Published in Prospect Magazine, October 2018
Access to finance, to our financial services, and ensuring that there is financial inclusion 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, explains my passion for financial inclusion.
My community stretches for hundreds of square miles from the Scottish borders, to the outer edges of Newcastle and down to the Cumbrian and Durham County 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 my constituents feel it most. We may live in the land of Hadrians Wall, Vindolanda and the country’s biggest forest at Kielder, but big towns like Haydon Bridge and Corbridge don’t have any branch of a bank. 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 get finance to keep themselves warm during winter. Many thousands of local Northumbrians rely upon heating oil, and LPG, to keep their homes warm. During the cold winters of 2009 and 2010 it was very noticeable that the elderly, and the fuel poor, could not get the finance to be able to buy the 500 litres 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, provided a blueprint energy saving guide for the rural communities, and created long term savings plans to cater for the inevitable snowy days and extreme Northern weather.
Added to this, from the beginning of my time as an MP, I have battled against the pay day lenders, loan sharks, doorstep lenders that existed in our local communities, 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. This summed it up. Fortunately Wonga have moved on, and Newcastle are back in the premiership.
And when Archbishop of Canterbury, Justin Welby, issued his clarion call to “compete pay day lenders out of existence” I realised that something must be done.
I came together with a group of committed Northumbrian locals and worked with my local church leaders to create a Community bank in Northumberland. The Northumberland Community Bank – as it is now called – is a credit union that trades as a bank. It was launched in November 2015 by the Archbishop of York John Sentamu.
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 the running of the bank, because of my ministerial post, but watch from the side-lines like a supportive parent. The Northumberland Community Bank goes from strength to strength.
The bank now works in partnership with the County Council, and has exciting plans to expand, to take on payroll deductions, and in the longer term possibly provide business services.
When people ask if we can really change the way that financial services work for the poorest in our communities, my answer is simple: come to North East and I will show you how we already have. The success of the community bank model in Northumberland provides a blueprint for the rest of the country.
As a government minister you would expect me to point out the success of the Coalition and Conservative governments to address financial exclusion. 3 key steps make a massive difference and provide a building block for so much more:
- the National Living Wage – something which I championed for back in 2013, and was delighted the government introduced – is now tackling low pay, and has boosted pay packets of the lowest paid by £2,000 a year since its introduction. Wages will be £9 an hour by 2020.
- Increasing the level at which you start paying tax has benefited the typical taxpayer by £1,075 – a massive saving from 2010 when tax was being paid by workers on minimum wage.
- 3.3 more people are in work since 2010, and almost 3 million apprenticeship starts.
- Auto enrolment providing long term saving in the form of pensions to nearly 9.9 million people – transforming the long term financial prospects of so many.
The government has done much to improve financial inclusion, not least creating a Minister for Financial Inclusion. As the first Minister created I consider it a great honour. It is a job I pitched for, and whilst there are hurdles to climb. I was delighted to guide the Single Financial Guidance Bill through Parliament this last year – which will create the Single Financial Guidance Body to create one organisation for guidance on pensions, debt and money information. It will make a big difference in many ways – but let me give you one example.
Contained within the Single Financial Guidance Bill is a new measure designed to give those doing the right thing and taking action to clear their debts a six-week breathing where they do not incur high interest rates and late payment penalties, which only make tackling the issue more difficult in the long term.
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 it is an issue I am determined we continue to make progress on to ensure that everyone is financially included.
Guy Opperman is the Member of Parliament for Hexham in Northumberland