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Don’t forget the taxpayer

Technology must serve consumers, not vice-versa

By Peter Dowd MP  

Blinkered? The Treasury sold taxpayers' stake in Lloyds at a loss. Photo: Mike Ford/Alamy Stock Photo

In October 2008, the then-chancellor Alistair Darling, announced £17bn and, subsequently, £20bn-worth of recapitalisation for Lloyds and RBS respectively. According to the ONS, at the height of the crisis, taxpayers provided, in one fashion or another, £1.5 trillion to shore up the financial sector.

However, many of those taxpayers who helped rescue of the banks have found themselves financially challenged as a result of the ensuing recession.

In direct cash terms, stagnant wages have resulted in a borrowing spike and cutbacks in personal spending. With deep cuts to public services, those same taxpayers have had a double whammy, given the strains on the delivery or non- delivery of those public services.

In the meantime, the Treasury has sold off the taxpayer’s stake in Lloyds at a £5.9bn loss according to the National Audit Office. In addition, the recent sale of 925m shares in RBS has left taxpayers with a £2.1bn hole in their pockets. Is this a third whammy for the poor old taxpayer?

Despite the big four banks making £11bn in profits from high street banking in 2015, a growing number of high street branches have closed in recent years. They continue apace, despite the Government’s Access to Banking Protocol.

Given the healthier state of the banks, it seems reasonable that they should reconsider many of the closures affecting our high streets and leaving communities all over the country financially excluded.

This should not come at the cost of advances in payment technology, online banking or developments in consumer preferences. But such advances should not leave vulnerable people or groups behind.

The UK plays host to one of the most advanced global banking industries in the world, yet we face unacceptably high levels of financial exclusion where 1.5m adults remain without a bank.

The gulf between those reliant on banking technology and those who rely on branches must be bridged. It would be a mistake to pare down banking infrastructure simply because technology allows for it. Technology must serve consumers, not the other way around.

The rate of bank branch closures should alarm us all, particularly given the impact it has on small and medium sized businesses. Research has shown that SME lending suffers where branches are shut.

Labour wants to work with our banks. But, if need be, we will make it more challenging for banks to close branches.

Over the past decade, the relationships between banks and customers have
been damaged by a series of high-profile incidents. The taxpayers who rescued the banks 10 years ago feel aggrieved and let down by an approach which appears to treat them as commodities. Those customers—taxpayers—were there for the banks in difficult times, what about some reciprocation?

Labour wants a more diverse banking system. A Labour government would create a National Investment Bank, similar to those in Germany and the Nordic countries, to bring in private capital to deliver lending power. It would support a network of regional development banks that would drive growth in their communities. The banks would deliver the finance that our small businesses, co-operatives and communities desperately need.

The World Bank states “financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs—transactions, payments, savings, credit and insurance—delivered in a responsible and sustainable way.”

A Labour Government would put that reasonable definition at the heart of its economic policy. In other words, financial inclusion for the many not the few.


Read more from our financial inclusion supplement

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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