Chapter 1: Introduction
Why does financial exclusion matter?
1.For most people, access to financial services is an important part of everyday life. At the most basic level, a bank account is used for paying bills and receiving income; access to a bank account is also usually a pre-requisite for gaining employment and receiving social security benefits. Access to savings and affordable credit is an important factor in allowing people to meet unexpected expenses, while conscientious provision for retirement relies upon pension products. These services are a recognised feature of day-to-day life for most people.
2.A sizeable minority, however, lack access to these products. This presents a significant barrier to engagement in modern society, and can also lead to individuals incurring significant additional costs due to reliance on sub-optimal forms of financial access. Those who are financially excluded in this way typically experience other forms of social exclusion, or have other vulnerabilities related to old age, disability, deprivation or a lack of digital skills, meaning that the effects of financial exclusion are compounded or reinforced. Free markets do not always serve the financial needs of these customers effectively.
3.In an increasingly connected society, and with greater movement towards a cashless economy, lack of access to financial services will put individuals at serious risk of social exclusion and marginalisation. In her speech to the Charities Commission in January of this year, the Prime Minister explained how the Government:
“Will recalibrate how we approach policy development to ensure that everything we do as government helps to give those who are just getting by a fair chance—while still helping those who are most disadvantaged. Because people who are just managing, just getting by, don’t need a government that will get out of the way, they need a government that will make the system work for them.”1
She went on to state:
“With all these steps we will deliver this new agenda of social reform. And government will step up to support and—where necessary—enforce the responsibilities we have to each other as citizens, so that we respect the bonds and obligations that make our society work. This means government supporting free markets as the basis for our prosperity, but stepping in to repair them when they aren’t working as they should.”2
4.At a time when the Government is focused upon developing a ‘shared society’, and making the system work for those people who need it, positive interventions to overcome the issue of financial exclusion are essential. This report sets out a number of practical, deliverable recommendations, based upon our extensive evidence, which would help to address the injustices of this persistent problem and, as a result, support the Government’s aim of delivering a fairer society.
The focus of the Committee
5.The Committee was appointed by the House on 25 May 2016 to “consider financial exclusion and access to mainstream financial services”.3 From the outset of our work, we sought to address fully both elements of this remit, giving due consideration to access to services but, also, seeking to understand the wider social implications of financial exclusion, and relationships with other forms of deprivation and exclusion.
6.We were mindful of recent work that had taken place in this field, including the extensive body of work produced by the former Financial Inclusion Taskforce and the detailed inquiries and report of the Financial Inclusion Commission. We heard evidence from individuals involved in this work, and sought to take account of their findings where appropriate.
7.Our recommendations are to the UK Government, reflecting the fact that financial policy is considered to be a ‘reserved matter’ under the various devolution settlements that have been made with the constituent nations of the UK. The nature and extent of devolution, however, necessarily means that across some policy areas that proved relevant to the inquiry—particularly, but not only, education—our recommendations might be of more direct relevance to England than they are to Northern Ireland, Scotland or Wales.
The work of the Committee
8.We published a call for evidence in July 2016, setting out 14 questions for consideration by interested organisations and individuals. Over the course of our inquiry we received 101 submissions of written evidence and heard from 52 witnesses in 23 evidence sessions. The Committee also carried out two visits, to Coventry, and to Toynbee Hall4, to meet with individuals who had experienced financial exclusion and a range of organisations that provide advice and support in this field. We are grateful to all those who gave up their time to make these visits worthwhile, and to all those who provided evidence to the Committee. Notes of both visits are contained in the Appendices of this report.
9.We are also grateful to Karen Rowlingson, Professor of Social Policy in the Department of Social Policy and Social Work, University of Birmingham, who served as the Committee’s Specialist Adviser.
10.Our report concentrates on:
- The extent and nature of financial exclusion (Chapter 2);
- Leadership from Government and proactive regulation (Chapter 3);
- Financial education, advice and capacity building (Chapter 4);
- Financial exclusion and vulnerable groups (Chapter 5);
- Access to financial services (Chapter 6);
- Financial exclusion, credit and borrowing (Chapter 7); and
- Welfare reform and financial exclusion (Chapter 8)
1 Prime Minister Theresa May, The shared society: Prime Minister’s speech at the Charity Commission annual meeting, 9 January 2017: https://www.gov.uk/government/speeches/the-shared-society-prime-ministers-speech-at-the-charity-commission-annual-meeting [accessed 14 March 2017]
2 Ibid.
4 A charity providing advice and support services in the east end of London.