To ask Her Majesty’s Government what plans they have to require the Financial Conduct Authority to have regard to financial inclusion.

Financial inclusion is a priority for this Government. Her Majesty’s Treasury and the Financial Conduct Authority already work closely to meet the Government’s aims on tackling financial exclusion. As outlined in the future regulatory framework review consultation that was published in November 2021, the FCA’s current and ongoing initiatives to improve financial inclusion demonstrate that it can already effectively support the Government’s financial inclusion agenda through its existing operational objectives and regulatory principles.

My Lords, financial exclusion has dogged this nation for decades. It is a personal tragedy for individuals and holds individuals, communities and businesses back. Does my noble friend not agree that with a concerted effort from HMT, a “have regard” duty for the FCA and the involvement of the Bank of England and all financial services firms, we could truly have an economy and a society that worked for everybody and were truly financially inclusive?

As I am sure my noble friend knows, since 2019 the Government have chaired the Financial Inclusion Policy Forum, which brings together the Government, the FCA, industry and consumer groups to deliver on the aims that he has set out. We are aware that there have been responses to the recent future regulatory framework review on the question of a “have regard” duty to financial inclusion. The Government are considering all the responses to that consultation and will set out their response in due course.

When the Government last discussed this, they said they would try to make sure that there was a bank left in every community, and that they were working on that policy. I remind the Minister that there are record numbers of closures, leaving many vulnerable communities without a bank. When are the Government going to take some action—or are they going to wait until all the banks have closed before they do anything?

My Lords, we are taking action in a number of areas. As we have committed to previously, we will ensure that we legislate to ensure access to cash. There are also some industry led-solutions under way, with five new bank hubs set up this year that allow different banks to pool their services together to ensure that communities still have access to those important services.

Does the Minister agree that one means of improving financial inclusion would be to add financial literacy to the core curriculum in schools, and will she now consider it?

My Lords, financial education is covered within both the citizenship and mathematics curricula, and primary schools are strongly encouraged to teach citizenship, including financial education. In addition, the Money and Pensions Service published financial education guidance for primary and secondary schools last year to support school leaders in enhancing the financial education that is currently delivered in their schools to make it memorable and impactful.

What assessment have the Government made of the effectiveness of the FCA in tackling the poverty premium—that is, the extra cost that people on low incomes pay for essential services and products such as prepayment energy meters? Does the Minister agree that, as the cost-of-living crisis grows, the FCA could make more progress on this vital issue if the regulator were required to consider financial inclusion across all areas of its work?

My Lords, the Government are conscious of the poverty premium, and so is the Financial Conduct Authority. We are committed to ensuring that all consumers can access financial services and products that are affordable to them. There are examples of concrete action in this area—for example, a pilot of a no-interest loans scheme and a pilot of prize-linked savings schemes for people who are struggling to access appropriate and affordable financial services. That is something that we want to continue to build on.

Does the Minister share my concern at the rate of closures of rural banks? This is a particular problem for the elderly who often have no access, other than by public transport, to get to banks. It also poses security problems for many shops in what is coming up to the busiest time of year. Should there not be some sort of social policy constraint on banks to ensure that a minimum number of branches are kept open in rural areas?

In addition to the answer which I gave previously, it is also possible for consumers to use Post Office services to carry out many of the functions they need to access banking. That network is distributed around the country.

My Lords, the Centre for Social Justice estimates that 1 million people are currently borrowing from illegal moneylenders. Clearly, they do not feel financially included. What steps will the Government take to stop that, and to ensure that these people known more about credit unions, for instance?

The noble Baroness is right to raise the issue. The Government are taking a number of actions in this area. I previously referred to the pilot of a no-interest loan provision which the Government are supporting. They are also putting record financing into consumer debt advice to ensure that if people are in trouble, they get access to the help which they need.

My Lords, I have a letter here written by the FCA chief executive to the Financial Services Consumer Panel, dated 20 October 2021. In it, the FCA chief executive associates financial inclusion with the expectation that

“Firms must pay due regard to the interests of its customers and treat them fairly.”

Given that almost every financial product has been mis-sold, and given that many banks have been engaged in money laundering, tax dodging and sanction busting, so that it is hard to find a pristine bank, how are the Government going to deliver fair treatment of customers, when the FCA’s fines are puny, and they have so far not secured better practice or behaviour.

I do not recognise the picture which the noble Lord paints. Our banks and financial services provide an essential service to people up and down the country. They were one of our essential partners in distributing the support we provided to businesses through bounce-back loans and other support packages throughout the pandemic. Yes, there have been certain problems in certain areas, which is why the Government are taking action—for example, on anti-money laundering legislation and counterterrorist financing legislation. I am afraid to say that I just do not agree with the noble Lord.

My Lords, given that there is a significant amount of in-work poverty, will the Minister join with me in congratulating those employers who are working to assist their workforce to access low-cost loans and debt repayments via salary deduction? Might the Minister also consider encouraging some of the financial firms to make financial education more widely available in the workplace, given that many have not had the benefit of this education in schools?

My noble friend makes a very good point. Financial education should not stop at schools, and the workplace offers a great opportunity to continue that education. For example, with the success of auto-enrolment in pensions, we see the importance of an ongoing engagement in our financial lives throughout our careers.

My Lords, the bank HSBC, the housing and homeless charity Shelter and other charity partners are working collaboratively to ensure that certain people with no fixed address are able to access basic banking services. Do the Government welcome this kind of innovative thinking? More importantly, what efforts are Ministers making to encourage other banks to design and launch similar products for other financially excluded persons?

I absolutely welcome that kind of innovative thinking, and the collaboration between the private sector and social enterprises, to support vulnerable consumers. Of course, there are basic bank accounts designed to ensure that everyone can have access to banking services; however, we want to encourage continued innovation and collaboration with the private sector.

My Lords, what support are the Government currently giving the credit union sector?

My Lords, I think a noble Baroness before referenced the credit union sector. It does excellent work in supporting people with access to low-cost credit. I am sure that it is part of our Financial Inclusion Policy Forum, where we bring together representatives from industries of all sorts to look at what more we can do to ensure financial inclusion in this country.

Would my noble friend the Minister like to reflect for a moment on the excellent work of the Financial Inclusion Commission, which has put forward a plan to ensure that the regulator has a “must have regard” provision to tackle financial inclusion? Will she and her colleagues sit down with that commission and put together an action plan that can see real progress in tackling the issues facing financial inclusion?

My Lords, the Government are absolutely committed to taking action on financial inclusion. That is why we have the Financial Inclusion Policy Forum that brings together industry, consumer groups, the regulator and the third sector. We publish an annual report on the Government’s work on financial inclusion, which sets out the broad range of initiatives and ongoing work to support the sentiment that my noble friend expressed about taking action in this area.