For all the press coverage of this week at Labour conference, it would almost seem like not much else is on the agenda other than the big debates we have seen on Brexit and the party’s democracy review. The truth is that both inside and outside there have been vitally important debates on wide ranging issues including education, adult social care, housing and the economy.
This week I have also participated in three Prospect and Fabian fringe events on financial inclusion, addressing complex issues that highlight real human cost. It’s well known that despite developments in consumer preferences and payment technology, the state of competition in the banking sector remains a matter of great concern to regulators and policymakers. In an uncompetitive market, more vulnerable and less informed consumers are likely to pay much more for financial services than those who are more financially literate. But the challenges are much wider, and some rightly also ask the question as to whether vulnerable consumers should have to switch for a better deal or whether you can get better services through regulation.
The need is clear. The Financial Inclusion Commission highlights how the UK is ranked ninth in the world in terms of banking inclusion by the world bank. A total of 1.5 million adults remain without access to the services of a bank in Britain today and only an estimated 50 per cent of those would like a bank account. Half of those who have newly joined a bank have incurred penalty fees. A total of 26 per cent of the newly banked are net losers, incurring more penalty charges than they gain in savings. There are 13m people in the UK who would not have enough savings to support them for one month if they experienced a 25 per cent cut in income, and between 3 and 5m households use high-cost credit.
This is a social justice issue. Of those who incur charges from unauthorised overdrafts, more are in poor areas, they are more likely to be BME, single parents or disabled. Fees incurred can amount to hundreds over the course of a year. Benefits changes and the shift to universal credit have compounded levels of debt and fluctuations in household finance.
Young people are also in need of better banking services. Over last few weeks, I have been conducting a short survey of young people in my constituency on their attitudes to financial services. Even anecdotally, the emerging results are interesting. On a scale of one to five, the weighted average score was 3.5 as to whether you are “confident that you are making good financial choices”. In responding to the question of the ease of getting advice on financial matters, the score dropped to 2.7, and was only marginally higher, at 2.9, for whether “financial products meet your needs as a millennial”.
All too often, we see technology as the answers to service provision or market reform alone. And they are part of the answer. But technology can’t replace relationships, and it is relationship-based services that create understanding, trust and confidence.
In tackling the challenge of financial exclusion, there’s a desperate need for an integrated cross government strategy. The state has a role to establish a framework and services that measurably include rather than exclude low-income segments of society. Indeed, a comprehensive approach towards financial inclusion is vital for Labour’s proposed programme of policies to truly act “for the many and not the few” and to provide a key foundation for shared prosperity.