[Lord Speaker] Second oral question.
Lord Holmes of Richmond.
[Lord Holmes of Richmond] My Lords, I beg leave to ask the question
standing in my name on the order paper.
[Baroness Penn] The government wants to ensure
that people, regardless of their background or income, have access
to useful, affordable financial products and services.
To tackle financial exclusion, the government convenes
the Financial Inclusion
Policy Forum, which brings together ministers, regulators and industry
and the third sector to provide leadership and promote collaboration.
Since 2019, the government has allocated £100 million of dormant assets
funding to support Fair4All Finance's work to improve access to affordable credit.
[Lord Holmes of Richmond] My Lords, would my noble friend agree
that financial inclusion doesn't just bring economic
benefits to the individual financially included.
It brings economic, social and psychological benefits to all of us.
To that end, would she agree it's high time that we revisit
the question of a "have regard to" financial inclusion duty
for the FCA?
[Baroness Penn] Well, my Lords, I’d absolutely agree with the sentiments
expressed by my noble friend about the importance
of financial inclusion and the government does recognise that there has been
a strong interest in the proposal for the FCA to be given a seperate
"have regards to" financial inclusion.
However, at present the government's position remains that we believe the FCA's
existing objectives and regulatory principles are already well aligned
with the objectives of financial inclusion,
and we don't believe that a separate "have regards to" financial inclusion
would necessarily lead to a different approach
or tangible improvements over the current arrangements to the aim
that we all want to see, which is greater financial inclusion
and less exclusion.
[Lord Watts] My Lords, the government
says that it's in favour of this, but it's watching as banks
close in many communities, many poor areas have no bank
at a time when those banks have seen soaring profits.
When is the government going to act to do something about this?
To make sure people have access to banking services?
[Baroness Penn] Well, my Lords, there are existing obligations
that are enforced by the payment services regulator.
But noble Lords will also know
that the government's committed to legislating to protect access to cash,
and that legislation and those measures will be included in the forthcoming
financial services bill.
[Lord Howell of Guildford] My Lords, does tangible improvements include wider
social ownership of assets.
Wider ownership of popular capitalism.
At the moment, capitalism isn't very popular at all.
So may be some reinforcements to spread the benefits
of capital beyond those who benefit
anyway because they've got capital in the first place.
[Baroness Penn] I would agree with the sentiments expressed by my noble friend.
And I think that access to capital is something that
should be offered to the widest range of people so that they can benefit from it.
[Lord Sikka] My Lords, the biggest barriers to financial inclusion
are poverty and regressive taxation
that robs people of disposable income.
Some 14.5 million people already live in poverty.
The poorest 10% of households pay 47.6% of their income in direct
and indirect taxes, compared to 33.5% by the richest 10%.
Can the minister explain how and why
the government has created this shameful position
of exclusion?
[Lords] Hear! Hear!
[Baroness Penn] Well, I would say to the noble
Lord that in the £37 billion of financial support
offered to people this year to support them
with the high costs of living that has been targeted
at those on the lowest incomes and those least able to pay.
So the government has taken progressive measures
to help protect people against rising costs of living.
[Lord Bird] Would the minister agree with me that if you fail 35%
of our children at school, then you are going to have a lot of
financial exclusion.
[Baroness Penn] My Lords, I would agree that school is a very important place
to start for people's life chances and also their financial understanding.
I'm pleased to say that under this government, the achievement gap
for children at school between those
in the poorest households and those in the wealthiest households has narrowed.
And that's something we need to continue to make progress on.
[Baroness Tyler of Enfield]
My Lords, pursuing the point on poverty that we've just heard about
is the minister aware that the poverty premium,
which is the extra costs that people in poverty
on low income pay for essential products and services cost
the average low income household some £430 a year,
which is the equivalent to some ten weeks grocery bills.
So could the noble Lady, the minister, explain why she doesn't think
that actually giving the Financial Conduct Authority specific powers to tackle
financial inclusion, including the poverty premium, isn't a good idea.
I just don't understand it.
[Lords] Hear! Hear!
[Baroness Penn] Well, my Lords, I am aware of the poverty premium
and it can exist in different ways, in different sectors.
There is already work underway to tackle that poverty premium.
For example, the other week in questions
I spoke about work in the insurance sector to ensure those
with pre-existing conditions or those who are older can access
products.
And we're continuing to work through the Financial Policy Inclusion Forum
to make sure things like the poverty premium are tackled.
[Lord Knight of Weymouth] My Lords, according to evidence from the Center
for Financial Education, financial habits are formed at around the age of seven.
They also tell us that only 20% of primary school
children are receiving financial education.
That's despite personal social health and economic education
being a compulsory subject.
It's probably too wide a subject for many teachers
to be able to cover everything that's required.
What is the Treasury doing to work with the Department of Education to ensure
that every child from primary school upwards gets decent financial education?
[Baroness Penn] Well, there are a number of different avenues
through which financial education is taught at schools, including through
the maths curriculum and the citizenship
education, as well as PSHE.
And so the government’s well aware of the importance of this topic
and continues to work with the Department for Education to make sure that schools
and teachers have the resources to ensure children can learn about it.
[Baroness Bull] My Lords. My Lords.
[Lords] Crossbench! Crossbench.
[Baroness Bull] Oh. Thank you.
[Lords] Conservatives!
[Baroness Bull ] Oh! My Lords I'm grateful to the noble Lord for giving way.
Following on from the noble Lady, Baroness Tyler's
question about the poverty premium, which sees those who can least afford
it forced to pay more for essential goods and services.
Can the noble Lady, the minister, say what government
is doing to work with energy providers to prevent them charging
more for electricity, which is accessed via a pre-payment meter?
[Baroness Penn] Well, my Lords,
pre-payment meter customers are covered by the price cap.
So do receive protection there.
But it is a higher rate for pre-payment customers and Ofgem
believe that is necessary to reflect
higher operation costs and risks.
However, there are a robust set of rules in place to protect pre-payment meter
customers, ensuring that if suppliers identify
that they're in a vulnerable situation,
including where they are self-connecting or so rationing their supply,
they must be offered additional support credit.
And in doing so,
suppliers must consider also their ability to pay back that credit.
So there is a robust set of support available to people in that situation.
[Lord Forsyth of Drumlean ] My Lords,
given that the government has done well in reducing the taper rate,
is it not still the case that people in work on Universal Credit
are paying an effective marginal rate of tax of 55%?
That is 10% more than the highest paid people in the country.
So while we are talking about tax cuts, as we appear to be
in the Conservative Party at the moment,
would it not be a good idea to reduce the effective marginal rate of tax
of those who are poorest in order to encourage people back into work
or in work to value their contribution to society?
[Lords] Hear! Hear!
[Baroness Penn] Can I
agree with my noble friend's
sentiments and as he has pointed out, a cut to the taper
rate of Universal Credit is essentially a tax cut for those on the lowest wages.
And also proves to make sure that the incentives are aligned
to take on more work and
bring home more money.
So I would totally agree with him, but I couldn't
speculate on any future policies in that direction.
[Lord Tunnicliffe] My Lords, I'd like to congratulate Lord
Holmes of Richmond on his tenacity on this subject.
It's a tenacity that's got to me.
The fact that stands out to me is that 22% of adults
have less than £100 in savings.
And they're not just unlucky, they are victims.
They are victims of policies by firms ranging from car parks
to banks to reduce costs and hence make more profits.
What we need is a comprehensive, holistic approach.
Now the government is going some way down that road, but
the Financial Inclusion Commission wrote to Mr.
John Glen,
setting out a comprehensive way forward,
including the concept of a "have regard" duty on the FCA.
Is that letter being responded to
and how does it fit in with the government's general approach?
[Baroness Penn] My Lords,
I'm sure that letter will be responded to, although I'd like to take
this opportunity to pay tribute to the work of my honorable friend
John Glen, who I think it was addressed to as Economic Secretary to the Treasury.
He has done a huge amount
in post to promote financial inclusion.
But can I reassure noble Lords, that work will continue.
The FCA has, for example, consulted on its new consumer duty
and the noble Lord referenced those who don't have access to savings.
And of course the government
has to Help to Save program to ensure that those who are on low incomes
get more support to save so that they have
a financial buffer for when times are tough for themselves to.