What does the new government mean for financial inclusion?

After what feels like months of build up, we’re finally on the other side of the election. For those whose work is shaped by policy it’s been a fairly quiet year by recent standards. A government in its final months doesn’t tend to push through ambitious policy reform, and the ‘wait and see what the election brings’ approach spread through Whitehall and into government arms-length bodies, regulators and beyond. I’m certainly ready to stop the waiting and get stuck in.

So while the new government shifts around the desks in Whitehall and puts new names on office doors, here’s my overview of what we’re expecting next, and what it means for financial inclusion – particularly for people with mental health problems.

The new government has been relatively quiet in terms of policy commitments throughout the campaign period. Since the election was theirs to lose, the Labour Party have been mostly focused on avoiding gaffes and not attracting too much criticism.

However, the combination of the manifesto and their ‘Plan for Financial Services’ actually gives a fair bit to go on – more than in most policy areas. My quick run down here is split into anticipated change in regulation, products and broader policy that affects our money.

In specific areas where it’s politically popular, Labour has focused on ‘tougher’ regulation – for example stronger fines for polluting water companies and higher standards for energy companies with automatic compensation for customers when things go wrong. But in financial services the focus has been less on tightening regulation, and more on balancing the need for consumer protection with competition. 

The party has said that they will ‘streamline the rulebook’ for financial services firms, looking at where the Consumer Duty may have created duplication of rules. However, they’ve made a point to say that ultimately this is for the FCA to decide, so whether anything will actually change there remains to be seen. It feels very much like a manifesto inclusion to ensure that the banks feel heard, rather than a concrete commitment to change specific regulation. 

Where we are likely to see more change is in the regulation of new and emerging technologies. Labour has committed to a new ‘Regulatory Innovation Office’, bringing together cross government functions to look at how to help regulators update regulation, speed up approval timelines and coordinate across regulatory boundaries. This is something we have been calling for, informed by our research into online harms which found that people with mental health problems in particular were experiencing harm as a result of issues like scams falling in the gaps between regulators.

And the commitment to press ahead with the regulation of Buy Now Pay Later (BNPL) credit hits home the need to speed up regulation of ‘new’ and emerging harm – BNPL is hardly innovative technology and in the years it’s taken to move it into a proper regulatory framework people with mental health problems in particular have faced disproportionate harm. 

Labour has also committed to tougher regulation of AI, with binding regulation on the companies developing the most powerful AI models, and to reform gambling regulation – although with very little detail about what this will look like.

There are some concrete changes to financial products and services that Labour has already committed to. That includes launching at least 350 banking hubs within five years, making the mortgage guarantee scheme permanent, tackling the high cost of car insurance and piloting new ways to boost savings. 

And there are also some broader commitments to innovation in financial services with a focus on boosting financial resilience, for example products like longer term fixed rate mortgages, cross-sector approaches to fraud prevention and a focus on monitoring use and acceptance of cash. Where there have been concrete commitments in this space it’s been very much focused on financial resilience and inclusion for under-served groups.

While changes to financial products and regulation will make a difference to financial inclusion, arguably it’s broader policy that will really determine outcomes. Having access to cash and great savings schemes won’t tip the dial if you don’t have enough money coming in to cover your basic outgoings. 

Policy commitments like reform of Statutory Sick Pay, mandatory reporting on the disability pay gap, changes to the Work Capability Assessment and improvements to employment support are all ones to watch here. And it’s possible that there may be broader reforms to the benefit system to come that didn’t make the cut in the manifesto, although Labour’s appetite to redesign Universal Credit appears fairly low.

Ultimately, whether Labour succeeds in its plan to boost economic growth is going to be more central to what household finances look like over the next five years than any changes they make to regulation or individual products – and that certainly remains to be seen.

So if their manifesto is to be believed, there are some changes in the financial inclusion space that we should expect from this new government. But as we know from experience, not every government delivers everything in its manifesto, and pretty much every government delivers a whole lot that isn’t. So it’s useful to focus on the priorities and principles that underpin the manifesto, and the Financial Services plan, to give us a clue about what else might crop up. 

Tulip Siddiq, who is likely to be the new Economic Secretary to the Treasury, has set out a very clear focus on financial inclusion and tackling inequalities, as well as promoting innovation. She’s also committed to a new financial inclusion strategy, which is likely to bring in a much wider range of policies and initiatives, including using innovation in areas like open banking and finance to tackle problems of inequality such as financial outcomes for people from minoritised ethnic groups or people with mental health problems. 

We hope we might also see moves to introduce independent regulation of the bailiffs, to continue momentum towards a ‘tell us once’ system for sharing consumer data, a better funding settlement for debt advice and changes to the fundamental unfairness inherent in insurance pricing and underwriting. But that all remains to be seen. 

Watch this space and we’ll make sure to keep you updated on the policy changes as they happen.