Budget Resolutions and Economic Situation — amendment of the law

Part of Oral Answers to Questions — Prime Minister – in the House of Commons at 1:58 pm on 24 March 2010.

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Photo of John McFall John McFall Chair, Treasury Committee, Chair, Treasury Committee 1:58, 24 March 2010

That is an idealistic position. I do not know enough about the statistics in terms of three months or six months, and some young people get lost in the statistics. The important thing is that we help people after six months, but if it were felt that there was a detrimental effect after three months, and if it were possible to implement the proposal, I would quite happily support the hon. Gentleman's suggestion.

I mentioned public anger, but I shall refer to that later, because I mentioned also financial inclusion, and I certainly welcome the Government's policy on basic bank accounts. As the Chancellor and others know, the Treasury Committee from the previous Parliament forged the policy to ensure that we have a 10-year plan for financial inclusion. We pushed very hard for the Government to act on the problem, and all of us must realise that banking is not a luxury, but vital for our society and our economy.

There was a social contract between the banks and the public: as long as the banks were able to provide basic, essential functions to the public, particularly saving and lending, bankers' bonuses and excesses were tolerated. But no more. With the onset of the financial crisis, the banks stopped being able to carry out those functions, people no longer felt that their money was safe and the banks stopped lending to businesses and households. That social contract has broken down, and we must bear that in mind for future policies.

Considerable public anger is now directed at the banks, and that is understandable given the economic difficulty that many families face. However, given the importance of financial services to the economy, we will not have a secure economic recovery until the financial sector is also on the road to recovery. So it is important that we address the issue of concern and public anger, and restore confidence in the financial sector.

I mentioned financial inclusion. The Government's proposals on basic bank accounts is very welcome, and work is being done already by the Financial Services Authority and the Treasury in respect of data for banks on where people open accounts and where lending is made to businesses and individuals. However, all of us have seen, in our own areas, the proliferation of cheque cash shops, payday companies and doorstep lending in places with little or no banking provision. We need clarity about to whom the banks are lending and not lending. For example, there is a lack of access to cash machines in ethnically diverse areas-a fact that has more potency than a diversity indicator itself. Underneath the figures lies an explanation for why we lack sufficient provision of those basic bank accounts, and we need to go further to ensure that we get that information across.

Even today, 1.75 million people do not have a bank account.