Tackling Financial Exclusion (Financial Exclusion Report)

Lord Kirkwood of Kirkhope Excerpts

Monday 18th December 2017 Lords Chamber

[Lord Kirkwood of Kirkhope (LD)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Altmann. She is an expert on pensions and she is right to draw attention to its important role in dealing with financial exclusion. Her speeches always repay careful rereading.

I declare an interest in that I am a continuing member of the Financial Inclusion Commission, which has been in operation for the past few years in this important area of social policy. I too acknowledge the skill and wisdom of my noble friend Lady Tyler and the way in which she steered the committee’s work. It was an excellent experience; it was the highlight of my week while it lasted, and I felt quite bereft once it had stopped. Whatever committee she chairs next, I shall certainly be applying to join.

The committee raised the profile of the issue that we are debating. There have been some expressions of disappointment at the Government’s response and, if I am honest, I shared that feeling when I read it, although it was quite long. However, I was not surprised because this is quite difficult territory.

We have to look to the future about how we are going to take the issue forward. I am going to spend a few minutes on the mechanics of what we are facing. It is true that the Government can say they have not been doing nothing and there has been some progress. I was encouraged when we had the election; reading between the lines of the Conservative manifesto, I believe if the Prime Minister had been left to her own devices we might have had more social justice. It is no accident that “A Country that Works for Everyone?” is the subtitle of our report; we were trying to work with the grain of government policy. The Prime Minister might have had more opportunity with a new incoming ministerial team. I think everyone understands that a lot of this business is eclipsed by our withdrawing from Europe but we must not ignore the domestic agenda, and in particular it would be a mistake to ignore this part of that agenda. I would argue that, as someone may have said earlier, a lot of the discontent that drives the emotional Brexit response is rooted in some of the problems that this report addresses.

I think that it was the noble Lord, Lord Patten, who said that we were getting high marks for not spending money. I would have liked to spend quite a bit of money, but we were very constrained. We were making reasonable suggestions that did not incur huge bills and were rooted in the evidence that we heard—the evidence is very powerful. I concur with colleagues on the committee who said that we were very well served by the staff and our advisers, but the stars for me were those who gave us and sent us evidence. The body of evidence left is, sadly, a year out of date now—as colleagues know, the dogs bark and the caravans move on rather quickly—but is more up to date than a lot of the assured ONS official statistics and is a goldmine for researchers, policymakers and, indeed, legislators who want to take the question forward.

I do not know whether the Minister has time to do this, but I would like to understand what the mechanics of some of these new elements will signify and how they work together. We have a new ministerial team, but there is a contradiction in attention. Guy Opperman is an excellent Member of Parliament for Hexham. He does very good work and is familiar with this territory, but he is looking after pensions as well which, as the noble Baroness, Lady Altmann, just explained, is a full-time job in its own right. How does he relate to Stephen Barclay? I do not know him nearly as well; he is Economic Secretary, but has about 17 responsibilities, most of them related to Brexit.

How do those of us on the committee who want to take a continuing interest in the subject focus our representations to ensure that we are on the right side of that dual responsibility offered to those two politicians? How does the policy forum fit into that? If it is merely a six-monthly meeting of stakeholders around a big oak table where they say what they think is wrong with the world, go home and come back in six months’ time, how useful will that be? If it is not that, what is the policy forum to be?

I think it was the noble Viscount, Lord Brookeborough, who mentioned what was done by the Financial Inclusion Task Force in 2005. It had a very small Treasury-based unit with three members of staff. Sir Brian Pomeroy was an experienced hand and a wise man. It made a real impact for next to nothing—this was not public expenditure resourcing that you would notice; it was a sensible amount of money. It made a big impact in increasing the number of basic bank accounts issued.

I am trying to work out how this new arrangement with a split responsibility at its ministerial head will work. There is the policy forum, the single financial guidance body, which is welcome, as are breathing spaces for debt, and the Financial Conduct Authority, which I think is beginning to play a responsible role and getting a much better feel for the issue. The noble Viscount, Lord Brookeborough, also mentioned the financial life survey by the FCA, Understanding the Financial Lives of UK Adults. It is an excellent survey and a valuable document, and it will, to its credit, make the data widely available. The survey is not about people who are just about managing, it is about people who are finding it just about impossible to stay financially afloat at every stage in life. So the FCA’s work will contribute, but there are gaps.

I point to two random examples that have come in front of me in the past few weeks. The Post Office current account has no online payment capability. That is a mandated feature of ordinary basic bank accounts, but it is not included in Post Office accounts. I am disappointed that we are not making more of the Post Office. It could be carrying a lot of the weight—the noble Lord, Lord Patten, made this important point—but it is not being given the chance to do that, or it is shying away from the responsibility. Either way, this is exactly the kind of gap that could be identified and dealt with if this new machinery were put in place and acting effectively.

Finally, the Financial Inclusion Commission produced a publication looking at improving access to household insurance, which stated that nearly 16 million adults who have some need for contents insurance have no insurance protection against fire, flood or burglary. Of that 16 million, 10.5 million are renters and two-thirds of those renters are potentially vulnerable. So there is another gap. I am getting a long look from the noble Baroness, Lady Goldie, who is the Whip, so I will stop now.

At the beginning of today’s sitting, the noble Lord, Lord McFall, the Senior Deputy Speaker, said that he was interested in taking committee reports forward. I hope that we can keep the community of interest that our colleagues on this ad hoc committee established during our sittings, maintain a constructive interest and monitor the future work done in government on this important public sector policy.

Financial Inclusion: New Technology

Lord Kirkwood of Kirkhope Excerpts

Thursday 6th July 2017 Lords Chamber

[Lord Kirkwood of Kirkhope (LD)]

My Lords, it is a pleasure to speak on behalf of the Liberal Democrat Benches as the spokesman for our party, and I am grateful to my colleagues for their support. I am pleased to take part and grateful to the two noble Baronesses who just spoke, who both made short but powerful points. The Minister should pay attention to them.

I am finding it difficult to keep up with the noble Lord, Lord Holmes of Richmond. Every time he raises a subject, I have to come to the Chamber, because he raises such apposite and important points. I am overawed by his work rate. I think that his Whip should tell him to take the weekend off so we can get a little respite.

He made a powerful speech. He played a significant role on the ad hoc Committee on Financial Inclusion. I know that because I sat alongside him. I am delighted that he, who sits on the government side, has decided to take a continuing interest in fintech’s potential, because I hope that that means that the constructive pressure we put on the Government will continue. It is good if we can count on his continued interest and leadership from the Conservative side, because everyone is aware of the potential.

Like the noble Lord, I have had my eyes opened to the extent of fintech—its £6 billion contribution to the economy, although that figure may now be out of date—and its 60,000 employees in the United Kingdom. It is a big player. For that reason alone, we need to pay attention to it.

We like the Minister less in his Treasury role than in his other role; we like him in both, but he has to work harder to get the same likeability. I hope that he understands that. In his 12 minutes answering all the other important questions—perhaps he cannot do it in 12 minutes—I would like an idea of the vision. I know that a lot of valuable and important work is going on. I am very impressed by the Government Digital Service: it is doing some invaluable and innovative things. As the noble Lord, Lord Holmes, said, we have a Minister whom we can look to, who was with us yesterday. That is all very positive.

However, I struggle to understand the strategy—I know that that is a pretty meaningless word, but what is the overarching vision over the next few years? Obviously, the Treasury has an important role, and we have BEIS, the DWP and the Cabinet Office. If I have a criticism, it is that, if the Government have a plan clearly set out to deal with fintech and all its different manifestations, I am not aware of it. Like the noble Lord, I have been looking at this area as closely as most people. It is a fast-moving area. If the Minister can satisfy me that somebody, somewhere knows what is happening, that would be really reassuring. It is very important to manage this area of public policy, because it changes so fast, and managing change is a key component to getting this right—otherwise we will lose the leads that we have established in this area.

The noble Lord, Lord Holmes, is right to compare and contrast digital and financial exclusion. They are parts of the same problem, but they both need to be fixed at the same time, otherwise it is the people at the bottom of the pile who will be left out. Opportunities are created for young people, and others with smartphones, to gain open access across the globe to new levels of service with distributed ledger technology, blockchain, and the like. There are fantastic opportunities. The downside needs to be managed as acutely and as carefully as the upside; that is very important.

We also need to work with business and universities. I notice that Strathclyde now has a new master’s programme for fintech, which starts in September. Are the Government nudging the university and FE sector into that area, encouraging it to do it, and making it easier for it to do? There is also an emerging concern about the fact that we are quite good at conceiving the ideas, but scaling up some of these small, innovative, disruptive businesses is not something that we are properly paying attention to; other countries and other parts of the world are using the talent that we have.

I know that this is hard to avoid, and I apologise for mentioning it, because we are all going to get sick of it, but Brexit will have a skilled workforce issue; there are already some signs that people are beginning an exodus because of the uncertainties. However, there are huge opportunities, such as the payment services directive. Whether we are in or out of Europe, there will be new standards and a new drive, as well as a new international context for those small disruptive businesses that we are so good at creating—not just at the Old Street roundabout. There are some very good examples of that in Edinburgh and other parts of the United Kingdom; there are hubs, mainly around universities, that can feed off the back of the financial and technology expertise that they are generating. So they are capable of making their way in a very successful fashion after Brexit, if we are alive to the opportunities.

The noble Lord, Lord Holmes, was right to mention regulation. The FCA has done very well, with its sandpit ideology of allowing new innovative businesses to come into the place and work with clients in an open but controlled situation to see whether it works, making sure that the regulator can establish the risks and maintain a light-touch regulation as much as it can. The FCA sometimes gets a bad press for gold-plating things, but it has established a reputation for not doing that in the fintech sector—but it is something that has to be guarded against in future.

The noble Baroness, Lady Stedman-Scott, does an enormous amount of work with disadvantaged communities and on creating jobs for people, which is important. With the client group that both she and I are interested in, it is about getting some kind of identification or verification that is guaranteed. There is an obvious digital way of doing that now. I know that the GOV.UK Verify programme was designed to support that and develop it, but what is going on in that regard? How successful is it? To what extent is it being used—is it yet useful? The last time I heard, it had just been started. The banking provisions and the requirements of knowing your client—KYC—means that the requirements for identification may be more onerous than can be easily coped with by people at the bottom of the financial pile.

I will finish on that, except to say that I hope we can rely on the noble Lord, Lord Holmes, to use his energy in future to continue coming regularly, if not frequently, to the House, as it gives the Government the chance to say what they are doing and what their plan is, and it gives us the opportunity to check that we are all content with the direction of travel. I am grateful to the noble Lord, Lord Holmes, and I look forward to the Minister’s reply—in his ministerial role for the Treasury.

Children: Affordable Childcare

Lord Kirkwood of Kirkhope Excerpts

Thursday 9th January 2014 Lords Chamber

[Lord Kirkwood of Kirkhope (LD)]

My Lords, it is, as always, a pleasure to follow the noble Baroness, Lady King of Bow, and her very powerful contribution. The vignette of the former Prime Minister playing with a train set in Downing Street goes a long way to explain a lot of the paralysis that occurred in the Labour Government. I also want to say to her that she is very welcome in bringing the younger members of her family into this House. If I knew more about it, I would do more to help her, but she sets a very good example and I hope that she will feel at home in blending her important work here with her important family duties. She has made an important speech and her personal experience illuminates the issues in this debate very well.

I am pleased to be sandwiched on these Benches between my noble friends Lady Tyler and Lady Walmsley, who both know a great deal more about this issue than I do. I can therefore indulge some of my more esoteric interests, which focus on the contribution that childcare can make to in-work poverty in this country. We are going to have to face up to in-work poverty much more squarely in the middle to longer term in this country and I am convinced that childcare can contribute to strengthening work incentives and getting families in a position to trade themselves out of the indebtedness and the poverty that we all see.

There have been some powerful speeches, one or two of which have mentioned issues relating to the long term as opposed to the short term. In the long term, if we do not have a qualified workforce coming through to generate wealth, then the dependency ratios that we face in this country will cost an enormous amount of public resource to deal with properly. If we do not increase the life chances of people at all levels of the current income distribution in our nation, we will be storing up enormous problems for ourselves in the long term.

Childcare increases, as I say, the opportunities to work; it increases the life chances of children and adds to their potential. I am not thinking of young people merely as economic units but, if they have better qualifications and a better start in life, they will carry more weight in generating the wealth that will, it is to be hoped, pay my pension in due course. I therefore declare an interest to that extent.

Childcare also reduces child poverty. However, the current Government have next to no chance of achieving the 2010-20 child poverty targets, and that is a matter of concern. I was interested to read the important work that has just been carried out by the Commission on Social Mobility and Child Poverty, to which I shall return in a moment. Mr Alan Milburn, the distinguished chair of that important organisation, pointed out in his recent report that two-thirds of children in poverty in 2010-11 lived in working homes. That is completely new. I have been interested in these issues for more than 30 years and we have never before been in a position where that is the case. It is not going to get better any time soon unless we address it with some urgency.

I pay tribute to the noble Baroness, Lady Massey, who is an acknowledged expert, and compliment her on the tone in which she introduced the debate, which was very useful. We are striking allegiances as we go along, which shows viability, and the way in which we approach these matters is important. My noble friends Lady Tyler and Lady Walmsley did an enormous amount of work in our Liberal Democrat working group, which produced a viable document. I hope that other colleagues across the party divide will take the time to look at it because I certainly found it valuable.

I wish to make a point about co-ordination, which perhaps will come more easily from me because I come from Scotland. We need to remember that tax rates are set, rather obviously, on a UK basis but that childcare policy is now largely—certainly in Scotland—a devolved matter. We need to be careful, therefore, that the context in which some of these policy changes are being made has been properly thought through. I should like an assurance from the Treasury Bench —I know my noble friend understands these issues perfectly well—that the necessary steps are being taken to make sure that there are no surprises in the different tax positions being taken at a national United Kingdom level and in the devolved legislatures. It is important to make sure that the interface is kept as efficient as it can be.

Turning to the short term, I was struck by the evidence that was submitted by the Commission on Social Mobility and Child Poverty in response to the Government’s current plans on childcare. I know that this is a cross-departmental issue and that the Treasury has an obvious interest in all of this, but I would really like, more than anything else, to take away from this debate an assurance from the Minister that that report, submitted by Mr Alan Milburn and his distinguished group of commissioners, will be absolutely and thoroughly studied. He has made a number of recommendations, two of which I think deserve particular attention. It would be possible to switch some of the resources— £750 million, £800 million, whatever was announced in the Budget earlier this year—to some of the lower echelons, particularly for low-income families who may be able to take advantage of universal credit, whenever that happens; I am not holding my breath for it to happen any time soon.

Mr Alan Milburn has suggested that rather than having a ceiling of £150, 000 you could make it £120,000, save some money and switch it into putting an 85% support level within universal credit. That makes perfect sense. It would cost no extra money at all—the money is already in the plan, and from a social justice point of view, that is an incontrovertible idea that needs to be addressed. If it is rejected, then I, for one, would like to hear the reasons why.

The second thing that Mr Milburn said, and I agree with him, is that within universal credit the current plans have got a split, a 70% or 80% cliff edge. He makes some valid criticisms which I absolutely associate myself with, and that deserves an answer as well. The right reverend Prelate the Bishop of Ripon and Leeds also made some important points, and Barnardos has made some valid criticisms, with options for change which are entirely reasonable and need to be studied to help us understand how we can deal with some of these issues going forward.

I remind the House that the current tax credit levels of childcare were originally set in 2005 at £175 for one child and £300 for more than one child. If the current plans hold, they will exist all the way through to 2016 at that level. The Commission on Social Mobility and Child Poverty estimates that by the time we get to 2016—there have been various estimates about the increases in childcare that have occurred and are obviously evident—childcare costs will increase by 80%. All the powerful points that have been made earlier by colleagues indicate that it will get worse between now and 2016 rather than better.

My final point, which I have mentioned glancingly, is that I am very concerned that universal credit will not now be available to low-income households until the end of the next Parliament. That might be a slightly pessimistic view but I am well known for my pessimism, especially when it comes to IT projects and central government. Will my noble friend go back to the department and say “Have we got some contingency planning for some of this?”. I agree with universal credit, I think the architecture is perfectly good and I have been a stout supporter of the principle. However, if we are really thinking of a 2017 introduction and a 2018 rollout for everybody, we really need to make contingency plans now to deal with this issue if that is what actually happens.

In the long term, we need to engender the concept that this should be a core public service available to everyone, and I agree with everything that has been said in that regard. In the short term, we need to seriously consider switching resources from some of the money that has already been allocated to support the needs of low-income families in work in the United Kingdom.