House of Lords report states worrying signs of financial exclusions of significant parts of the United Kingdom population!
Today’s release of House of Lords report are worrying signs of poverty, lacking financial education and inclusion of millions of United Kingdoms citizens, the British government and Banking Sector has to due diligence, so that the citizens can be included and have safe transactions of their monies and their salaries. The day-to-day planning and the problematic planning for the future, isn’t supposed to be for so many and such big parts of the population. United Kingdom have about 64 million citizens and the numbers of low-income is now 13.5 million, that is huge part of the total constituency who suffer and struggle day-to-day. Together with the lacking ability to strengthen their financial muscles and use of the limited funds, as the banking are either getting all digital or the banking branches in their rural area has been closed. This with the lacking secure work and the quick loans and credit debt can create an economical environment that is hostile to such amount of segment of the population. That even worsening the trend of lacking financial stability and creating a banking sector for all parts of the population.
Who is excluded from the Financial institutions:
The House of Lord report of reports that in the United Kingdom there are about 13.5 million living in low-income house, young people who in regard has 1 of 5 has bad credit ratings, 600,000 older people who is financially excluded. Between 1989 and 2016, a total of 53% of all Bank Branches has closed. Also since the exclusion of bank branches, the internet access isn’t all over the British isles, therefore the report states that 12 million people lives without internet access in rural areas and also 3.8 million who lives without internet at all. So if the bank branches are closed in these areas and also lacking digital facilitation, than these people are excluded from the financial institutions (HL 132 P: 14, 2017). Also that 1.71 million people doesn’t have bank accounts in 2017, estimated by the report (HL 132, P: 15, 2017). “Research from the Money Advice Service (MAS) has suggested that 16.8 million people—40% of the working-age population—have less than £100 in savings available to them at any time. This alarming figure leaves millions at risk of financial exclusion as savings can provide a buffer to unexpected expenses and reduced income through job loss, illness, or upon retirement. Moreover, 13 million people report that, should they experience a 25% cut in income, they do not have access to enough savings to support themselves for one month” (HL 132, P: 19, 2017).
Serious reason for Financial Exclusion:
“The ongoing closures of bank branches, and an increasing reliance on digital services, pose a number of challenges for customers. The Post Office provides a wide range of banking and financial services through an extensive branch network. The majority of customers, however, are simply unaware that these services exist. The current waste of this untapped potential is not acceptable, and needs to be addressed through a concerted joint effort from Government, the banks and the Post Office” (HL Paper 132, P: 4, 2017).
“Our recommendations are to the UK Government, reflecting the fact that financial policy is considered to be a ‘reserved matter’ under the various devolution settlements that have been made with the constituent nations of the UK. The nature and extent of devolution, however, necessarily means that across some policy areas that proved relevant to the inquiry—particularly, but not only, education—our recommendations might be of more direct relevance to England than they are to Northern Ireland, Scotland or Wales” (HL Paper 132, P: 10, 2017).
Banking Sector Approach:
“The Panel argued that the introduction of a duty of care would lead to cultural change in the banking sector: “A duty of care would engender long-term cultural change in financial services providers. It would bring much-needed clarity to the rules governing the relationship between firms and their customers . . . Firms would no longer be able to adopt a ‘let’s see if we can get away with it’ approach, but would have to avoid conflicts of interest and take their customers’ best interests into account at every stage of their engagement” (HL Paper 132, P: 31, 2017).
Basic Bank Account:
“Basic bank accounts were first introduced to the UK in the mid-1990s, but the offer has expanded and improved in recent years in light of the EU Payment Accounts Directive (PAD), which requires member states to ensure that everyone can access a bank account with “basic features”, and a subsequent agreement between high street banks and HM Treasury” (…) “Barclays and the Co-operative Bank told us that they were taking on more than their share of these loss-making accounts (the Co-operative Bank reported that basic accounts formed some 20% of all their current accounts), and suggested that this was because too many banks did not currently offer the account. Barclays said: “The basic bank account is a key component of financial inclusion. That is a loss-making product but part of our investment in society . . . Ensuring that all banking participants are party to that, not just the subset that is currently signed up to it, is important; otherwise you have people going into the branch of a bank that they think would be great for them and they are told, ‘Sorry, you’re not someone we want to bank. Can you go down the road and be supported by someone else?’ That is not a good” (…) “For HM Treasury, the issue of encouraging banks to promote the basic account was also a matter of not wanting to exacerbate financial exclusion even further: “We do not want people to go into a bank and someone reaches into a dusty drawer and makes them feel as though they are asking for something that is not quite legitimate, so we work closely with the banks to make sure that the basic bank account is part of the normal suite of banking products, and we are very keen to monitor that to make sure that it is.” (HL Paper 132, P: 57-59, 2017).
As you read the quotes from the paper, you understand the difficulty that is there, and the lacking polices and financial inclusions, as the modern state and the open market theory combined with down-turn of steady paying jobs have left the low-income households and older people left behind. These sort of struggles are combined with the centralization and digital financial products that is not understood and is harder for many to learn. As much as the banks are likely to hold on to costumers that are costly and carry losses on, than the ones who creates the fortunes and vast profits. These sort of programs has to established as by law, to make sure the banking sector complies and opens their gates to the ones in need and also supply them with education to use the financial instruments. This is because with lacking knowledge the costumers and citizens wouldn’t know about the possibilities they have with their paycheck and their earnings. Therefore, they are not only losing out on the standard option, but also on future needed services. That should be a concern for any serious government, that the citizens get parts of the financial institutions and get their own accounts to secure their day-to-day, but also to plan their future.
That a state like United Kingdom, one of the key members of European Union, would have so many millions in levels of low-income households, has such amount of people living on the outside of the banking sector was for me discouraging, as this one of the modern states who is a pillar in faith of building society and when that society doesn’t have the capacity to involve such amount of citizens into monetary safety, it is worrying and also a signal of needed change in the HM Government and by the Banking Sector. This is not something the White Hall, the Westminster or anyone representing their constituency on the British Isles should accept. There are lots of work to do, but the people need to be aware and scream for change. Peace.
HL Paper 132 – ‘Tackling financial exclusion: A country that works for everyone?’ (25.03.2017) link: https://www.publications.parliament.uk/pa/ld201617/ldselect/ldfinexcl/132/132.pdf