Thank you very much indeed for inviting me. As Sunder says, our Taskforce ended its life last week. In case you were wondering, we did actually die a natural death as opposed to death in suspicious circumstances because we were given a finite six-year life by Ed Balls when he was the responsible minister. And last Thursday was indeed the sixth anniversary of our starting.

That makes this a good time to take stock because, although I think we did achieve quite a bit - hopefully that would be the general consensus - there is more to do and of course it has to be done within a different political environment, a different political context.

I want to put divide my remarks into three parts. First, I want to say a word about what has been achieved in financial inclusion; second, to tell you a little about what’s left to do; and third, consider how it can be taken forward now that there’s no Taskforce to act as a co-ordinating body and that the team at the Treasury, who serviced the task force and were responsible for financial inclusion policy, has also disappeared, or will do so in a few days time. So how do we go forward, and how do we work within the new political environment?

However, with apologies to those - and I know there are some  - in the audience for whom this will be already be very familiar territory, I do want to start by sketching out what it actually means to be financially excluded in 21st century Britain.

When we started at the beginning of 2005, there were three and a half million unbanked. Now, by our definition, ‘unbanked’ means adults in a household where there is no bank account. That is not all the adults who don’t have bank accounts, because some adults are in households where at least one other person does have a bank account - but three and a half million adults lived in a household where there was no bank account held at all.

If you have no bank account in modern Britain all sorts of disadvantages follow, actually or potentially. First you may find it more difficult to get a job, because many employers won’t employ you, and don’t have to employ you, if they can’t pay you through a bank account.

You’ll probably pay more for basic everyday utilities; water for instance, or gas, and electricity, than people in this room pay because you can’t take advantage of discounts from paying by direct debit. And there are some things you can’t buy at all. You can’t get a mobile phone contract, so you have to go “pay as you go” which of course is more expensive.

A bank account is also a gateway to other services that most people would think were basic, for example access to affordable credit. Often, the group of people we’re talking about – mainly people in the bottom three deciles of the income distribution – need from time to time to borrow money for essentials: small amounts of money, unsecured, for a few months at a time for kids’ clothes or the washing machine packing up; not for luxuries like cars or plasma televisions but for basic essentials. They will find   mainstream, affordable finance very hard to access and, instead, end up paying APRs in the hundreds of percent, even thousands sometime  -  or even in some cases finding themselves forced onto the illegal money lening market.

You don’t have access to normal sorts of savings opportunities, which makes it more difficult for you to build up a cushion. Most likely, therefore, if something unexpected happens, since you won’t have a cushion to fall back on, rather than saving then spending, you will have to borrow to spend and then repay the borrowing.

It will be more difficult to get insurance - even basic insurance like home contents insurance. So when the floods struck Hull for example, many people without very much by way of possessions lost everything.

So we say that in a modern economy, being connected to financial services is akin to being connected to basic utilities.  If you’re not connected to financial services it’s as serious as not being on the gas, water or electricity.

To be clear, we do not say that everyone must to be connected to financial services; what we have said, as a Taskforce, is simply that everyone should have the opportunity to be connected if they want to be, and should have the means to make an informed decision as to whether or not they should be connected.

So that’s the context in which, in 2005, the last government launched a fairly comprehensive financial inclusion initiative. It included setting up the Taskforce which was a very diverse group, including in its membership senior bankers – in fact the heads of retail banking from major banks - consumer advocates, social policy researchers, third sector organisations, and others - a broad spectrum of people with an interest in financial inclusion.

The government of the day also established the Financial Inclusion Fund, which in the end amounted to £250 million, to fund various initiatives - so really quite a lot of money was put behind the initiative.

The reason I am rather labouring that detail is simply to underline the very strong political support and intent that existed for financial inclusion at that time, which we can compare to the situation we see now under the Coalition government, as I shall do later in this talk.

Starting then with what did we achieve. I said that we began with three and a half million unbanked. We had a target of getting that down by a half in conjunction with the banks, and many other people who were able to play a role in doing so.  It is actually now down to one and a half million. So it’s reduced by 60%; the target was more than met and that’s good progress, and we certainly give credit to the banks for the steps and the initiatives they took to bring people into banking. Five years ago if you were someone on a low income who went into a bank to open an account, they might have asked you for ID that you simply don’t have, like a driving licence or a passport. If you were asking about products - the basic bank account, for example, which is mainly the product that people on low incomes have taken up in becoming banked - very often the information wasn’t there, the person behind the counter didn’t know about it. And frankly there was sometimes a poor attitude towards someone that didn’t look as if  they belonged to the middle market and they would be treated accordingly.

But the banks, to their credit have reduced those barriers significantly. We’ve been monitoring that closely, including very recently undertaking another round of mystery shopping – which is about to be published - which shows that many of the barriers have genuinely come down. There are differences between the banks and  I’ve just written, on behalf of the Taskforce, to the retail Chief Executive of each bank, pointing out where their results differ from the norm, so to speak, but by and large the banks did step up to the mark  and have been successful in meeting the goal.

That’s the good news. The less good news is firstly, that not all those people who have bank accounts are making full use of them yet and we know there’s an element of dormancy among them. Some work needs to be done on that because to give someone a bank account is not the same as making them sufficiently confident to use it, particularly given the very justifiable fear that many people have of losing control if they move from managing their money in cash to managing through a bank account.

But secondly, one and a half million remaining unbanked is still too many. So there is more work to be done here and we must do it now in the absence of the Taskforce and in the absence of the Treasury team, in order to bring that number down. We undertook  some research last year to assess what proportion of that one and a half million might still reasonably be brought into banking because of course we know there is a core of people  that in practice will not ever become banked, for example some  older people and others people who are firmly  entrenched in the cash economy.

The answer was that roughly a half of the currently unbanked could be brought into banking if suitable products by suitable providers were available. There are many barriers to that, not least a deep mistrust of banks about which I shall say a little more in a moment as it has very significant implications for how we go forward. However the reality is that many of the remaining unbanked are reluctant to go to a high street bank and therefore we need to start thinking of other ways of providing a service to them.

I’ve also mentioned the problems of getting affordable credit when it is needed. About £100m of the £250m went to supporting third sector lenders - credit unions and community development finance institutions. That has been successful in that it has enabled over 300,000 small loans to be made at affordable rates to people who would otherwise have been pushed into the high cost credit market. But the reality is that one hundred million pounds still represents quite a small proportion of the total demand. If you look at the balances of the commercial sub-prime lenders, you will see they are far greater than that, so while a £100 million and 300,000 short term loans have made an important contribution to the problem, there is still a long way to go.

The banks’ contribution to this (the provision of affordable credit) has, I have to say (and we have said this to them openly) been disappointing because we expected them to be more supportive of third-sector lenders than they have been. With some exceptions they generally have not done this so, whilst we do give them credit for what they did in bringing people in to banking, we give them the opposite of credit - which I suppose would be debit - for what they didn’t do to support affordable credit.

The most important point, going forward, is that there is an unfilled gap - and it’s quite a big gap - between mainstream lenders and the high cost sub-prime market. That gap is partly filled at the bottom end by credit unions, but there’s a lot more to do and I’ll say a bit in a moment about how we might meet the challenge of filling the gap.

On insurance, we’ve engaged with the industry and they now do produce low-cost, no-frills home contents policies for, say, 80p a week, that you can get through social landlords, so that’s good progress. But although the product exists and is starting to be rolled out, it’s happening slowly and we would like it to go faster; it’s on the right track but it’s on too slow a track.

One other important achievement, I feel, though,  is that there has been a significant increase in awareness of the need for financial inclusion, and in the momentum that has built up behind initiatives to promote it. Many organisations – government departments, NGOs, local authorities, think tanks and others - are now aware of the issues of financial inclusion and are engaged in tackling it.

Overall, therefore, a realistic assessment would I think be:  yes we’ve made some good progress, but there is still quite a long way to go.

I said that we had met the banking goal, - that we have reduced the number of unbanked by more than a half - but we are now getting into more difficult territory because it’s clear that the barriers are now as much on the demand side as the supply side. Yes, of course we want banks to continue to offer bank accounts for people that come and ask for them - they must carry on doing that. But the reality is that, of the remaining unbanked, a significant proportion do not want to go to a bank. Many have a deep-seated and ingrained mistrust of banks - and I should say it’s a mistrust that predates the financial crisis. We have published research evidence of people’s negative attitudes towards the mainstream banks. Very often they’re negative because of anecdotes they have heard from friends, or have read in the press. Often it is based on personal experience. In a survey the Taskforce carried out recently, a striking finding was that, of the unbanked people we sampled, six out of ten had previously held a bank account.

So what that’s telling us is that there are people who have tried a bank account and have fallen out of banking for one reason or another, very often because something unexpected happened – for example, they tried to use a direct debit but there was not enough money in the account when the direct debit was due, and so they received an unexpected charge which knocked their household budget out of kilter. Many who had tried to save money on bills by paying through direct debits found that those savings were largely eroded by such charges.

Among this group, therefore, people lack confidence that they will be fairly treated by conventional financial institutions. This is exacerbated by, as I’ve already mentioned, a justifiable fear of losing control, because if you are used to handling your money in cash, suddenly to see it on paper on a bank statement is not the same as having it visible in tins or jam jars on the mantelpiece.

All of this has contributed to a feeling of mistrust on the part of people on low incomes,  a feeling that the banks ‘are not for people like us, they’re not sympathetic to our problems - they might have been contractually justified to make these charges but it’s not fair, it’s not fair for someone like me’. And that sentiment has been quite instrumental in keeping people away from a basic service of which they could make use if there were a suitable and trusted supplier for them.

So what do we do about this? Well, the first thing I want to say is we’ve heard a lot since the crisis of people saying, ‘we must rebuild confidence in financial services’.  I can only say that for the group we’re talking about, the idea of rebuilding trust when, for the people we are talking about, when it hasn’t really existed in the first place, can sound fanciful. Of course we must all do what we can to rebuild trust in financial services, but that is not the answer for this group of people, because it will be always difficult get them to trust the financial mainstream.

So there are three lines along which we have been working and along which, as we depart, we ask the government to continue to work. First, although people are suspicious of financial institutions, there are people whom they do trust. There are intermediaries - so called’ trusted intermediaries’ - that we can use, and indeed have already been engaging with successfully, to act as a bridge between the financial services industry and customers on low incomes; they include housing associations, local authorities, many NGOs up and down the country such as organisations working with older people or with people with special problems such as drugs and alcohol, disabilities and so forth. There are numerous bodies around the country that are able to act as engaged and trusted intermediaries in this way; and we have been engaging with and we would like to go further with engaging with them, and are proposing the government should do more to engage with them.

Something else we’re encouraging is that the banks themselves enter into partnerships with trusted intermediaries -  RBS for example has partnerships with such intermediaries and people who won’t necessarily want to go straight to RBS, will go to a housing association or an NGO that has a partnership with them.

Secondly though, there are some people who, whatever you do, will never want to go to a high street bank, and so we have been exploring alternative channels through which financial services could be offered and delivered. For example, we are very interested in supermarkets as providers of financial services to people on low incomes. Our research tells us that they are widely trusted. People visit them anyway to buy food and  they are geographically accessible to many on low incomes who are financially excluded. But also, people don’t feel embarrassed to do something they would feel embarrassed about doing at a bank counter. Many people on low incomes have said to us, when wwe talk about saving, ‘I’d like to save £2 a week but I would feel embarrassed going to the bank and handing them only £2”. Whereas when they pass the supermarket checkout they would find it much easier just to have £2 put onto a savings card. So supermarkets, I think, are potentially very important and we would encourage the supermarkets, with whom we have recently had meetings on this subject, to think about providing more financial services for financially excluded people.

The Taskforce has also been enjoining the government, for five years now, to get the Post Office to do more for people on low incomes by providing appropriate financial services. The Post Office is a trusted organisation and if it were enabled to provide a full basic banking service, that would probably be the single most effective step government could take to further reduce the number of financially excluded.

We’re also very interested in the third sector; particularly in the idea of community banks. If you go to the USA you will find in the corner of individual cities there will be a small community bank, serving maybe the Hispanic community or just perhaps a group of low income workers in a city. I’ve been very interested and disappointed that there has been no kind of efflorescence of community banks in this country as there has been in the America. I think that’s also something we should keep thinking about.

Thirdly though, and a little more radically, we are saying to the government that  we really ought now to take a step back and stop thinking only about the traditional bank account ‘product’ that exists. What we should be saying to ourselves is “what do people on low incomes actually want?” What are the services they need?  For example, they need a way of receiving money, a way of paying money (preferably one that is efficient for the receiver) and a way of saving and a way of smoothing out fluctuations in income and expenditure. Something we’ve commissioned research on is a ‘budgeting account’. I said that many people on low incomes are fearful of losing control when they start using a bank account. Well, it’s possible to have a bank account that has in it notional ‘jam jars’. We have just concluded a piece of research that we’ll publish soon, showing how that could work and also suggesting it could be commercially viable to somebody who might offer it. So there are new products and there are also, potentially, new non-retail bank models. We are thinking now of using technology - e-money for example – indeed it’s quite easy to conceive of a basic banking service based on a pre-paid card. It might be linked to your mobile phone, you may be able to get text messages which tell you what your balances are. It could be linked to cash networks like Paypoint or Payzone, you can have access to an ATM, your pay can be paid straight onto the card, and you can set up direct debits on the card. So there are new ways of looking at banking that are not branch-based in the traditional sense and which could be very attractive to people who are financially excluded.
There is a gap between the charges that we here can all borrow at and what people on low incomes often find themselves having to pay. An uncomfortable truth about all this is that it is expensive to serve people on low incomes who borrow small amounts of money for short periods. It is an uncomfortable fact because, even if you’re not trying to make a profit, when you work out the APRs, they come to some tens of percent per annum, rather than the single figures or low tens of percent that most of us in this room would pay.

It’s not a gap that the private sector would fill directly, but it is a gap that the third sector could fill, if supported by the private sector. The next piece of this jigsaw is therefore to get the banks to be more supportive financially of third sector lenders and there are now some promising signs that the banks are beginning to offer support for third sector lenders, on the basis that their capital will be properly remunerated whilst still ensuring  that  much lower rates can be charged to borrowers than they would pay if they were to use the higher cost commercial alternatives.

Next,  I want to say a word about how we can make further progress with financial inclusion given that we don’t have (as we did we did under the last government) a comprehensive financial inclusion programme or strategy. I told you that in 2005 a fairly large amount of money was put behind quite a well-thought out strategy - we don’t have that any more and the question is how to continue the initiative in the current political climate.

I think a first, positive, point to make is about the energy and momentum that has been generated on financial inclusion through the work of many people - and by no means just the taskforce -  over the last six years. Many people who had never heard of financial exclusion now know what it is, now know it’s a problem and now know something should be done about it. So there’s positive energy out there that we can capitalise on.

So far as the current government is concerned, there is no comprehensive financial inclusion strategy. But on the positive side, Ministers do speak about wanting to be supportive of financial inclusion. The Financial Secretary to the Treasury is on record as saying, several times, that he is supportive of financial inclusion initiatives and that he recognises that financial exclusion is something that needs to be dealt with.

Indeed, although the Taskforce and the Financial Inclusion Fund have ended, there have  been two recent extensions of projects that were begun under them. First, 500 money advisors whose funding ran out on the 31st of March were (rather late in the day, it has to be said) reprieved for one year at a cost to the Exchequer of £27 million – that was a welcome development (although the important task of ensuring that they can be employed sustainably in the future still remains).

And going back to what I was saying about affordable credit and money going into the third sector, that’s just been increased by £73 million in the last few weeks, so there is clearly still some tangible support for financial inclusion.

There is also now a Social Justice Cabinet Committee which we are told has financial inclusion among its responsibilities. This is new for us - we’ve never before had a Cabinet Committee with responsibility for financial inclusion, so that sounds positive and we will all, I’m sure, be banging on their door to make sure that they keep financial inclusion well on their agenda. You’ll all know that there is a financial services regulatory reform programme underway. It was good to see in the consultation document that the Treasury issued a few weeks ago that the Financial Conduct Authority, which is one of the organisations that’s going to be spun out of the FSA, will have a financial inclusion mandate - that’s also a positive development. But we do have to recognise that there is no focussed central policy core and there is no co-ordinating mechanism as there has been in the Treasury to date. There is no longer a central rallying point, which is a role that we, as a Taskforce, have sought to play over the past six years.. What we’ve been saying to the government, therefore, is ‘alright, you’re not going to have a Taskforce and you’re not going to have a team at the Treasury, but  you should recognise that financial inclusion, and making further inroads into financial exclusion,  still need high level oversight’.  Our final recommendations to Government, which you can read on our website, make some specific proposals towards that.

So, finally,here are some other things we can all do, as individuals and organisations. We should continue, all of us, to advocate and lobby for financial inclusion. We should support NGOs that have sprung up specifically to support financial inclusion.   We can encourage bodies – including think tanks, since I’m speaking at one today!- to hold meetings on the topic and keep it on of the policy agenda. And, of course, we should continue to press all concerned - including particularly government and the financial services industry -  to carry on and broaden their support for those initiatives which give access to basic services that most of us, frankly in an advanced economy are fortunate enough to be able to take for granted.