Financial Inclusion — House of Commons, 2017-12-07
Topic: Domestic Commerce
Jeremy Mark Quin (Conservative, Centre-right): I am most grateful to the Minister. He raises a valuable point about credit unions, although they are not the focus of this debate. I do not wish to push my luck, but I hope we will have another opportunity to discuss them in the future The Minister is right about the progress that has been made since 2006. The increase from 2% to 3% in the interest rate allowed for credit unions has helped to make them more sustainable. It has permitted higher dividends, while ensuring that credit unions’ borrowing rates are very competitive. Without wishing to go all Gilbert and Sullivan, there is something apt in making the punishment address the root of the crime, so I am delighted that funds recovered from convicted loan sharks will, from next year, help to pay for incentives for credit union membership in the communities on which loan sharks prey A financially inclusive system is one that is fit for purpose for all in society, regardless of their economic status. It is one in which individuals can participate fully and not face punitive restrictions in the financial products that they can access. It is also a system in which measures are taken to help to prevent people from falling into a downward spiral of financial hardship Every constituency MP knows the scale of the issues. There are approximately 1.5 million unbanked adults in the UK. According to Citizens Advice research, 13.5 million adults have difficulty managing money and making financial decisions. The ONS found that in the first quarter of this year only 2% of income was put aside as savings. The savings of those who do have them are often woefully insufficient to deal with life’s inevitable financial pressures—because of the breakdown of a washing machine or a car needed for work—through to more fundamental losses of income. The requirement for credit is therefore a given Financial exclusion can be further exacerbated by factors such as the high cost of credit and pay-as-you-go services. The commission estimated this poverty premium to be a cost of £1,300 a year to our poorest families. In the meantime, many from across the income spectrum lack good financial guidance at a time when the range and complexity of financial products has never been greater, and the need to make the right long-term decisions, in the light of increasing longevity, has never been more acute. Financial inclusion is a huge topic, but the House will be pleased to hear that I intend to focus this debate on education, information and guidance. I was the a director of a credit union before entering this place, so I knew our sense of frustration—indeed, I am afraid, our sense of failure—at not being anywhere near as effective as we felt we should have been at persuading those in need of credit to use our cheaper community rates rather than accessing high-cost and high-risk lending The battle to ensure financial awareness has to start very early. I welcome the fact that the new national curriculum has made financial literacy statutory for the first time as part of citizenship education for 11 to 16-year-olds. I also recognise that improvements in basic maths, alongside the excellent results we have seen recently in literacy, are fundamental. However, I am afraid that focusing on secondary level may be too late. A report by the Money Advice Service found that financial habits are largely formed by the age of seven. Worryingly, a separate study by the Gambling Commission found that nearly half a million children as young as 11 are gambling weekly. All we can do to increase financial literacy among children at primary school should be encouraged, and much can be done incrementally. I am aware that educational cartoons have been produced in Singapore and elsewhere to teach the basics of financial literacy at the very earliest ages. Simply having a single teacher in a school with the knowledge and understanding of how to teach financial literacy, who can act as a focus for provision inside that school, can be critical Any Member of this place knows how bewildering financial information can be to consumers. We all, in common with every citizens advice bureau in the country, are aware of the dreaded presentation at advice surgeries of a carrier bag full of financial information, much of which will be highly complex. We need to harness modern technology to help to provide our citizens with clear information about their financial position so that we help them to make educated judgments. Nowhere is this more apparent or more pressing than on pensions. All too many people suffer the scandal of lost pensions, while countless others are unaware of their post-retirement financial position until it is too late. I certainly know of examples of lost pensions from my own constituency It was a real pleasure to serve on the Work and Pensions Committee in the last Parliament. Our first report after I became a member of that Committee was "Pension freedom guidance and advice", which highlighted the critical importance of the pensions dashboard for explaining clearly to consumers what they can expect and to ensure that they do not lose out I am delighted by the fresh impetus that the Minister has given the pensions dashboard. Bringing together data from 64 million pension pots is ambitious but necessary. Providing a single accurate and comprehensive source of pensions knowledge will be immensely useful to help to facilitate financial capability and retirement planning. I appreciate how complex a process this is and I have no wish to break the back of any camel. However, when the system is up and running, I want the concept to be extended to clarify for consumers with savings products, a mortgage or debts the full extent of their financial position, thereby helping them to plan accordingly On guidance, I welcome what is outlined in the Financial Guidance and Claims Bill and the Government’s plans, which have broad cross-party support, to create a single financial guidance body. This, too, is in keeping with the recommendations of the Financial Inclusion Commission’s report, and it has been welcomed by Which?, Citizens Advice and Age UK A lot of great work is conducted at a community level—I particularly draw hon. Members’ attention to the valuable work conducted by the Horsham debt advice service—but the scale of this issue requires support on a national level. I have witnessed at first hand the excellent work carried out by the Money Advice Service, the Pensions Advisory Service and Pension Wise. They are all superb in their different ways, but I am certain that a single body will provide a more effective means by which to impart co-ordinated and consistent guidance I am at one with Citizens Advice in seeing three aspects of the Financial Guidance and Claims Bill as particularly positive: the new body will support only advice that is free at the point of use and is independent; it has an objective of targeting help at those most in need; and it has a remit to support joined-up services and to fill gaps, not to duplicate current provision. I am only too aware of the other pressures on time in this Chamber, but I look forward to the Bill’s Second Reading in this place as soon as possible One of the Bill’s provisions begins the process of implementing the Conservative manifesto commitment to provide a debt respite scheme. Under the terms of the Bill, the Secretary of State must, within three months of the establishment of the body, seek its advice on the establishment of such a scheme. That will be an early test, and one to which a great number of us look forward to the SFGB and the Government rising. This will be but one early example of the body’s strategic function to support and co-ordinate the development of a national strategy to improve financial capability. The SFGB will have to rise to the challenge outlined in research by Which?, which shows that only 36% of consumers use Government advisory bodies as an information source about their financial options Advertising and effective resourcing are key to ensuring high uptake, particularly among the groups who would benefit most from accessibility. Financial exclusion disproportionately affects lone parents, single pensioners and the long-term sick and disabled, and the active recruitment of those people requires the effective use of Government funding I would also like pensions guidance made much more widely available. Without wishing to be indelicate, Madam Deputy Speaker, I can say that the services of Pension Wise, determined by age as they were, are available to our excellent Minister, but not, alas, to his excellent Parliamentary Private Secretary and nor, surprisingly, to myself. The younger the age range, the more effective this service will be I finish where I began. The SFGB will have a role in advancing financial inclusion, as will the new financial inclusion policy forum, which will be co-chaired by the Minister and the Economic Secretary. Especially at a point when the interest rate cycle is turning, financial inclusion is of critical importance. I welcome the moves by the Government that are under way, but I welcome still more the further reforms that I look forward to the Minister progressing.