Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 100-111)


1 MAY 2007

  Q100  Mr Gauke: One final question. I do not suppose either of you know what the OFT is doing about the campaign for Christmas products, do you?

  Ms Whyley: No, although we are very encouraged to hear that you are going to write and ask them, and I stress the urgency. I think Elaine and Brian are right, we are in May and people start their Christmas saving in February, so we may well have already missed the boat this year, so we really do need to know what is happening.

  Mr Rhodes: I might be able to be a little bit more helpful. They are keen to meet us and I am meeting them shortly.

  Q101  Chairman: But, as of this time, you do not know.

  Mr Rhodes: I am not here to defend the OFT either, but ---. I expect to meet them in the next fortnight. I suspect, as a result of this morning's discussion, that will certainly take place within the next fortnight if not sooner.

  Q102  Peter Viggers: I was interested in the emphasis that Citizens Advice place on the encouragement of individuals to save, even though they may be in debt, and drawing on its very long experience.

  Mr Rhodes: Yes.

  Q103  Peter Viggers: Do you think government strategy on financial inclusion takes sufficient account of the importance of promoting savings by those in debt?

  Mr Rhodes: "No, but", is the answer. As I said at the outset, it does strike me that section four of the March report was really quite carefully drafted in terms of what people were going to look at in terms of insurance as against saving, and I think that leaves us feeling slightly or potentially frustrated; but I think initiatives like the Saving Gateway have got to be positive signs and, if you like, what we see as an increased interest by the Government in the last year really in promoting financial education has also got to be welcome. I think the kind of issues that arise for us are the kind which are reflected in the NAO report on the FSA which was issued yesterday, which is that there is a lot of fragmented activity going on around Whitehall and quite how that fits together and how, going back to the NAO report, that fits together with what is happening down in Canary Wharf with the FSA. If that could be got together rather better, maybe we would have even more focus on the saving aspects of financial inclusion.

  Q104  Peter Viggers: I must say, I did note your use of the expression that banks have "spare profits". I wonder if you would like to have another crack at defining that?

  Mr Rhodes: I am not sure how far I want to be taken down this track. I think I simply said that the financial sector appears to have fairly strong balance sheets and reports recently, but I do not think I want to be taken any further, except to reflect that some of those institutions have, from our perspective, shown a real commitment to the financial inclusion agenda and some less so.

  Peter Viggers: Let us leave it at that. Thank you.

  Q105  Mr Breed: A couple of brief questions. If the big banks are not quite as interested as we might like them to be in the smaller market and we have not got the credit unions in the same sort of coverage and understanding and market acceptability, is there not a case in between the two for bringing the credit unions up more along the idea of a community banking operation so that people recognise it much more? This is a sector which is completely different from main banking, because it has the features of credit unions, but it is much more acceptable and has a degree of regulation within it, probably a light touch. Is that not a way forward?

  Mr Rhodes: The short answer, I think, is, "Yes." We in Citizens Advice are working at a national level closely with ABCUL, the largest of the credit union groupings, and, indeed, it is also happening at a local level. In fact, I believe, in your own constituency, the Liskeard bureau is working to help develop with the credit unions, and that has got to be welcome.

  Q106  Mr Breed: I am hoping ultimately the Cornish credit unions will get together so we have a Cornish Community Bank, but that is perhaps a fond hope. Looking at the next thing, have you come across the fact of banks utilising what we may call the money laundering regulations as a very convenient way of stopping some people being able to access a bank account?

  Mr Rhodes: I do not pretend to be an expert in this, and if I get this wrong I am going to end up writing back to you, but I think that there are a whole load of issues out there as to why, in certain circumstances, basic bank accounts and the rest are more difficult to access. This is as much a personal view as anything else, but I think the sense is that there is almost as much to do with the attitudes of individuals within a branch of a bank and the attitudes and understanding of what the position is as much as any concerted effort to be difficult.

  Ms Whyley: We would agree with that. I think there is still quite lot of confusion around how those regulations should be implemented, and I think it is very dependent on individuals within individual branches. I do not think that accounts for all the people that still do not have bank accounts, but there are still people being turned away because they cannot provide the right ID. It is less of a problem than it was, and I know the Banking Code Standards Board's "mystery shopping" is helping that process, but I think there is still some inappropriate use of those regulations and I think there can be a lack of understanding with branch staff and customers actually of the right ID for that account.

  Q107  Mr Breed: Finally, in terms of the education, it seems to me that if we are going to get this inculcated in that way, it has got to start at a much lower level, perhaps even at secondary school education level. I know there was some evidence that we are beginning now to recognise that that ought to be some part of the curriculum so that people understand the whole way in which the financial industry operates, so that when they do get approached by credit card companies or are seeking savings or understanding that sort of thing, they have some reasonable understanding. Is that something you think should be more heavily promoted?

  Ms Whyley: I think there is evidence that financial education, even with very young children, and actually drawing out the financial education lessons in some of the things they would be learning every day anyway, particularly with maths and so on, can help people become more financially capable. I know the Personal Finance Education Group is doing an awful lot to promote financial education within the curriculum—so I think there are efforts there—but I think that is a different thing from financial capability. It can help contribute to it, but when you get out there and you are making those decisions and you are faced with the vast array of choices, there is still a need for generic financial advice and other types of support, but it can only be a good thing.

  Mr Rhodes: I fully agree with that. The FSA is providing some important funding to help that happen at secondary level. One of the banks, which I did not mention, is going to be helping bureaus promote it at a primary school, junior school, level, and I think that begins to open up some very interesting opportunities at that level which begin to touch on the Child Trust Fund, on which I am not an expert, but where bureaus and schools can work together in a complementary way with bureaus coming in and working with parents groups in those schools at the same time as the children are learning about things in class. It seem to me that there is a real risk that an eight or ten year old coming back from school who is asking parents to pick up a pair of scissors to cut up their store card might get a clip round the ear unless the parents have actually been given the same message at the same time.

  Q108  Chairman: Talking about that, I think there is a promotion today from the Competition Commission saying that if store cards are charging above 25%, then there could be a cheaper way of doing things. That started in this very community when the store card people came to us. I presume you welcome that, giving even more clarity?

  Ms Whyley: I am not entirely familiar with all the detail, but certainly anything that flags those higher interest rates up to consumers, absolutely, yes.

  Q109  Chairman: John, quickly to finish, you wanted regulation for Christmas savings products. We do not have that. What about the present situation? Is it adequate now?

  Mr Rhodes: For Christmas savings products?

  Q110  Chairman: Yes.

  Mr Rhodes: No. It does seem to us that, if you have got 750,000 people who are in a market with a dominant supplier, more people than there are in the whole of ABCUL membership, then it does seem to us that there should be a regulation of that, and I suppose our feeling is that it probably sits with the FSA. It is a nicety as to whether it is a savings scheme or not, but perhaps more important whether people see it as that. We would look to the FSA which describes itself as the Financial Watchdog to provide that oversight.

  Q111  Chairman: As we heard earlier from Brian Pomeroy, the OFT is investigating the findings about the hamper market, including whether there is fair competition, but do you think it is possible or appropriate to consider competition in the hamper market separately from the wider markets or shorter term savings products?

  Mr Rhodes: I think I am going to pass on that. I do not think I can give you a particularly informed answer.

  Chairman: If you pass on that, I will pass on the session this morning. That is it ended. Thank you for your attendance this morning and for your evidence.

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