Introduction

Roughly 2.5-3.5 million Britons do not have a traditional bank account. A government study suggests that banks are not refusing services to disadvantaged communities outright; instead banks simply do not offer the unbanked appropriate services to fit their needs. There is also a problem of insurance redlining, particularly in the case of council housing (publicly-owned housing) residents. Many residents do not have the appropriate financial literacy to purchase homeowner's or life insurance or simply can not afford the premiums.

Government Action

• In order to improve access to financial services and expand access to credit, the incoming Labor Party government estab-lished the Social Exclusion Unit (SEU) in 1997. The SEU was organized into a number of Policy Action Teams, with financial exclusion assigned to Policy Action Team 14. PAT14 drafted a number of recom-mendations for expanding access to credit, long-term and home content insurance, and banking facilities. These recommendations were taken under consideration by the Financial Services Authority and HM Treasury.



• The Policy Action Team provided similar responses for nearly every area of financial exclusion. The team clearly stated that any statutory or regulatory action taken should increase competition and consumer choice. Recommendations were careful to minimize public sector intervention and avoid the appearance of credit rationing.



• The task force stressed the need for banks to voluntarily expand their low-cost bank account program. They also recommended using the post office system as an accessible location for banking services. No legislation addressing any of these suggestions has been introduced. The task force also recommended that banks voluntarily disclose the geographic distribution of their checking and savings account to highlight any possible discrimination.



• The task force suggested setting up an "insurance with rent" scheme targeted to council housing residents. This type of scheme would utilize collective rates for the entire building to lower costs and allow residents to pay rent and insurance at the same time, reducing transaction costs. No legislation addressing any of these sug-gestions has been introduced.



• PAT14 suggested that credit unions serve as alternative credit providers in cases where banks are not adequately serving the market. By merging community and employers based fields of membership and streamlining capital requirements, the task force believes that credit unions could effectively serve as micro loan providers for low-income and small business. No legislation addressing any of these suggestions has been introduced.

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