As noble Lords have heard, the Select Committee did a lot of listening and we know that finance affects every person in the land, from the poorest to the richest. Our knowledge and appreciation of the many interventions, whether the basic bank account promotion, the control of payday lending or the encouragement of education in personal and household budgeting, has increased. Our imagination has also been stimulated and sometimes appalled by the testimony of those not included in the ordinary money transactions most of the population take for granted. In her introductory remarks, the noble Baroness, Lady Tyler, mentioned some of the statistics that back that up.
We are on a journey. There have been some achievements, going back as far as the government strategy of 2004, the taskforce of 2005 and the commission that reported in 2015. The present Government’s response to the committee’s findings is also welcome, if, as the Minister will have already realised, some of us think it has been a bit too mild. There is a long way to go towards full financial inclusion, the lack of which, in a mature economy, illustrates starkly the relationship between poverty and power, between the person and the policy, between the micro and the macro, and the breathtaking inequalities in income, housing, health and education already mentioned by several speakers this evening.
I draw noble Lords’ attention to just a few of the many recommendations in this complex subject that have already been referred to in the debate so far, from chapter 7, “Credit and Borrowing” and chapter 8, “Welfare Reform”. The sharp reduction in payday lending by regulatory action made us face up to the ease with which it is possible to fall into unmanageable debt. Other reasons have also been mentioned tonight, including gambling. Other high-cost credit areas, again referred to by the noble Baroness, Lady Tyler, being reviewed by the Financial Conduct Authority, should also be considered for regulation, as in recommendation 16. What is the timetable for the Financial Conduct Authority policy review on further interventions, mentioned in the government response at paragraph 5.41? At the same time, further support for the affordable credit industry should be provided, with, as we have heard, investment capital rather than grant or revenue funding. This, if supported, could be directed especially at credit unions such as the effective but underfunded Advance Credit Union at Erdington in my own diocese. What specific targets would the Government support for this ambition, as in paragraph 5.50? Alongside the well-needed, well-designed support there also need to be light-touch fees and regulatory regimes appropriate for these small and medium-sized financial enterprises.
The fruit of these recommendations, if we needed any incentive, will be seen in the removal or reduction of the poverty premium and, beyond that, the possibility of people beginning to save for the first time in their lives. Chapter 8, “Welfare Reform” deals with how the ordinary ambitions of people trying to participate responsibly in the economy have been hindered by the implementation of the worthy ideals of universal credit. Here, we recommended the abolition of the seven-day waiting period and flexibility in the frequency of payments. I note the Government’s optimism in paragraphs 5.51 to 5.55, but we have to realise that the tragic consequences of the failure of tightly managed household budgets are seen at food banks and places of welcome all over the country. Those applying for universal credit are being given impressive support by the Just Finance Foundation and Just Finance Black Country, by the Good Things Foundation, supported by Lloyds Banking Group, by Christians Against Poverty with its debt centres, four of which are in Birmingham, and by other money advice centres.
These actions and most of the issues raised in the committee’s report are well documented close to the people; for example, in my own area by the Birmingham Financial Inclusion Partnership, which I commend to the Minister. By way of general requests, in addition to the challenge to the Government to attend to the 14 other recommendations that have not so far been tackled, will the Minister recognise and commit to the need for the continuous, top-level leadership from government mentioned by the noble Baroness, Lady Tyler, in focusing on the multiple remedies to reduce financial exclusion? I know various people have been named tonight as being responsible, but this matter is so complex and serious for the welfare and inclusion of the whole population in our successful economy that it needs the very highest level of attention and a report back to this House.
Will the Minister give further support to those local authorities that have well worked out but under-resourced strategies for reducing financial exclusion? Thirdly, will he recognise and give vigorous support to the role of the NGO, charity and faith sectors in meeting personal needs, both for practical, life-saving assistance and sustainable money advice?
In the minute left to me, I express the hope that in future we may take time to reflect at the macro level on the bigger question of the meaning and uses of money and to examine our own assumptions about the systems we operate. In a city where Winterval, if I may mention this to the noble Lord, Lord Patten, has been abolished in favour of religious traditions from all backgrounds, perhaps we might, at this end of term, look to the vulnerable baby with an unmarried, teenage mother and a compassionate foster father, who had the attention of rich philosophers, poor shepherds, powerful governors, a reluctant innkeeper and even joyful angels; a baby who grew up to teach that crumbs from the table were not enough and that nothing less than a much larger table, at which all could share the feast, would.
The Minister of State, Department for International Development (Lord Bates) (Con):…I say at the outset that we take this report extremely seriously. It was well researched, there was some incredibly important evidence in it, and it was well presented. That was a very important element. It has been a very important part of the Government preparing their own strategy.
Another extremely important pillar of financial inclusion is addressing affordable credit. The Government have been active in ensuring that a functioning consumer credit market and a well-run regulatory regime are maintained by transferring supervision of the consumer credit market to the Financial Conduct Authority and legislating to require it to introduce a cap on the cost of payday loans, a fact recognised by the right reverend Prelate the Bishop of Birmingham and the noble Baroness, Lady Tyler, in her introduction. It is worth pausing to remember that that cap has had an immediate effect. There were 4.2 million payday loans approved in the first six months of 2014. In the first six months of 2015, after the cap was introduced, that had reduced to 1.18 million. That means that 760,000 borrowers have been able to save some £150 million per year, money that has gone back into the pockets of the poorest in our society. A feedback statement published by the FCA in July has found the cap to be successful and it will consult on further interventions in spring 2018.
….The right reverend Prelate the Bishop of Birmingham wanted us to recognise the important contribution that charitable organisations make in tackling exclusion, and I am happy to do that. I can give one example, of LifeSavers, which works with local credit unions to help savings clubs in schools. The initiative, developed by the most reverend Primate the Archbishop of Canterbury and Young Enterprise to start savings discussions in primary schools—which I am sure the noble Viscount, Lord Brookeborough, will welcome—introduces the benefits of savings at a very early age. The Government have contributed £600,000 to this initiative.
As regards the timetable for the Financial Conduct Authority’s publication of its recommendations under the high-cost credit review, the FCA published a feedback statement in July 2017 which showed that the cap on payday loans has been successful. Consumers now pay less. In respect of the high-cost credit market, it identified specific concerns in rent to own, home-collected credit and catalogue credit, and identified issues in arranged and unarranged overdrafts. Having investigated the issues, the FCA will consult on any necessary intervention in spring 2018….