New Labour’s approach to financial inclusion was wrong-headed in several key regards. They assumed too much about the capacity of people on low incomes to save regularly. They too often overlooked issues of unequal access to financial services, the problem of financial illiteracy, and the explosion in personal debt. And most of all, of course, they mistook
a short-term boom for long-term stability, failing to recognise a dangerous imbalance between finance and the so-called ‘real economy’. Yet like so much of New Labour’s economic policy, while its head was in the clouds, its heart was at least in the right place.
Following the banking bailout, consumer affairs magazine Which? established the Future of Banking Commission, whose report was published this week. Led by Conservative MP David Davis, and featuring contributions from Labour MP John McFall, Vince Cable, and Bank of England chief Mervyn King, the Commission’s stated aim was to protect consumers. It chose to achieve this, however, by stabilising the banking system, rather than empowering ordinary people at the expense of financial institutions.
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