Banks (Financial Exclusion and Access to Finance)

Gareth Thomas Excerpts

1st reading
Wednesday 14th January 2026 Commons Chamber

[Gareth Thomas (Harrow West) (Lab/Co-op)]

I beg to move,

That leave be given to bring in a Bill to require banks to measure and disclose their performance in reducing financial exclusion, including exclusion from affordable credit, and in improving access to finance for small- and medium-sized businesses; to establish a system for rating banks according to that performance; to require banks to cooperate with credit unions and community development finance institutions to address financial exclusion and improve access to finance for small- and medium-sized businesses; and for connected purposes.

I declare at the outset that I am a member of the M4Money credit union.

Dal Dhillon is a great Coventry entrepreneur who runs Dhillon’s Brewery, Dhillon’s Spire Bar and the Sky Blue Tavern, which, together, are helping to fire up Frank Lampard’s growing army of Coventry fans as they push for the holy grail of premier league promotion. When Dal wanted to expand his businesses, he hit a stumbling block that affects many growing businesses: accessing affordable finance. His application was rejected by a mainstream bank, so Coventry and Warwickshire Reinvestment Trust—a community development finance institution or community bank—stepped in. It is not for profit, accredited by the Financial Conduct Authority, community-focused and takes the time to understand the entrepreneur, their business and their ambitions. In essence, it is a proper community bank. Since 2010, CWRT has loaned more than £37 million, helping small and medium-sized enterprises overlooked by traditional lenders in their communities to start up, grow and thrive.

Thousands of small and medium-sized businesses are sadly locked out of access to affordable credit at the moment, meaning, in short, that they cannot get fair banking. This holds back too many people in too many communities from turning strong ideas for new inventions or new services into more jobs, new high street ventures or just great commercial opportunities.

For the entrepreneur who does not have a track record or assets, access to business finance and financial advice is a huge challenge. Indeed, the cost of business finance in the UK is higher than in other comparable countries. When in government, senior figures at one bank told me that the typical business client who received personal sit-down financial advice had a trading income of £10 million or more. According to the Federation of Small Businesses, which is concerned about access to the funding its members need and supports this Bill, nearly half of small businesses recently rated the overall availability and affordability of new credit for small businesses as poor.

At the same time, millions of people across the UK do not have access to affordable credit when they need it most. More than 20 million adults are now classified as financially underserved—a 50% rise since 2016. One in three adults faces barriers to mainstream credit, often leaving them without safe or affordable options. Some 12.5 million people have no savings to fall back on in a crisis and almost 2 million have turned to illegal lenders in the past 12 months alone.

As the team at the excellent London Mutual credit union pointed out to me when I visited last week, not having fair access to affordable credit can mean that people have to use payday loans, forcing those who can least afford it to put up with higher charges and interest rates—paying a poverty premium. It means it is harder to save, and more costly to buy key things like a fridge or to repair a broken boiler. In short, it is harder to pay for life’s unexpected costs.

The financially underserved do not live far away; they are in all our communities. They are among our families, they are our friends, and they are certainly our neighbours. I welcome the work that my right hon. and hon. Friends on the Front Bench have put into establishing a financial inclusion strategy. My Bill seeks to build on that good work. We need to go further if the loan sharks are to feel that their opportunities are shrinking, and if we are to see credit unions doubling in size and community banks unlocking more of the business ambition in our country, especially in the most economically deprived areas.

A fair banking Act would require the Financial Conduct Authority to analyse the performance of mainstream banks, according to their size, on the provision of equitable access to credit for individuals and small and medium-sized enterprises. It would create a published ratings system that showed which banks were doing well and which less so. Banks could improve their ratings by expanding their provision of affordable lending to underserved communities and businesses, and by creating partnerships with community banks or community development finance institutions.

I am not interested in bashing Britain’s banks—they are critical to our economic future, and huge sources of wealth and jobs for British people and for all our communities—but I do think they could do more. There are fair banking requirements in other countries, most notably in the US, where most British banks already operate comfortably under them. There are of course differences between the financial services environment in the US and here in the UK. A UK fair banking Act would need to focus on small business lending and an individual’s ability to access affordable credit, and less so on mortgage lending, which is a key issue in the US.

American fair banking requirements mean that British banks invest in left-behind communities in the US. They invest in and work happily with community banks or community development finance institutions—indeed, British banks are among the largest investors in US CDFIs. They do not lose money and there is often joint lending by CDFIs and banks. In the reports they have to publish they celebrate, for example, their work with women entrepreneurs and with black and ethnic minority businesses.

The question for those British banks is why they will not back such requirements here. Why will they not do more with community banks and credit unions in the UK? To be fair, there is some investment in CDFIs from Lloyds and J. P. Morgan, but it is striking how many other major banks invest in CDFIs in the US but do not invest similarly here. As a result of US requirements, British banks are already used to working with the disclosure requirements that I envisage introducing through the Bill. The majority of the data needed for the disclosure requirements under the Bill will already be collected by the FCA in, for example, its consumer credit product sales data, so it would not be over-regulation.

Following detailed research for the fair banking campaign, conservative estimates suggest that the requirements in the Bill could result in, for example, an increase in the level of annual lending here by CDFIs and credit unions from an estimated £250 million a year up to £3.3 billion a year. That would transform the prospects for thousands of entrepreneurs and financially underserved people in all our communities.

There have been some suggestions that the measures in my Bill might overlap with existing laws and regulations, including the recently introduced consumer duty. Unfortunately, that duty applies only to people who are customers, so people who apply to banks and are turned down are excluded from it. Also, no mechanisms or metrics are currently in place, or being proposed, on measuring banks’ performance on expanding access to affordable credit as a whole.

Specifically, there is no current framework for benchmarking banks’ actions on providing affordable credit or on working with credit unions and CDFIs. There is currently no mandate for banks to expand access to affordable credit, and no incentive for them to work with credit unions and CDFIs to do so. What the widespread exclusion from credit demonstrates is a major market failure. Current measures are not working and voluntary measures are not enough. The measures in my Bill would end that failure.

Talent, and entrepreneurial talent in particular, exists everywhere in the UK. We need to give that talent the chance to flourish, and more affordable sources of credit are key to that. No one in crisis should be forced into punishing levels of debt or worse because the mainstream banking sector has locked them out.

I am grateful for the support of the Federation of Small Businesses, Small Business Britain, Richard Marshall of Pall Mall Barbers, the Building Societies Association, the Association of British Credit Unions, the Co-op party, Responsible Finance and the excellent team at the Finance Innovation Lab. A fair banking Act is a common-sense, proportionate measure that could have transformative benefits for businesses and communities across the UK. I commend the Bill to the House.

Question put and agreed to.

Ordered,

That Gareth Thomas, Dame Meg Hillier, Sarah Champion, Liam Byrne, Sarah Owen, David Burton-Sampson, Lloyd Hatton, Bill Esterson, Mr Tanmanjeet Singh Dhesi, Nick Smith, Anneliese Dodds and John McDonnell present the Bill.

Gareth Thomas accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 27 February, and to be printed (Bill 363).