There is much, at half time, to consider from the Financial Services and Markets Bill’s progress through Committee Stage in the House of Lords. I have spent this week writing for Crypto AM about some of the ways in which I think the Bill falls short and sharing my suggestions – the amendments I have tabled – to improve it on topics ranging from parliamentary scrutiny to regulator accountability and empowering SMEs by permitting rights of action for breaches of the FCA handbook.
For me though, more than all of this, important though it certainly is, the most important issue is the question of financial inclusion. Financial inclusion, as described by the Governments annual Financial Inclusion report, is ensuring that “all individuals, regardless of their background or income, have access to useful and affordable financial products and services.” Despite efforts, captured each year in these annual reports, we have not achieved what we must on financial inclusion.
For that reason, I am putting forward several amendments each addressing a different aspect of financial inclusion. Perhaps the most significant is my proposal that the FCA have a specific objective for financial inclusion. It is of that level of importance. They should.
I have long argued that the Government must do more to address financial inclusion and two years ago put forward a similar amendment to the last Financial Services Bill. Currently the FCA has a strategic objective of making sure relevant markets function well, or as they put it…
“Financial markets must be honest, fair and effective so consumers get a fair deal. We work to ensure that these markets work well for individuals, for businesses and for the economy as a whole.”
However, with this piece of legislation the Government are planning to add new secondary objectives to the regulators to advance the international competitiveness and medium to long-term growth of the UK economy. I am broadly supportive of this move but feel that unless we directly address the issue of financial inclusion then the pernicious problem of financial exclusion will continue to dog our nation.
Financial inclusion is simply enabling everyone to be able to exercise their full rights as a citizen in this country. This is obviously an economic issue but if every citizen was financially included what would come through that as well is psychological benefits for those individuals – but also, social, and economic benefits for the whole of society, for that local community and for the country as a whole. Whichever lens you choose to look through it just makes sense.
The full text of my amendment:
“Financial inclusion objective for the FCA
(1) The FCA has an additional primary objective to promote, monitor and report on financial inclusion in the United Kingdom.
(2) The promoting, monitoring and reporting must include but not be limited to—
(a) measures the FCA have taken to increase financial inclusion;
(b) levels of digital literacy and connectivity impacting financial inclusion;
(c) levels of financial literacy education in primary and secondary settings;
(d) specific issues facing particularly disabled and older people.
(3) Reports must be published every six months from the passing of this Act.”
When I spoke in the debate, I considered progress between the last time we debated my proposal for a financial inclusion objective, back in 2021.
I asked the Minister:
“Are there now more or fewer bank branches and ATMs? Is there more or less cash acceptance and financial inclusion?
And answering my own question I argued that
“whatever government agenda we consider—growth, levelling up, or increased connectivity and creativity for our citizens, communities, cities and country—a financial inclusion objective for the FCA makes sense. It is now time to enable the FCA to play a spearheading role in financial inclusion, and to accept my amendment.”
This amendment would assist the FCA in gaining a greater grip on the problem and address the blockers, barriers and bias causing so many to remain so shamefully shut out of mainstream financial services. Such services which would be so enabling, empowering to each and every one of them.
Being financially excluded is devastating and destructive, not just for individuals unable to access mainstream financial services, but for all of us as a society. Ensuring greater financial inclusion makes sense. It makes psychological, it makes social, it makes economic sense. This amendment would add to the collective and widespread work in this area.
There was widespread support for the amendment and for the need to push with increased power the financial inclusion issue.
Baroness Kramer summed up the situation:
“My biggest gripe with the FCA on the financial inclusion agenda is that it is passive. If a new product or organisation were to come forward serving part or all of that community, it would of course appropriately regulate it. The problem is that it does not use its incredibly powerful and influential role as a regulator to spearhead the actual change—to pick up the words of Lord Holmes.”
Responding for the Government, Minister Penn said:
“The Government seek to ensure that people, regardless of their background or income, have access to useful and affordable financial products and services. We work closely with regulators and stakeholders from the public, private and third sectors to improve people’s access to useful and affordable financial services, and we are taking a significant step to protect the most vulnerable by legislating to protect access to cash through this Bill.
“While I commend these amendments and agree with their intention, the FCA’s objectives are core to its functions and should not be changed lightly or without detailed consultation, given the complexity of, and the risk of unintended consequences for, the way financial services are regulated in the UK.”
“Where there are gaps in the market that mean that some consumers struggle to access appropriate financial products, it is right that the Government, not the regulator, take the lead on action to address them.”
“The Government have done this by, for example, requiring major banks to provide basic bank accounts for those who might otherwise be unbanked.”
The FCA plays an important role in supporting this work. In his evidence to the Public Bill Committee, Sheldon Mills, the executive director of consumers and competition at the FCA, highlighted the proactive approach that the FCA takes on this issue, in line with its existing objectives, working in partnership with Fair4All Finance and others, and using the FCA’s innovation labs to explore how innovation can promote financial inclusion.”
In conclusion, when it comes to financial inclusion, we are clearly far from there yet. We will be pushing the Government harder as we move to the next stage of the Bill, not least in respect of a potential consultation on the matter. As ever, I welcome your thoughts and ideas on how we can move closer to an economy, a society where financial inclusion is less an aim, more a reality, for all our benefit.