Why Financial Inclusion matters to me
Access to financial services really matters. Just ask my constituents in rural Northumberland.
I have one of the biggest constituencies in the country, and the story behind the creation of the Northumberland Community Bank in 2015, and the reasons why this was needed, explain my passion for financial inclusion.
My community stretches from the Scottish borders to the outer edges of Newcastle and down to the Cumbrian and Durham boundaries. It takes me several hours to drive across. And when people talk about the loss of high street banks, no cash machines and the lack of financial services, it is my constituents who feel it the most. We may live in the land of Hadrian’s Wall, Vindolanda and the country’s biggest forest at Kielder, but big towns like Haydon Bridge and Corbridge don’t have any bank branches. This affects business and tourism and creates a sense of isolation and exclusion. As the big banks withdrew, it was clear that something needed to be done.
At the same time, my constituents were struggling to keep themselves warm during winter. Many thousands of local Northumbrians rely on heating oil, and liquefied petroleum gas to keep their homes warm. During the cold winters of 2009 and 2010 it was very noticeable that the elderly, and the less well-off, could not get the finance to buy the 500 litres of fuel that is the minimum purchase of heating oil.
This was particularly acute when we had spring cold snaps. As a result, we formed oil buying clubs across the rural districts. We also provided a blueprint energy saving guide for rural communities, and created long term savings plans to cater for the inevitable snowy days and tough Northern weather.
Added to this, from the beginning of my time as an MP, I have battled the pay day lenders, loan sharks and doorstep lenders, particularly as we recovered from Labour’s 2008 boom and bust recession. For a while, my local football team, Newcastle United, was sponsored by Wonga. Fortunately, Wonga have moved on, and Newcastle are in the premiership.
When the Archbishop of Canterbury issued his clarion call to “compete pay day lenders out of existence ” I realised that something must be done.
I worked with a group of committed Northumbrian locals, including my local church, to create a Community bank. The Northumberland Community Bank is a credit union that trades as a bank. It was launched in November 2015 by the Archbishop of York, John Sentamu.
“My constituents were struggling to keep their homes warm. It was noticeable that the elderly and less well-off could not buy fuel”
The Community bank is fully accredited, with money safeguarded in just the same way as Barclays or HSBC. But it is not owned by multinationals or based in Hong Kong. It is a mutual, paying a dividend when it can. It has taken hundreds of thousands of pounds of local deposits, allowing us to make low-cost loans to those who need them the most.
It exists in the space that Justin Welby and I are both concerned about—the just about managing—who are sometimes only a few steps away from financial exclusion, or worse. I am now no longer actively involved in running the bank, because of my ministerial post, but watch from the side-lines. The Northumberland Community Bank goes from strength to strength.
The bank now works with the County Council, and has plans to expand, to take on payroll deductions, and in the longer term to provide business services.
When people ask if we can change the way that financial services work for the poorest, my answer is: we in the north east already have. The success of our community bank provides a blueprint for the rest of the country.
Four key steps have made a massive difference. First was the National Living Wage, which was something I championed back in 2013, is tackling low pay, and has boosted pay packets of the lowest paid by £2,000 a year.
Second, we have increased the level at which you start paying tax, which has benefited the typical taxpayer by £1,075—a massive saving from 2010.
Third, over 3.3m more people are in work than in 2010, and more than 2m new apprenticeships have been created.
Fourth, pension auto-enrolment now provides long-term savings for 9.9m people.
As the first Minister for Financial Inclusion in the Department for Work and Pensions, I consider it a great honour. It is a job I pitched for, and while there are hurdles to clear, I was delighted to guide the Financial Guidance and Claims Bill through Parliament last year. The bill will create a single organisation for guidance on pensions, debt and money information.
Contained within the Financial Guidance and Claims Act is a new measure designed to give people trying to clear their debts a six-week breathing space where they avoid late payment penalties.
I believe that when we work together, we can develop innovative solutions to tackle poverty and improve financial inclusion. It is undoubtedly a challenge. But we must continue to make progress. When it comes to banking, everyone must be included.
Banking on Change is a publication which examines how we can develop a comprehensive policy approach towards financial inclusion. The report features contributions from the likes of John Glen MP, Peter Dowd MP, Anne Pieckielon, Chris Pond and Guy Opperman MP.
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