Sam Rex-Edwards, our Head of Movement Building and Campaigns, reflects on last week’s sudden closure of the Financial Fairness Trust by asset manager Aberdeen Group.
The shock move by asset manager Aberdeen Group plc to oust the CEO and Board of the Financial Fairness Trust, and to abandon the foundation’s mission, marks a watershed moment in the ongoing struggle to tackle the root causes of poverty and inequality in the UK. While Aberdeen framed the decision as a ‘natural evolution’, the deeper message is clear: we cannot rely on voluntary approaches by profit-driven financial institutions to fix market failures. Just as Aberdeen retained the ability to make this decision for their charitable foundation, so can any business switch their priorities in whatever they see as the best interests of their business.
Yet the government continues to shape financial policy around the apparent belief that such institutions will prioritise public good. Nowhere is this more evident than in access to affordable credit. Millions are excluded, individuals and small businesses alike, often with devastating consequences. Meanwhile, lenders like credit unions and Community Development Finance Institutions (CDFIs) – who are often best placed to provide services to customers that larger institutions can’t or won’t support – struggle to scale up to meet demand.
There are some great examples of mainstream banks partnering with these providers, and making a positive difference as a result, but such efforts are fragmented and unstable. As Aberdeen’s actions show, a change in leadership, corporate strategy or the prevailing political winds can swiftly undo progress.
Fair access to affordable credit is not a niche social project — it’s an economic imperative. Yet today, millions of people across the UK have no realistic, affordable options when they need to borrow for essentials. That forces them into a cruel choice between high-cost credit, illegal lenders, or simply going without. These ‘choices’ can have serious impacts on people’s mental and physical health and ability to work.
Similarly, the growth of small and medium sized businesses in areas classed as deprived, and/ or led by people of colour or women is hampered by algorithm-based lending decisions that cannot take a holistic approach to people’s circumstances, or the business cases they present. This is slamming the brakes on the potential for SMEs to help drive inclusive growth across the UK.
The entrenched and devastating issue of access to affordable credit, and the Fair Banking Act as a key solution to it, became a national conversation earlier in the year, with the documentary, Michael Sheen’s Secret Million Pound Giveaway. Since that documentary, we know that over half of all MPs have been contacted by their constituents, asking them to back the Fair Banking Act.
As the Treasury prepares its long-awaited Financial Inclusion Strategy for this autumn, Aberdeen’s decision should provide a timely reminder that it’s not enough to hope that big business will act in charitable ways. Difficult though it may be, as much push back as industry may bring, legislative intervention is sometimes needed – and this is unquestionably the case in relation to access to credit.
A senior director at Lloyds Banking Group recently said they had learnt from the work banks do with CDFIs in the United States, and that they want to replicate the kind of ‘symbiotic relationship’ between the two sectors that the US enjoys. That symbiotic relationship only came about through legislation – the Community Reinvestment Act. We need a similar legislative approach here. Without it, the current – though welcome – enthusiasm from a handful of banks for supporting community lenders such as CDFIs is at real risk of a change of heart from the leadership. It also means that those institutions that are doing much less to help address the issue of affordable credit can freeride on the work of others.
If we continue to leave financial fairness to the discretion of the market, we will continue to get what the market delivers: patchy access, predatory products, and persistent inequality.
A Fair Banking Act would be a powerful statement that access to affordable, ethical credit for consumers and businesses is not optional. It is fundamental to a fair, modern economy. It’s the responsibility of the government to act to make sure that it’s not left to the whims of company bosses.