Tackling financial exclusion: A country that works for everyone? Contents


The United Kingdom is at the forefront of the global finance industry and is a leader in the fields of financial services, technology and innovation. Despite this high standing, a sizeable number of UK citizens lack access to even the most basic financial services, while still more are forced to rely on high-cost and sub-optimal products which can prove damaging to their long-term financial health. The ‘poverty premium’, whereby the poor pay more, serves to exacerbate the effects of financial exclusion, reinforcing a vicious circle. In addition, bank branch closures are a depressingly regular feature in news headlines and, when combined with a growing emphasis on digital services, will intensify financial exclusion.

We do not believe that this situation is acceptable. Recent speeches and policy announcements have clearly set out the Government’s ambitions towards a shared society, and to make ‘the system’ work for all. Our conclusions and recommendations in this report are consistent with these wider Government objectives, and will help the Government to deliver on this agenda.

The Government needs to give stronger leadership and central co-ordination to initiatives that seek to address financial exclusion. Work to address financial exclusion cuts across various Government departments and extends to local authorities, businesses and civil society. In addition, there is a need to collaborate and co-ordinate with the devolved Legislatures and Administrations, to create a cross-UK response to financial exclusion. Since the demise of the Financial Inclusion Taskforce initiatives have lacked central co-ordination and oversight; in addition, the loss of the Taskforce gives the unfortunate impression that financial inclusion is no longer a key priority for the Government.

We recommend the appointment of a clearly designated Minister for Financial Inclusion to lead and co-ordinate work in this field. The Minister should provide annual reports to Parliament, setting out progress made in addressing financial exclusion. A strong lead from the Government should be supported by proactive regulation; we recommend that the remit of the Financial Conduct Authority should be expanded to include a statutory duty to promote financial inclusion as part of its key objectives.

The Government must lead from the top, but support should also be provided to ensure that each individual is equipped with the lifelong skills required to make appropriate choices concerning savings, borrowing, and debt. We recommend the addition of financial education to the primary school curriculum in England, and a stronger role for Ofsted in assessing provision, in order to deliver against this objective.

While this will help to support the financial capability of future generations, those who are currently experiencing difficulties should not be neglected. Cuts to debt advice services—especially those provided at a local level—are a cause for major concern, particularly in an era of growing levels of household debt. The body that succeeds the Money Advice Service must have the appropriate mandate to be able to commission and fund effective and impartial debt advice for all who require it. In addition, the banking sector needs to be much more proactive in promoting basic bank accounts to those who need them, playing the fullest possible role in reducing the number of people who are currently unbanked.

The ongoing closures of bank branches, and an increasing reliance on digital services, pose a number of challenges for customers. The Post Office provides a wide range of banking and financial services through an extensive branch network. The majority of customers, however, are simply unaware that these services exist. The current waste of this untapped potential is not acceptable, and needs to be addressed through a concerted joint effort from Government, the banks and the Post Office.

Vulnerable groups including the elderly, those suffering from mental health problems and people living with disabilities are particularly ill-served by the growing number of bank closures, and we make specific recommendations to support these groups. We find it totally unacceptable that, over twenty years after the concept of reasonable adjustment was first introduced into law by the Disability Discrimination Act 1995, some financial services providers are still failing to make reasonable adjustments for disabled customers.

High-cost credit is a significant issue which can intensify the problems of those who are already in financial difficulty. The added value of a strong lead from Government, backed and supported by proactive regulation, was demonstrated clearly in the action taken to regulate parts of the high-cost, short-term credit sector in 2015. The success of these regulations makes the case for more widespread regulation of high-cost credit. In particular, we recommend that the excessive costs associated with unarranged overdraft fees and some rent-to-own products should be addressed as a matter of urgency, and we see no reason why a similar cap should not be extended to these services. Limitations on this sector will mean that demand for credit needs to be met elsewhere, and we recommend that credit unions should be provided with new freedoms and flexibilities to help them to meet some of this demand.

Finally, we received a high volume of evidence highlighting how recent Government welfare reforms could contribute to financial exclusion. We believe that the reforms were intended to promote social and financial inclusion, and are concerned that unintended consequences could undermine these aims. We make a number of important recommendations which would help to prevent benefit recipients spiralling unnecessarily into debt and financial exclusion.

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