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For a “fair” financial system, the banks must give something back

The leaders’ economy debate overlooked society’s most disadvantaged, and their relationship to the b

If this election has a buzzword, it is undoubtedly "fairness", which, along with "change", has been co-opted by all three main parties.

Last night's leaders' debate focused on the economy, covering banker's bonuses, regulatory reform and reducing the Budget deficit.

But what does this actually mean for most people? For all the vague talk of helping small businesses and protecting jobs, there was very little discussion of those now sitting at the bottom of the social and financial ladder, who continue to feel the fallout from a crisis they did little to create.

There are two main issues here. First is the plight of small businesses, many of which are struggling to obtain credit. Just a few months ago, it was reported that RBS, 84 per cent owned by the taxpayer, had failed to meet its target of increasing lending to businesses by £16bn.

The Better Banking campaign points out that some 25,000 businesses a year with viable propositions find it impossible to access credit. Small businesses in the UK have the highest rate of failure of all the OECD countries, largely because of undercapitalisation.

This is not "fair", and if economic growth is to be ensured, lending to small businesses must be a priority. The three main parties have all made nods towards this, but it remains to be seen whether they will go far enough.

Second is an issue that has largely been ignored across the board. David Cameron spoke last night about protecting the "frail" members of our society and Gordon Brown pledged to create jobs, while Nick Clegg argued for a tax system that is "fairer" to those on low incomes.

But what about the millions of people whose income is too low to pay any tax? Between five and seven million people have no access to credit because they don't have a bank account, or any credit history.

These people are disenfranchised, and at risk of falling into a cycle of debt. In January, the Financial Inclusion Centre said 100,000 families had borrowed £29m in total from illegal moneylenders over Christmas. The average amount borrowed was £288, but the average repayment was £820.

Even apart from such illegitimate loans, these families lose an extra £1,000 each year on average, through not being able to set up direct debits or flexible billing arrangements.

The 2010 Budget stated that banks would be legally obliged to provide a basic bank account to all UK citizens, to begin to redress the balance between banks and society's most disadvantaged members. It remains to be seen whether this will be upheld in the emergency Budget published after the election.

The Better Banking campaign is urging the party leaders to implement a series of measures: full disclosure on lending to small businesses, incentives and obligations for banks to take social responsibility, capping the amount that can be charged for credit, and reinvesting 1 per cent of banks' profit for public benefit.

Labour has adopted some of these promises in its manifesto, and the other parties must follow suit. The deep-seated sense of injustice felt by much of the electorate will not disappear, as disadvantaged people and local communities continue to suffer while banks return to profit. From this perspective, splitting banks up, or temporarily capping bonuses, all seem like distant, token measures.

As the banking crash painfully illustrated, the financial sector has roots running deep into every section of our society. The only way that long-term "fairness" can be ensured is if a more reciprocal relationship is created, in which the banks nurture the society that bailed them out.

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Tags:Economy