My Lords, I shall also speak to our other amendments in this group, namely Amendments 22, 25 and 39. Amendment 19 adds “financial inclusion” as one of the matters which the national strategy should specifically seek to improve. Amendment 22 sets out a range of factors which the SFGB must address as part of this national strategy. Amendment 39 offers definitions of financial inclusion and financial exclusion for this purpose. Amendment 25 takes us back to issues of financial education, which we discussed at the end of our previous Committee day.
As will be readily identified, these amendments draw heavily on the recommendations of the House of Lords Select Committee on Financial Exclusion. We acknowledge that the Government have already dealt with one of its recommendations—that there should be a clearly designated Minister for Financial Inclusion, and we support this. However, this opens the way for other recommendations of the Select Committee report to be taken forward, two in particular. These are that the Government should lead and set a clear strategy to improve financial inclusion in the UK as one aspect of a wider strategy to tackle exclusion, and that there should be an annual progress report submitted to Parliament. A Minister should have lead responsibility, but work is needed across government. The role of the SFGB in these circumstances would be to support the production of the annual report in conjunction with
the devolved Administrations. This is exactly what Amendment 22 provides. However, if the Government were not minded to proceed with leading on a strategy and routine reporting, how will they take these matters forward? Can the Minister say more about when the Government will respond to the totality of the Select Committee’s report, and set out in particular what they see as their role in tackling financial exclusion and promoting financial inclusion?
As the report sets out, the precise use of the terms “financial exclusion” and “financial inclusion” have varied over the years, but we warmed to the approach adopted by the Select Committee, which we have set down in Amendment 39. This might be broadly characterised as financial exclusion representing the problem and financial inclusion the solution—that is, what we should seek to achieve.
One of the objectives of the SFGB is that it must have regard to improving the ability of members of the public to make informed financial decisions. Those who struggle to do so face the risks of financial exclusion, such as the inability to access what might be considered everyday financial products and services. As we know, such individuals can face significant barriers to engagement in modern society. Hence Amendment 22 requires the SFGB, as part of its role in developing a national strategy, to work widely with financial institutions and technology companies to support hard-to-reach groups in accessing financial support and products online.
At the same time as internet banking is growing, causing more financial services to move online, we are experiencing a programme of significant bank closures: 53% of UK bank branches closed between 1989 and 2016. It is suggested that this is a particular problem for older age groups who, we are told, place a high value on face-to-face contact, tend to be more reliant on cash and experience challenges in travelling, and one-third of people over 80 either have never used a cash machine or prefer to avoid them. Some of the high-street banks are responding to this by helping to develop the digital skills of their customers, and there is an obvious role for the SFGB in encouraging and promoting this.
Exclusion is not only a consequence of the digital challenge. The House of Lords committee heard about the difficulties for some, such as those without a passport or driving licence, in meeting rigorous requirements for bank accounts. These matters particularly affect the homeless, ex-offenders and migrants, to name but a few. Amendment 22 also highlights some of the financial exclusion issues which affect those suffering with mental health conditions. The report describes how certain behaviours, such as,
“disengaging … from contact with creditors and financial services providers”,
lead to the build-up of debt and problems with credit ratings, and that,
“excessive spending during manic episodes”,
can also lead to the build-up of debt. It is important, therefore, that arrangements include “control options” for customers.
However, as recent events demonstrate, the existence of control options does not guarantee provider compliance. One especially disturbing issue reported on by the Select Committee is the communication strategy pursued by some online retailers. This involves potentially “predatory behaviour” in the early hours of the morning, when lonely and isolated individuals are at their most vulnerable. This is a matter for the Government, the SFGB and others to be concerned about. Is the Minister satisfied with the current state of regulation and its implementation in this regard?
Finally, Amendment 22 calls for a review of the impact of the Welfare Reform Act 2012 on financial inclusion. While it calls for an annual review, we accept that it might better call for, as did the committee,
“a detailed, comprehensive cumulative impact study of how changes in social security policy resulting from the Welfare Reform Act 2012 might have adversely affected financial wellbeing and inclusion”.
Other organisations have tried, such as the IFS and the CPAG. A recent analysis by the latter showed that under universal credit and child benefit changes since 2013, families and children have lost more than any other group, with cuts far outweighing the increased support for childcare costs. Compared with the original design of universal credit, the average family with three children will be more than £2,500 a year worse off. The point is that the changes to universal credit will be heavily poverty-producing and lack of money is a feature of financial exclusion. While an annual review to monitor changes is helpful, the cumulative effect of all components of the changes to social security shows how mean-spirited and counterproductive they have been.
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Apart from the broad thrust of the universal credit system, particular aspects of the design impact very directly on the build-up of debt, such as the seven-day waiting period, which we believe should be abolished; more flexibility on monthly payments; more choice over the recipient of housing support; and the localisation of council tax support and the Social Fund at a time when local authority funding is being dramatically reduced. These matters, together with the impact of sanctions, need to be the subject of a comprehensive research programme.
Amendment 25 takes us back to education and, in part, to the debate we had at the end of our first Committee day. It is implied in our approach that if we are to achieve improved financial inclusion as a society—we have a long way to go—financial education is important. This amendment keeps the focus on children and young people. As far as secondary schools are concerned, we learned from evidence before the Select Committee that despite financial education being added to the national curriculum in England—the devolved nations being ahead of the game—the obligation to teach financial education applies to only 35% of state-funded secondary schools, the ones which are now maintained. Moreover, limited resources have been made available, including for teacher training. Notwithstanding this experience, we consider that the Secretary of State should be encouraged to have financial education added to the primary school education curriculum.
Early intervention is important in many areas, no less financial education. Money Advice Service research shows that attitudes to money are typically embedded by the age of seven. Notwithstanding that the current inspection framework sets out principles rather than a focus on individual subjects, part of the framework is concerned with supporting children to make career choices, and it is considered a sufficient nexus for Ofsted to take account of financial education provided in schools, hence the amendment urging that it does.
There is a major task here for the SFGB and we encourage the Government to support the issues we have outlined. I beg to move.