A consumer response to the recession
I went to an interesting seminar this morning at Consumer Focus – the new statutory consumer organisation formed from the National Consumer Council, Postwatch and energywatch. It brought together a range of organisations – unions, thinktanks, consumer and advocacy groups – with an interest in the effects of the financial crisis and recession on wider society. Mick McAteer of the Financial Inclusion Centre kicked off what was inevitably an extremely wide ranging discussion that equally inevitably did not come to a set of neat conclusions, but did start a process and raise lots of interesting issues. Here are a few random points from my notes either of good questions or interesting facts that were new (at least) to me, and which I’ve reported on a non-attributable Chatham House basis.
- Everyone is agreed that there will now be more regulation of the finance sector, but there is a difference between regulation in the interests of the consumer and regulation to keep the financial markets efficient and honest. There will be less competition after bank mergers.
- The pressure on banks with state holdings will be to repay their debts (which have steep interest rates) to government rather than lending to consumers or helping customers having difficulty repaying mortgages. Already Northern Rock has paid back a lot of its debt but is much more aggresively repossessing. Customers who do not make lots of money for banks could well find it harder to get access to banking services. How do we stop financial exclusion getting worse?
- Should banks now be regulated like utilities?
- The Post Office network will become more important in providing basic financial services, and goverment should do more to recognise its social role.
- The problems will not just be for those who are already socially/financially excluded or in poverty. Many people above the breadline but earning below median wages still rely on large amounts of credit to survive. While this may be unwise, cutting it off abruptly will cause real problems. (This ‘forgotten middle’ is a group that is generally neglected in policy discussion, and the TUC is developing some research on this.)
- Will there be a revival of mutuals? Building societies are now getting lots of deposits.
- The problem with reward structures in banks is not just at the top. Many modestly paid staff need to sell products on commission to get a decent wage, and the pressure is not always to sell approrpriate products.
- Social housing is being hit by the downturn in private housebuilding too – because lots of social housing comes from planning gain.
- There will be heavier demands on Job Centre Plus and advice agencies – indeed it’s started already – as more people lose their jobs.
- The government is faced with a “cacophany of asks” from the voluntary sector, which makes it hard for them to help.
- People in vulnerable work will find it gets even worse.
- There are a lot of questions about corporate governance raised by the crash. People in pension funds are interested in solid returns over their working lives, not short term profit taking – yet that’s how lots of funds are run.
Ed Mayo, the Chief Executive of Consumer Focus, has blogged the event, and included some photos, (where I look slightly more normal than the mugshot that accompanies these posts).
There has sometimes been some antagonism between unions and consumer groups on the basis that we are producer interests automatically in the opposite corner to the consumer interest. But life is more complicated than that. We live in a pluralist society where we all have multiple identities and interests. Yes, sometime unions can disagree with consumer interests, but our members are all consumers too. On issues such as pensions, unions are consumer advocates just as much as the obvious consumer groups like Which?, the recognition of which has led to lots of extremely effective coalition working on pensions issues in recent years. So I – and the other union representative – was very pleased to be there this morning, found a big common agenda and look forward to further work together with the organisations there.