“We're now at a stage where there are over a thousand Indian businesses contributing over a billion to the UK economy. That is a huge success story that so often would not have been written about in mainstream publications,” said Labour’s shadow foreign secretary David Lammy, addressing a Connecting Communities event in London this week.
The UK’s Opposition party has fired the proverbial starting gun to the lead up to the next general election, expected in 2024, and is clearly keen to make a connect with the influential diaspora electorate. Highlighting one issue the party feels would resonate across communities is a promise to clamp down on exorbitant hidden fees on remittance payments made by the diaspora from the UK back to family in the countries of their origin.
Lammy said: “Over £11 billion is sent from the UK to communities all over the world. It dwarfs our aid budget, sent for poor communities overseas. But it still faces sometimes quite excessive charges. I hope that in office, we can do something about those fees.
“In government, Labour will set the goal of reducing the obstacles and costs to cross border payments, keeping money in the pockets of Britain’s communities and allowing them to build on their contribution to Britain’s impact in the world."
Remittances are transfers from residents in one country to residents in another, typically a transfer of earnings sent in cash or goods to support families back home. They have been growing significantly in recent years and represent a key source of foreign income for many developing countries.
Reducing transfer costs on remittances to 3 per cent globally was one of the UN Sustainable Development Goals (SDGs) the UK and 190 UN member states signed up to in 2015. International payments involving foreign exchange rates can be expensive, with many involving costly hidden fees, averaging at 5-6 per cent in the UK.
According to the World Bank, remittance flows from the UK reached $10.7 billion in 2022 alone. If the UK had met the 3 per cent SDG target, an estimated $304 million in transfer fees could have been saved. Evidence suggests that remittance flows are more stable than foreign direct investment (FDI) and are typically countercyclical, with migrant and diaspora communities sending more money to families abroad when things are tough at home.
Lammy added: "The positive impact of diaspora communities to fighting poverty and inequality through remittance payments is too often overlooked. Costly hidden fees on these payments put financial pressure on families in Britain already struggling to make ends meet in the Conservative cost of living crisis.
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"Labour is proud of Britain’s diversity and it’s something we celebrate. Our communities are global bonds and bridges to every continent. It is a great strength not a weakness. Every part of Britain has been enriched by the contribution of diverse communities.”