Opposition parties must be called to account on financial exclusion
Faisel Rahman, The Guardian
Readers of this column will know that I have been promoting policies to improve financial inclusion, and to bring greater transparency to bank lending within excluded communities. What they may be less aware of is the inclusion of such measures in the budget last month, and their reinforcement – albeit hidden away – in the Labour party manifesto.
I and many other campaigners had been meeting with ministers and special advisers in the weeks before the budget announcement on this, and we must admit to being pleasantly surprised that they took action.
In the budget, the government committed itself to developing a People’s Bank at the post office, with a full range of affordable products. Although it is unclear if this means as an independent bank or via one of the existing banks as partners, if they were also to decide to turn all the post office card accounts into bank accounts – which would give holders access to direct debits, standing orders and ATMs – financial exclusion would pretty much be eliminated at a stroke because many of the 3 million people without bank accounts have a post office account.
Labour also proposed a levy on the banking industry to fund credit unions and community development finance initiatives, to help them scale up and offer an alternative to high-cost doorstep lenders. Many commentators picked up the commitment to a "universal service obligation" on all banks, which now gives people the legal right to a bank account if they have all the required ID.
While most banks already provided a basic bank account – an account without credit facilities – this latest obligation is most probably aimed at the new retail banks opening in the coming year. A debate on what this obligation might mean could spur campaigners and policy-makers to widen it towards banking in general – credit and savings, not just bank accounts.
Fewer commentators reported on the promised disclosure on bank lending, which I and others have been fighting for decades, as it is a cornerstone of transparency. If done right, it could put the onus on the banking industry to justify who and why they exclude, and would offer a measure of public accountability for their actions.
In its manifesto, Labour states that it will clamp down on the eye-watering interest rates charged by instant loans, payday and doorstep lenders, although it is unclear how.
The Conservative manifesto is very quiet on issues of financial exclusion. Although they are committed to "stopping irresponsibility in the private sector", they suggest that this will not be done through regulation, but rather a belief that "if people are given more responsibility, they will behave more responsibly". Interestingly, they want to ban excessive charges on store cards, but nowhere else, and create a Consumer Protection Agency, which will take on some of the tasks of the Office of Fair Trading and the Financial Services Agency. In addition, the Conservatives make a commitment to a free national financial advice service, funded by a levy on the industry, and to creating a national loan guarantee service for business.
The Liberal Democrats support Labour’s proposal of creating a Post Bank in the post office and, like the Conservatives, will try to limit store card interest rates. In addition, they will promote smaller and regional financial organisations to provide "local finance", and will clamp down on bank charges.
Labour has, through writing a budget, been able to dedicate the time and focus to think about policies on financial exclusion. Their proposals could become law if they win the election.
Since both the main opposition parties have said they will rewrite the budget within 50 days of taking office, I hope they give this issue the importance their manifestos have failed to. If they don’t, they will pass on a chance to develop a new contract between the finance industry and the marginalised, and help the 6 million people on the margins of financial services – of which 3 million are without bank accounts.