Budget leaves the door to CRA open
Our hope, in advance of the budget, was that Alistair Darling was going to give us some big and bold ideas for bank reform, in what would have been a hugely populist move with an election around the corner. And alongside the headline grabbing commitment to make banks provide basic bank accounts, delving into the detail of the Budget report, provides some interesting additional information that Alistair Darling didn't mention in his speech.
The commitment to banks publishing information about how they provide financial services (‘disclosure' - one of our four Better Banking proposals) that was announced a few months ago in the Pre-Budget Report seems to have been strengthened. Whereas previously the government said they would work with the banks on this, now they're saying they are ‘determined to secure greater transparency' and are working with the Financial Services Authority. They also recognise that this information is critical in order to ‘highlight differences in coverage and therefore the people most at risk of financial exclusion'.
There are also some encouraging noises on improving affordable credit and access to capital for low income households, with a commitment to consult on ways to get banks to ‘make an appropriate contribution to community lenders, through regulatory action or a new community levy‘. This certainly leaves the door open to a Community Reinvestment Act (regulatory action to encourage investment in community lenders) and the 1% levy that the Better Banking campaign is proposing. However, committing to consult on the other side of an election doesn't account for much (yet) and we can expect debate about the semantics of what precisely ‘an appropriate contribution' means.
The government's commitment to an internationally agreed transaction tax (a Tobin tax, or Robin Hood tax), is promising, though obviously depends on whether the G20 can sort it's act out. We'll need to wait and see what the International Monetary Fund review of a range of global regulatory interventions comes out with. Interestingly the Conservatives have said they would support a unilateral transaction tax, in a pre-Budget attempt to steal a march on Labour. However the prevailing opinion among those in the know, seems to be that it would need to be done internationally to actually work...but anyway.
The other announcement that featured in Darling's speech, was that a new obligation will be placed on banks to provide (basic) bank accounts to all, building on the voluntary commitment negotiated as part of the work of the Financial Inclusion Task Force - which has seen a significant fall in the number of ‘unbanked' households. Whilst any moves towards greater financial inclusion are wholly welcomed, offering basic bank accounts to all is only a small step towards what is needed.
A basic bank account is not (on its own) the solution to financial exclusion, as having a ‘basic' account doesn't give people access to the full range of financial services they should benefit from. It's also uncertain whether banks will actually do anything differently, since they will say they already provide this facility to anyone anyway. How the new requirement is monitored and enforced will be critical to whether it actually leads to any real change.
Overall, the Budget gives us grounds for optimism and we can be really pleased with the progress made...so far! However, there is still much to play for and we will have to work hard to keep the pressure on if we are to grasp the opportunity to secure real political commitment to systemic reform.