Financial Exclusion (Liaison Committee Report)

Lord Bilimoria Excerpts

Wednesday 25th May 2022 Grand Committee

[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.”