Britain’s Chancellor asked to tell the watchdog to focus on financial inclusion

VaselineOctober 3, 2024

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Britain’s Chancellor asked to tell the watchdog to focus on financial inclusion

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Leading figures from consumer rights groups and the City of London have joined forces in an unusual coalition, urging the UK chancellor to make financial inclusion a priority for the regulator.

Martin Lewis, Britain’s best-known consumer champion, and Charles Randell, the former chairman of the Financial Conduct Authority, are among the signatories of a letter sent to chancellor Rachel Reeves on Thursday.

The letter, seen by the Financial Times, said: “A market from which a significant part of the population is effectively excluded does not work well.”

Stressing that the Labor government has made a clear commitment to tackling the rising cost of car insurance, he said: “There are many other financial services where increased access and participation would support needy families and boost the economy.”

Citing examples of “rainy day savings and affordable credit and home insurance”, the letter said Reeves should “include financial inclusion as one of the financial policy priorities the FCA should consider”.

The letter added that making financial inclusion a priority for the FCA will allow it to seek additional powers to tackle issues in this area and identify what role others can play.

“This is absolutely not a finger-pointing exercise,” said Randell, who stepped down as FCA chairman two years ago and is now an adviser to law firm Slaughter and May.

“This is about supporting the government’s plan to make financial inclusion part of its growth strategy, working with regulators and others,” he said.

The Labor Party said it would “strengthen consumer protection and financial inclusion” as one of six key priorities outlined in the financial services plan it published at the start of the year.

Randell advised the Labor party on the plan ahead of the July 4 election and is a member of the UK’s Financial Inclusion Commission.

The FCA must consider growth and competitiveness as a secondary objective under the changes introduced by the previous Conservative government.

Reeves plans to double that later this month, telling the regulator in a formal “remission” letter that it must demonstrate it is acting to promote the expansion of the UK financial services sector.

Signatories to Thursday’s letter, which include consumer watchdog Citizens Advice and the Chartered Insurance Institute, want the chancellor to also include a focus on financial inclusion in the FCA’s priorities.

FCA chief executive Nikhil Rathi highlighted the importance of financial inclusion in boosting UK growth and competitiveness in a speech last month.

He said Singapore’s position at the top of the financial inclusion rankings showed that “a successful global financial center and a financially inclusive economy can go hand in hand”.

He added that Britain came seventh in the latest rankings, with 1.1 million people in the country without a bank account and 40% of school leavers not passing GCSE Maths.

The FCA requires banks to maintain access to cash in places where they have closed all their branches by opening shared banking centres. It also pressed banks to raise awareness of the no-fee, no-overdraft basic bank accounts they must provide.

Randell said the regulator could focus more on financial inclusion by examining whether its rules push people out of certain markets by making barriers too high for firms to serve certain types of customers.

He welcomed Rathi’s recent speech and said: “It’s more of the same – like encouraging innovation, supporting credit unions and encouraging firms that don’t offer certain products to show consumers where they can get help.”