Government not acted to prevent these closures?
Elsewhere, the Financial Conduct Authority’s regulation of the “buy now, pay later” sector is gradually coming on stream. However, the regulator has been clear that it expects the worsening cost of living crisis to push more people towards these new credit options, increasing the overall risk level. What assessment have the Government made of people’s increased reliance on personal credit? Will the new Bill address that? Can the Minister comment on the FCA’s consumer duty and whether the upcoming legislation will seek to strengthen it? It is worth remembering that the Government moved in these two areas only because of sustained pressure during the last Financial Services Bill. Much of that pressure was exerted by my noble friends Lord Stevenson of Balmacara and Lord Eatwell, but they were supported by noble Lords across the House and campaigners outside this place. How can we be confident that external voices are being heard as the Government put their legislative package together?
We may have come a long way on tackling financial exclusion, but the job is by no means done. I hope the Minister will recognise that fact in his response, and that the Treasury will avail itself of the experience of those who have spoken in this debate.
I will end on a slightly tangential point, if noble Lords will allow. These are very tough times for many across the country. Those with good access to financial products are struggling enough, but those excluded from them face what can only be described as an impossible task. Yesterday, people found out that the energy price cap is likely to increase by a further £800 in October. This situation is simply not sustainable so, while we await the financial services and markets Bill with interest, will the Government—I hope today or tomorrow—do the right thing and bring forward an emergency Budget? The Chancellor’s stubborn refusal to act can only harm efforts to provide people of all backgrounds with the financial security that they so desperately crave.
Viscount Younger of Leckie (Con)
My Lords, I too thank the noble Baroness, Lady Tyler, for initiating this important debate, as well as other noble Lords for their helpful and thoughtful contributions. There is much to cover; I will do my best. Tackling financial exclusion to ensure that everyone in all corners of the UK, regardless of their background or income, has access to fair and affordable financial products and services remains a key priority for the Government—more so in the context of the cost of living challenge, to which I will turn soon, which is already impacting the most vulnerable.
The Liaison Committee’s initial report on financial exclusion, and its follow-up report to which the Government responded a year ago, made some important suggestions. To reassure the noble Lord, Lord Bilimoria, we really are taking those suggestions seriously. Some progress has already been made; I listened carefully to the remarks by the noble Baroness, Lady Tyler, and I think she acknowledged that, but I say at the outset that much more needs to be done. I very much relish the opportunity to discuss these issues again today. I wish to address the themes raised, and I will start by focusing right away on banking and cash.
In the space of just a few years, technology has transformed the way that we access and make use of financial services. Until only a few years ago, I went into my local bank branch for any financial transaction; now I happily conduct pretty well everything online and have found it relatively straightforward. New opportunities and flexibility are of course welcome but, importantly, we also have an obligation to make sure that no one is excluded, which is of course the subject of today’s debate.
While eight out of 10 consumers use contactless payments and seven out of 10 use online banking, which are significant figures, the Government understand that physical cash—old-fashioned notes and coins that may still be kept under people’s mattresses—as well as access to a physical bank branch are still an important part of millions of people’s lives. The noble Baroness, Lady Tyler, eloquently gave her own statistics in this respect and it was alluded to strongly by my noble friend Lord Holmes.
I take note of my noble friend Lord Balfe’s point about educating people, especially the elderly, to become more digitally aware. He is right but he should recognise, as I think we all do, that there are some who simply will not pick up the bat. That is why, for example, the Government have made legislative changes to support the widespread offering of cashback without a purchase by shops and other businesses, and why we will be legislating to protect access to cash in the upcoming financial services and markets Bill as soon as parliamentary time allows.
My noble friend Lord Holmes and the noble Baroness, Lady Kramer, asked about helping those who wish only to use cash, which is a fair point. The Government’s plan for legislation will ensure that people can continue to take out or pay in cash in order to support the use of cash in daily life and its continued acceptance by business. Following the Government’s commitment to legislate, firms are working together through the Access to Cash Action Group to develop new initiatives to provide shared services.
As mentioned by the noble Lord, Lord Sikka, the Government understand people’s concern when their bank takes the commercial decision to close a local bank branch, and I have seen this locally where I live. Firms themselves are best placed to make the commercial decision required to operate their businesses for their customers but we believe that the impact of branch closures should also be understood, considered and, where possible, mitigated so that all customers, wherever they live, continue to have access to face-to-face banking services.
This matter was a strong theme in this debate. It was raised by the noble Lords, Lord Tunnicliffe and Lord Sikka, and the noble Baroness, Lady Tyler, herself. Let me expand on this and take account of the comments by Martin Lewis which were alluded to. In September 2020, the FCA published guidance for regulated firms setting out its expectations for banks, building societies and credit unions when they are considering closing branches or ATMs. It requires them to notify customers and the FCA of upcoming branch closures and to consider the provision of alternatives for customers. Alternative options for access can be via telephone banking, digital means such as mobile online banking, and the Post Office. The Post Office banking framework allows 99% of personal banking customers and 95% of business banking customers to deposit cheques, check their balance and withdraw and deposit cash at 11,500 Post Office branches in the UK.
The noble Lord, Lord Sikka, expanded on this theme and asked about banks consulting customers when closing. Although I have alluded to that, I shall add to what I said because in September 2020, the FCA published guidance for regulated firms setting out its expectations for banks, building societies and credit unions when they are considering closing branches or ATMs.
Noble Lords should also be aware of the introduction of shared bank hubs, an important industry initiative which was launched last year. This was alluded to by the noble Baroness, Lady Kramer. I took note of her scepticism about this initiative but also very much took note of her ideas, particularly those that have come from the US. I will certainly take them back. We believe that these hubs provide cash and basic banking services, including counter services run by the Post Office, as well as a dedicated space where community bankers from major banks can meet their customers, and that this is a viable alternative solution to offering bank services. That will help to answer questions asked by the noble Lord, Lord Sikka, and the noble Lord, Lord Bilimoria, who made the point that it is important to have an individual—a person—with whom you can have a face-to-face meeting, and I agree with him.
Eight additional bank hubs have been announced following independent assessments by LINK of the access-to-cash needs of local communities after the closure of a core cash service, in areas such as Brixham in Devon, Carnoustie, which I happen to know is near Dundee, Knaresborough and Syston. The industry has committed that from summer 2022 communities can also request a review. The Government very much look forward to seeing the results and their impact on communities.
The noble Baroness, Lady Kramer, asked about whether there is a condition for high street banks to provide services for the unbanked or to invest in an organisation. The Government believe that it is vital that everyone is able to open a bank account if they wish to do so. That is why the nine largest personal current account providers in the UK are legally required to offer fee-free basic bank accounts to customers who are unbanked, so that people can manage their money on a day-to-day basis effectively, securely and confidently.
Linked to this is the important issue of digital inclusion, which was raised by the noble Baroness, Lady Tyler. Banking hubs are potentially vital for those who might be vulnerable, digitally excluded with no access to a computer or the internet or, indeed, simply do not wish to access financial services digitally. We have to recognise that. The Government recognise that digital inclusion needs to be promoted alongside financial inclusion, and we are committed to ensuring that everyone has access to the digital infrastructure and skills necessary to participate fully in society, including in rural areas where staying connected can, as we know, be more challenging.
The noble Lord, Lord Sikka, asked about access to broadband; I think this was also raised by the noble Lord, Lord Bilimoria. To help those in financial difficulty to stay connected, social tariffs are available which offer low-cost landline and broadband services. The Government and Ofcom also agreed a set of commitments with the UK’s major broadband and mobile operators to support vulnerable customers.
A question was raised by the noble Lord, Lord Bilimoria, about broadband, and I want to expand on this a bit further. In 2021, the Government launched Project Gigabit, which committed a landmark £5 billion to support the rollout of gigabit connectivity in the hardest to reach areas. I am pleased to say that more than 67% of UK premises can now access—
Lord Sikka (Lab)
My Lords, I am grateful to the Minister. On that £5 billion, it seems that it is given to Openreach and others, and they keep the resulting assets as well as the income stream. What do we get, as members of the public, in return? It seems it is a win-win situation for the providers. They should be providing public access through their normal service, but they do not want to do that. They seem to be winning on every count and the public are left with empty pockets.
Viscount Younger of Leckie (Con)
That is a very specific question from the noble Lord. I will write to him about those services, particularly how the £5 billion is used, which is a very fair question. What I can say, which the noble Lord, Lord Bilimoria, will not like, is that it is not 100% coverage, but we have, I have to say, made a great leap forward since 2019, when coverage was a mere 8%. From his particular position at the CBI, he will acknowledge that—I hope that he will.
Of course, all these issues are relevant to help people manage their personal finances, particularly when things turn tight. That was another theme that I expected to be raised today, as indeed it was, particularly by the noble Lord, Lord Tunnicliffe, with his question about an emergency Budget, and by the noble Baroness, Lady Tyler, on affordability matters. Let me just say a little bit about that. The Government really appreciate that families up and down the country are facing an unprecedented cost of living challenge, with the rising price of food, fuel and goods hitting people’s pockets. I listened very carefully to the speech from my noble friend Lord Shinkwin on how the disabled in our society are particularly negatively affected. Of course he is right, and he will know about that.
The next few months will be difficult, and we know that people are concerned. These are partly, indeed mainly, global trends driven by global challenges, and Russia’s invasion of Ukraine has deepened a severe shock in energy prices. While the Government cannot eradicate these global pressures, we are helping where we can and are providing more than £22 billion of support to families this financial year. We are providing direct support for energy bills, with a £9 billion energy package announced in February. This will provide 80% of households with at least £200, with the vast majority receiving £350. We are also making sure that work pays. We have increased the national insurance threshold to £12,570 from July, saving the typical employee £330 a year. We are supporting the most vulnerable in society with the cost of essentials such as food, clothing and utilities by providing an additional £500 million for the household support fund.
The noble Baroness, Lady Tyler, asked what the Government are doing to alleviate the poverty premium, and I hope that I can give her an answer to that. On universal credit, we are increasing work allowances and reducing the taper rate, which means that the lowest-earning 1.7 million people in society receive an extra £1,000 per year. An analysis shows that fiscal decisions made by the Government are progressive and place the highest burden on the highest earners.
Along the same theme, the noble Lord, Lord Sikka, raised a question about the Government’s tax policy. I think he stated that he thought it was regressive. I just come back to him on that to say that Treasury analysis published as part of the Spring Statement shows that fiscal decisions made since the 2019 spending round are progressive, placing the largest burden on the highest-income households as a proportion of income. The poorest 60% of households receive more in public spending than they pay in tax, and households in the lowest income decile will, on average, receive more than £4 for every £1 that they pay in tax.
My noble friend Lord Shinkwin raised a point about disability and fuel poverty. In answer to that, 2.2 million low-income households will receive a £140 rebate through the warm homes discount. The Government are increasing the WHD by one-third, with 3 million households now receiving £150. I hope that that provides small examples of what the Government are doing. As I say, we recognise that this is a challenging and uncertain time for people. Just as we stood by people throughout the pandemic, the Government stand ready to do more to support people across the UK with their costs of living. However, I am afraid that is all that I can say on that subject at the moment.
I turn to the important area of access to fair and affordable credit, which can be life-changing for people, helping them to meet a sudden expenditure or to take steps to build a better life. The Government recognise the important role that credit can play in helping people to manage their finances, but also crucially understand the need for it to be handled carefully so that it does not turn into unsustainable debt. We are committed to supporting initiatives that expand the provision of fair and affordable credit.
The noble Lord, Lord Tunnicliffe, asked about the assessment that the Government have made about people’s increased reliance on personal credit, which is a fair question. The Treasury regularly monitors changes in the consumer credit market, including the impact of economic developments, as part of its normal process of policy development.
The Government have allocated £100 million of dormant assets to Fair4All Finance, whose work has focused on supporting affordable credit. This includes £3.8 million funding for that initiative to pilot a no-interest loan scheme, which is specifically designed for consumers in vulnerable circumstances and is already, we believe, improving lives. The NILS pilot is novel and unlike anything that the Government have done previously in this space, so it is right that the pilot is allowed to be tested for optimal methods for delivering these loans. The pilot aims to test the benefits to consumers, society and the economy and to show whether a permanent, nationwide NILS can be delivered in a sustainable way. It will test several variables, including loan amounts, repayment periods and terms, eligibility and payment rates. My noble friend Lord Balfe is right that it needs to operate with care so that debt is managed prudently, a point that I made earlier. We are pleased that industry also recognises the value of expanding provision, with JP Morgan’s corporate social responsibility fund planning to contribute £1.2 million to expand this pilot.
I move on to buy now, pay later, expanding further on the theme of credit. I note some noble Lords’ concerns about this area, as raised by the noble Baroness, Lady Tyler. We recognise that it can give rise to consumer detriment, which is why the Government announced their intention to regulate these products and published the consultation last October. It closed on 6 January, and we are now reviewing responses and considering next steps, including timings. We will take this work forward as quickly as possible. I am afraid that that is the best that I can do to answer the question from my noble friend Lord Balfe.
Along the same theme, we are taking further measures to help people who are experiencing financial difficulties and will require additional support. That is why, among other things, the Government continue to provide record levels of funding for debt advice via the Money and Pensions Service, which noble Lords will recognise used to be the old MAS. We know that debt can feel overwhelming; often what people most need is the time and space to find a sustainable way out of it.
My noble friend Lord Holmes asked whether the Government agree that debt advice should be regulated. Yes, debt advice is a regulated financial activity, which means that most firms that provide debt advice must be authorised and regulated by the FCA. When a person gets debt advice, they can check that a firm is regulated on the FCA register. That is also why the Government launched the Breathing Space scheme, which gives those in problem debt legal protection against creditor action, enabling them to seek professional advice and rebuild their finances.
Given the clear connections between people’s mental and financial health—another theme that has been alluded to today—the scheme also ensures that those who are undergoing mental health crisis treatment can access even stronger protections. I am pleased that over 60,000 people have already taken advantage of Breathing Space in its first year, including almost 1,000 people who have entered a mental health “breathing space”.
However, that is just the first part of the scheme and we are now working on the second element: the statutory dept repayment plan. This will enable people struggling with problem debt to enter formal agreements with creditors so they are able to repay what they owe over a more manageable timeframe. On 13 May, the Government launched a public consultation on draft SDRP regulations with the aim of laying those by the end of the year. We intend for the scheme to start in 2024.
I hope I can cover everything. I have a little more to say, particularly on financial education, which was raised by my noble friend Lord Holmes, the noble Lord, Lord Bilimoria, and the noble Baroness, Lady Kramer. This is a very important area that is rather close to my heart; I personally firmly believe in it. It is important that people grow up to make sound decisions about how to run their financial lives, whether that is to secure a mortgage, take out credit, save up for a holiday or plan their retirement, an issue that was also raised. Financial education in England is covered within both the citizenship and the mathematics curricula. Primary schools, for their part, are strongly encouraged to teach citizenship, including financial education. I recognise, as the noble Lord, Lord Bilimoria, said, that it is not just the young who need educating; it is the less young too, particularly those who are looking to plan for retirement, as he mentioned.
I want to say something about saving. I recognise that this is a difficult subject because we know that many people are not able to save and are struggling simply with the business of managing the costs of living. So in fear of being frowned upon by the grandmother, I think it is, of my noble friend Lord Balfe, I draw noble Lords’ attention to the Government’s Help to Save scheme, which offers a 50% bonus on up to £50 of monthly savings for a maximum possible bonus of £1,200 over four years to help people to build a savings buffer for a rainy day. I just wanted to touch on that.
Finally, and importantly, the theme was raised of the FCA and the matter of “having regard to”. The Government take a comprehensive and strategic approach to tackling financial exclusion, including working closely with the regulator, industry and the third sector. This was touched on by the noble Lord, Lord Bilimoria. A key mechanism to foster that collaboration is the Financial Inclusion Policy Forum, co-chaired by Treasury and DWP Ministers, launched in 2018 to provide leadership and develop solutions, including some that I have already highlighted. I know that some noble Lords are slightly sceptical about that; I have read the report and the comments made by the Liaison Committee, and I have read our own response. I know that the noble Baroness, Lady Tyler, and my noble friend Lord Holmes have called upon the Government to formalise collaboration on financial inclusion further by asking the Financial Conduct Authority to have regard to financial inclusion in the context of the future regulatory framework review. I want to give some reassurance that I know senior officials and Ministers in the Treasury are considering these suggestions carefully and will respond as soon as possible.
To conclude, clearly there is more to be done but, as today’s debate has demonstrated, a good of deal of work is already in train to tackle financial exclusion and to help those who are vulnerable or who face financial difficulties. I thank everyone who has contributed today. It has been a very informative and useful debate, and I have certainly learned a lot myself.
Baroness Tyler of Enfield (LD)
My Lords, this has been an absolutely excellent debate. I thank all noble Lords who have contributed and the Minister for his response. I know that time is extremely tight so I will really say only two things.
First, I very much agree with the noble Lord, Lord Shinkwin, that the recommendations made in the original 2017 report, and reiterated in the Liaison Committee report, are even more important today than they were then given the context in which we are operating. Many noble Lords have given excellent ideas and suggestions, which I really hope will be pursued. I agreed with most things that most of them said—not quite all, but I do not have time to go into that. I totally take the point that the problem for many people at the moment is simply not having enough money, a point acknowledged in the Select Committee report.
Secondly, like other noble Lords, I very much hope that we see very soon from the Government a package of support, particularly on increases to benefit and state pensions to help people who are struggling so much at the moment. Perhaps the Minister could convey my request to the two designated Ministers for Financial Inclusion, John Glen and Guy Opperman, to consider meeting me and other former members of the Select Committee so that we can see what more can be done in this area.