Examination of Witness (Questions 120-139)|
TUESDAY 5 FEBRUARY 2002
120. You said, "We could do more."
That was your phrase.
(Mr Brown) We could do more because the issue is a
very live one at the moment. If we did not have the polarisation
review at the moment and if there were not a number of Treasury
initiatives about individual savings and if there were not the
Sandler review going on, probably we might have come to the end
of the road in terms of what the Panel can do, given that the
Panel's job is to advise the FSA. There seem to be a lot of opportunities
for the Panel to make these points. We have made them to the Sandler
team and we have also organised some seminars based on this idea.
We will continue with it. We will be in discussions with some
of the advice agencies about the prospect or feasibility that
they could tack on such a service to their own current services.
121. It is not rocket science, is it? We have
legal aid for those who cannot work. The Citizens Advice Bureau
gives some financial advice. You have somebody on your committee
who comes from the modern unit of the CAB. Why are you not putting
forward a straightforward proposal? I am also intrigued by your
almost wetness. You are almost finishing your annual report. Have
you specifically put in that you have banged your head against
a brick wall with both the Treasury and the FSA over this issue?
(Mr Brown) No, I do not think we have and I do not
think we would because they are listening.
122. They are listening but are they doing anything?
(Mr Brown) That remains to be seen. I do not think
we are being wet about it at all. It is an issue that we have
raised. If you were to ask me, of the things that we have got
onto the agenda proactively from the Panel's point of view, it
would be one of the things that we have achieved. It is not rocket
science but it is not easy. I imagine the problems here are ones
of funding what is quite a new service and will require quite
a new structure of training and competence.
123. The Chancellor is facing these ISAs that
were supposed to be very attractive to low income people to help
them save. Your figures show only ten per cent of the population
has one. The Chancellor is facing stakeholder pensions not being
taken up by the target group that they were invented for. In this
industry, is government wanting to get them to a certain group
in society? The key thing there is that there is nobody to liaise
with. It is in the interests of the industry, of government and
of socially excluded people and we are almost apologetic about
saying it is about time we got some independent, free financial
(Mr Brown) I do not think we are being apologetic
about it. It is an issue we have raised.
124. When did you raise it? Which financial
year? It is not in here.
(Mr Brown) We have raised it this year.
125. It is in your annual report and we will
be able to see how you define where you are on the issue?
(Mr Brown) Yes. As advisers to the FSA, we have made
this point. They have included a rudimentary proposal for this
service in the consultation paper on polarisation as a consequence
of our making those representations.
126. Without being rude, when I went through
your membership, I thought you had specific terms of reference
to do something for the socially excluded. I thought you were
very middle class in orientation. Who on that panel would speak
with authority, knowledge and sensitivity about this group? Is
there such a person? Is your panel not lacking? It is very nicely
middle class, speaking on behalf of the socially excluded, but
they seem to lack an urgency that anybody who knows what is happening
on the ground thinks they should have.
(Mr Brown) I do not think that is true. The Panel
has two members on it from front line money advice services. If
you were there during the discussions we have with officials from
the FSA, you would see from their accents as well as from what
they say that they do give a view from what is going on, on the
ground, in no uncertain terms. It is incorrect to say that the
Panel is simply a group of middle class people who have no understanding
of working class financial problems.
127. Let us take this report. Thanks to Mr Plaskitt
who drew my attention to appendix four. If I take stakeholder
pensions and credit unions out, the obvious things related to
the socially excluded, what other item have you raised in this
list that relates to them?
(Mr Brown) There are several.
128. Tell me which ones.
(Mr Brown) 90 per cent of our agenda inevitably, because
it is about the regulation of FSA regulated products and services,
is to do with the regulation of financial services which are not
for the disadvantaged. It is inevitable, even if we do spend a
lot of our time on those issues, that a list of matters that we
have considered will look like
129. You cannot get away with that. You said
to Mr Plaskitt that asterisks were the only thing missing, that
you were very proactive. What are these issues that you raise?
You make a point in your present report of indicating which ones
you had raised rather than what they raised with you. I am very
concerned about people on vast estates in Leeds who are excluded
from mortgages, insurance, ISAs, bank accounts. You are looking
after them. I have a full page of items. Which ones relate to
them that you raise because I cannot see any, apart from the two
things I have mentioned.
(Mr Brown) I have already given one example which
is the issue of money laundering, because we raised the issue
that people have difficulty getting access to ordinary, every
day, financial products because of the difficulty with money laundering
rules. That was specifically brought up in the context of people
who are financially excluded.
130. Have you raised the difficulty people on
the estates have with getting a bank account?
(Mr Brown) Yes.
131. Where is it?
(Mr Brown) This is our report for the year 2000.
Chairman: You did mention credit unions
on page ten.
(Mr Brown) We have done a lot on credit unions.
132. Credit unions are a cop out because they
are very good but they are not taking on the five big banks in
terms of what they do for this group. In other words, it is separate
provision. What are we doing with the five big banks?
(Mr Brown) It is a long list. We made a substantial
set of points about stakeholder pensions in relation to the financially
133. I am speaking about bank accounts.
(Mr Brown) I know that; I will come to bank accounts
in a minute because we have quite a large programme of work on
basic bank accounts. You asked me to look through this list. Bank
accounts are not on this list. On stakeholder pensions, we made
quite a number of points regarding the interface between the benefit
system and the arrangements for stakeholder pensions. There are
a number of other points here which I could go through, although
it would be boring, where we raised the issues in the context
of a general issue of disadvantaged consumers.
134. You have stakeholder pensions on here;
I accept that. Have you raised the difficulty low income people
have getting household insurance, car insurance or any type of
insurance in certain areas? Whole post codes are wiped out.
(Mr Brown) The sale of general insurance products,
the conduct of those sales, is not regulated by the FSA at the
moment. It is about to be brought in partly because of pressure
from our panel because of the state of sales in the insurance
industry. No, we have not, because the regulator has no remit,
but we have put pressure on just because of those issues. There
are a number of other points here where we raise the problems
of low income and other excluded consumers in relation to that
specific issue. For example, the comparative information scheme.
We raised the issue of how people who do not have computers get
access to the so-called league tables on financial products. You
asked me about bank accounts. We have recently made representations
to the Treasury concerning CAT standards on basic bank accounts
because we noticed that the whole issue of basic bank accounts
is unresolved. Some of the basic bank accounts provided by the
banks are very unsatisfactory. A good example is that one of the
basic bank accounts supposedly had a penalty of £25 per day
on an unpaid direct debit, which we thought in the context of
a non-toxic, basic bank account for excluded consumers was not
on. We have raised this point. Furthermore, we have a programme
of research going into the field at the moment among excluded
consumers on how easy it is to get a basic bank account. Because
of the balance of the Panel's work, having to deal with the kinds
of issues that the FSA has to deal with, it will always look as
if the large bulk of our work deals with non-excluded people,
but I assure you that there are a lot of issues that we raise
within the context of seemingly middle class issues.
135. We are very grateful on our estates that
you are looking after us. When I look at social issues, page 65,
each paragraph I would finish with the word "and" because
it is a nice description but there is no sign of any activity,
any rapport, any initiative. When I get the 2001 or 2002 report,
do you think social issues will be more than half a page and that
there will be more activity than description?
(Mr Brown) The social issues that are half a page
there are in a four page taster of what was going to happen next
year. It was 25 per cent of what we were intending to do in the
year. It is not half a page in a 65 page report; it is just a
short run through what we were going to do in the future.
136. People's peers felt that hairdressers would
not be appropriate for the House of Lords. Do you not think your
Panel could consider speaking to the bodies to suggest getting
some working class people who know the problem, to help you in
(Mr Brown) That is a very difficult question. If we
aimed to put people on the Panel specifically because they were
excluded from financial services, it would be difficult to know
what they would have to say about it. I am very happy to have
a wider social range of people on the Panel. I do not think we
are lacking in sensitivity towards the disadvantaged and excluded
from the population, but putting people on who have difficulty
with financial services just as tokens would simply be tokenism.
It is a very difficult area. We really do have to work to represent
those people but it is a real shortcut just to say what kind of
accents people should have on this panel.
Chairman: We are interested in the issue
of financial exclusion and we will be looking at it at a later
time. We look forward to you contributing to our work on that.
137. I wanted to come back to the budget which,
in the FSA's plan, is £600,000 for the current year. On page
seven of your report, you identify actual expenditure as £517,000.
That is right, is it not?
(Mr Brown) Yes.
138. If you look at page seven, in the table
1.1 which seem to be the only accounts you produce, just a five
line table, which surprises me for £600,000-worth of public
money, the actual expenditure is £539,000. Is that a mistake?
(Mr Brown) You mean we did not spend up to budget?
139. If you look at line two, you say the actual
expenditure was £517,000; see table 1.1. If you look at table
1.1, in the second column, it gives the actual expenditure as
£539,000. Is that a mistake?
(Mr Brown) It would appear to be. I will have to come
back to you about this. There is a mismatch between those two