Westminster Hall
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Broadband (North of England)
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Andrew Jones (Harrogate and Knaresborough) (Con)
It is a pleasure to serve under your chairmanship this morning, Mr Sanders. As a west country man, you may not fully agree, but I believe that the quality of life that we enjoy in the north of England is higher than that of the south. I recognise, however, that big differences remain between our economies; the north’s lags quite a way behind the south’s. There are many reasons for that, and one of the main ones is our relative lack of infrastructure. We have, historically, described infrastructure in terms of power generation or transport links, but that is an old definition. Broadband is one of the key infrastructures that we need to take advantage of the opportunities of the digital age.
The Government have been right to recognise that broadband matters; they have put significant investment behind it quickly and extended it widely, and brought in private sector capital. They recognised early that the opportunities are so wide that they have an impact on, and improve, many aspects of life. Some of those influences are critical for the future, such as helping with education, telehealth and keeping the economy competitive. There are opportunities to enhance the quality of our lives significantly by keeping in touch with family and friends, and there are things that are simply fun, such as streaming films or gaming. I will highlight a couple of important things relevant to my area: telehealth and business.
Telehealth or telemedicine is a means of using technology for access to expertise whenever it is needed, and for the provision of care. It helps in tackling the challenges of an ageing population and helps people to stay in their own homes. It brings health care into people’s homes or communities, however remote those are. Telehealth is a simple idea, on which we have leadership in the north of England. I have seen an impressive demonstration of telemedicine by doctors from Airedale general hospital, and have seen it in use in the stroke unit at Harrogate district hospital, where the clinicians can access the best stroke care remotely. A good, fast internet connection is needed for that, which means superfast broadband. Telemedicine is part of the future, and it is fantastic.
In the world of business, which was my background before I became a Member of Parliament, people must be accessible to their customers, and that now includes web access. Different parts of the north have strengths in different sectors, and I am sure that other hon. Members will focus on the ones relevant to their areas. Two with scale in North Yorkshire are the visitor economy and agriculture.
Last week was English tourism week, and as part of that I visited several tourism facilities in my constituency, including the Bijou Boutique bed and breakfast in Harrogate. The proprietors, Stephen and Jill Watson, talked to me about the large proportion of their customers who find out about them online and book online. Managing their online presence is critical so that more customers will be able to learn what their business has to offer. That is particularly true for our area, where so much of the economy is driven by visitors.
A highlight this year will be when we host the grand départ of the Tour de France. It is only 90 or so days away, and Yorkshire will become a huge visitor and media attraction. Superfast North Yorkshire has responded by enabling communities along the route to get broadband. The roll-out may not be completed before the tour arrives, but at least it has listened, responded and made progress.
Superfast broadband is not just about reaching customers, and enabling them to reach businesses in turn. It drives business efficiency, helps with access to purchasing deals and takes cost and bureaucracy out of the business. We can see that in the agricultural sector, where some regulatory matters require an online presence. For example, the online cattle tracing system and dealing with the Rural Payments Agency require connectivity. Government is going online. Businesses with a turnover of more than £100,000 must fill in their VAT returns online; there is no choice. That catches many farmers and rural businesses, and it is not easy to do that through a slow dial-up facility.
Kate Green (Stretford and Urmston) (Lab)
I congratulate the hon. Gentleman on securing a debate on a subject of great importance both to his constituents, who live in a rural setting, and to businesses on the largest industrial estate in Europe—Trafford Park, in my constituency. Does he agree that although those businesses may have very different characteristics, they all share an urgent need for superfast broadband connection, to maximise business potential?
Andrew Jones
Yes, I strongly agree with that argument. I do not think that the scale or sector of a business, or the geography, really matter. The point about broadband is the ability to get access to customers all over the world. We need it, and quickly. The hon. Lady’s point is absolutely correct. For a rural business, dialling up on a slow landline that other family members might also use is incredibly slow going. Businesses without connectivity are being left behind, which is why good, reliable superfast broadband matters.
I want to share with the House one of the successful lessons of the North Yorkshire roll-out. North Yorkshire will shortly become the best connected county in the country, because our delivery vehicle was already in place as the Government launched their broadband strategy. That vehicle was a company started previously by North Yorkshire county council, called NYnet. NYnet has done extremely well, and deserves congratulations and praise from across the county. Being in a position to start promptly and knowing where some of the challenges would lie made a difference. North Yorkshire was the first county in the country to award its roll-out contract. The roll-out has been going at the rate of about 6,000 to 7,000 properties per month, which is a good rate. I checked the latest data and at the end of last week 102,402 properties had been enabled to receive superfast broadband of at least 25 megabits per second.
Just having the capacity, however, is not enough. People have to choose it. Take-up is running at 16.2 %, and rising sharply. Superfast North Yorkshire expects to reach 20% take-up by summer, and 30% by the middle of next year. That is significant as those rates of take-up also trigger clawback elements in the contract, so the roll-out provider—in this case, British Telecom—will have to pay money back to NYnet. It will be able to use that for reinvestment to roll out broadband to remaining properties, perhaps as match funding for Government schemes. The lesson from the roll-out is that the importance really lies in demand stimulation for both residential and business customers.
In North Yorkshire, significant business support and training have been on offer. There have been local conferences at Ripon racecourse and Fountains abbey, ably organised by my hon. Friend the Member for Skipton and Ripon (Julian Smith); my hon. Friend the Member for York Outer (Julian Sturdy) came to speak. We encouraged business and communities to get involved. There has been good business follow-up and more than 900 businesses have been helped.
I saw for myself how Superfast North Yorkshire has been operating when I attended the launch of the service in Boroughbridge in my constituency. I thought that it was good marketing, and I come from a marketing background. It was 6 December last year. We had a roadshow, involving the local school, the local mayor, local businesses, Father Christmas, of course, and some Christmas carols, Christmas punch and Christmas cake. It was a very Christmas-themed event. We also had a giant mouse, which I used for a ceremonial switching on of the service, and, to communicate that the service was available, a fibre-optic Christmas tree lit up to symbolise it. Basically, everything added up to show that something had happened—something new, fun and for everyone. I have been informed by the local community that the take-up in Boroughbridge has been high.
Julian Sturdy (York Outer) (Con)
I congratulate my hon. Friend on securing this important debate. He is absolutely right to praise the work of Superfast North Yorkshire and what it has done so far in the roll-out of superfast broadband across North Yorkshire and York. I am pleased to hear about the success in Boroughbridge, but does he not agree that the key stage to reach now is that next 10%? There are not-spot communities throughout my constituency and North Yorkshire, and Askham Bryan, Askham Richard, Hessay and Acaster Malbis, all in my patch, are part of the not-spot area. Is it not right to help those communities in the last 10% to bridge the digital divide, which means looking at how we can enhance new technologies to reach them? That is the key point—getting to those communities—and it will not always be done through fibre to the cabinet.
Andrew Jones
My hon. Friend is as wise as ever, and I strongly agree with him. I am about to deal with those points so, if he will forgive me, I will not address them now.
The question now is about looking ahead. I want to share a couple of points with my hon. Friend the Minister. We need to be vigilant so that one provider does not develop any kind of monopoly abuse—although we are not there yet, and I have seen no evidence of such abuse in my county. As a Conservative, I believe in the merits of competition to bring choice, value and innovation, and I know that the issue is already on the Minister’s radar.
I want to focus on the point made by my hon. Friend the Member for York Outer: how to give the opportunity of broadband to all homes, taking the figure from 90% to 100%. This year, my home county of North Yorkshire has roll-out phase 2 to take us to 93%. Phase 3 is planned for 2015, which will take us further. In that phase, the quest and challenge will probably move from being financial to being about decisions on the delivery method, which may have to change for the isolated homes and hamlets that are a feature of our rural areas. Satellite, wireless or other new technologies are likely to be used away from the cabling roll-out that we have seen thus far. That is urgent and important. I want people in the villages of Lower Dunsforth or Nidd in my constituency and those throughout the north who are missing out on the opportunities of broadband to be connected, so that they have opportunities to drive their businesses and to get all the benefits that broadband brings.
Superfast North Yorkshire has told me that it expects to hit 100% by 2017, which would be extremely positive, so I want to say two things to the Minister. First, and perhaps most importantly, is simply that we should press on, and quickly. Those doing the roll-out must be held accountable for the speed of progress. It is not great that some counties seem to be only just starting the sprint when North Yorkshire is approaching the finish line. That is a competitive advantage for North Yorkshire—not something I worry about normally, but from the perspective of UK plc, we need everyone to be there. Whatever the blockages, constraints or capacity problems might be, they need to be removed.
Secondly, will the Minister work with colleagues to promote business training? I have read that the benefits of the UK’s becoming a world-leading digital economy are measured in tens of billions of pounds, but only half of small and medium-sized enterprises have a website. That presents a huge opportunity, but training will be required for people to take up or even recognise it, because I have also read that many companies do not think that it is relevant to their business.
Finally, I thank the Department for Culture, Media and Sport team for putting North Yorkshire at the heart of the first phase of the roll-out. As a team of North Yorkshire MPs, we pitched for our county’s inclusion in the roll-out. It was one of the first things we did as a team after arriving in Parliament, and we were delighted to be successful. The reason why we were included was our ability to have a delivery vehicle, in the form of NYnet. That proved to be a wise decision, as we are now leading the country in this area.
The North Yorkshire team grasped the opportunity and many lives in our county are better for it. Broadband roll-out is a key part of dealing with the north-south economic divide that I mentioned at the start of my speech. We are still fighting the battle for more infrastructure in the north as a whole, and I think we are winning that battle, but for broadband it has been well and truly won.
Eric Ollerenshaw (Lancaster and Fleetwood) (Con)
It is a pleasure to serve under your chairmanship, Mr Sanders, and to be able to speak in this debate to balance the Yorkshire impact from Lancashire. I congratulate my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones). Even though he comes from Yorkshire, he makes a good case.
First, I put on record my belief that the Government’s roll-out of superfast broadband has the potential to transform the rural economy and in particular the nature and future of our rural villages. In simple terms, villages in my area of the north-west, as in many parts of the country, have suffered the loss of shops and businesses to more urban areas, to the extent that many have now in effect become dormitory housing for the nearest big towns, retirement villages, or a combination of both. I will not rub it in, but in the last year of the previous Government, we lost six rural post offices, which were virtually the last shops in the villages concerned. My village schools, however, have gone from strength to strength, simply because of the high quality of the education, and they are now attracting pupils back from the urban areas. I am grateful to the Government, which only recently introduced funding protections for those small schools. As my hon. Friend laid out, the broadband programme has the potential to reverse that rural decline and to bring back what I call “live” villages, where businesses operate and activity returns in the daytime. Where villages have been hooked up, there is clear evidence of businesses wanting to get back into and operate in them.
It is great that the Government have now decided to add to the pot of money to achieve even wider superfast broadband coverage—we hope to 97% of such areas. It is so transformational that it will have an impact on regional imbalance and the so-called north-south divide, giving a chance for regional and rural business to compete with the best down south without relocating. That is a key plus. Originally in my area, it was clear that the contracts would cover only 93%, and it seemed unlikely that coverage would get up into the villages in the hills above Lancaster, in the trough of Bowland and the Lune valley. There would therefore be a problem about what was happening in the low land and what was happening in the high land. It also seemed likely, given what we have seen throughout the country, that BT would yet again win the contract, and BT could not guarantee either that it would cover every property in an area or the speed—it was only in terms of average speeds.
As a result, a local community group got going in my area, led by Professor Barry Forde, formerly a professor at Lancaster university, and ably supported by some keen enthusiasts such as Chris Condor and Martyn Dews. They put together a social enterprise company to reach the areas that could not be reached. It offered to lay fibre to every single household in the areas for which it got responsibility, leaving no one out. On top of that, it guaranteed 1 gigabit of speed to every single household, which BT could not do. There were various negotiations with the county, but the company was allowed to experiment. I have to put it on the record that at the beginning even I was wondering whether it could manage all that. The whole purpose of the social enterprise was that the costs would not be the same as for BT because farmers would lay cables across their land without the need to obtain wayleaves and in return would receive superfast speed without having to pay the same rental charge because they had allowed their land to be dug to lay the fibre.
There were questions about whether there would be problems in certain areas and whether people would be involved and buy shares in the social enterprise. Interestingly, three or four years down the line, the enterprise has happened. It is called broadband for the rural north—B4RN—and the indication was that the outline plan could cover 3,500 households in the hills above Lancaster, although there was some dispute about that. It applied to the rural communities broadband fund, but unfortunately Lancaster district council had already applied with Lancashire county council, and the contract for most of the county went to BT. The county council and district council wanted to cover the largest possible part of Lancashire so it is understandable that most of the grant went into the big pot.
BT obtained the major contract, and B4RN dug its way across the hills, but BT then refused to say which 3% of the region would not be covered by its network. That forced B4RN to lodge a complaint with the European Commission about Lancashire county council’s use of state aid, and delayed matters even further. B4RN agreed to drop its complaint if the county council would protect B4RN’s postcode areas from BT’s rival scheme. It then seemed that B4RN could get moving, and Arkholme, Quernmore, Abbeystead and the hamlets of Littledale and Roeburndale are now wired up with 1 gigabit to every house and farm and no one is left out.
That is a demonstration of the big society, but there were frustrations along the way. For example, it was necessary to take a cable across one of Network Rail’s bridges, which carried an average of six trains a day. We got Network Rail down to show it that the fibre cable would lie on the bank, which was nearly 12 feet—I still use imperial measurements—from the railway line. Would Network Rail agree to that? Unfortunately it would not, because it might set a precedent and there would have to be rental to the community project. Failure to obtain Network Rail’s agreement added to costs because B4RN had to drill under the ground. That community group was strong and just kept going when such obstacles arose.
I, the local MP, B4RN, the community group, and most people in that part of Lancashire still do not have a map of which areas BT will or will not cover. B4RN put Abbeystead and Quernmore villages, which are on my patch, on to cable, but in between is another village, Dolphinholme, which has 181 inhabitants. B4RN had to take cable through it because it is between Abbeystead and Quernmore. However, out of the blue, BT suddenly started to fibre up Dolphinholme, a tiny village in the hills. However, it decided that one of my biggest villages in the lowland, Glasson Dock, will not be fibred up to receive superfast broadband, yet it can provide it to a tiny village in the hills, miles away from anywhere, which just happens to be next to the community group’s project.
I found out only this week that on the other side of the community group’s project at Wennington in the hills, BT is offering to pay farmers £4.50 or £5.50 a metre to lay its fibre cable across their land. B4RN, of course, cannot offer money. It can only offer a return to the community group. B4RN tried to obtain a map from BT, but I am now being contacted by constituents in my biggest urban area, the city of Lancaster, asking when they will have superfast broadband. The hon. Member for Stretford and Urmston (Kate Green) referred to a business park. I have a business park in my constituency, the White Cross estate. It is supposed to be a start-up area for new businesses, but BT has not provided it with superfast broadband, yet it has taken it up into the hills next to a community group.
What is going on? I am a Conservative and I believe in competition. BT is receiving Government grant, but B4RN receives no grant and is a community effort with community money. It seems to everyone in B4RN’s area that BT is using its strength to surround and hem in the only existing tiny piece of competition in the great county of Lancashire. There are serious questions about what is going on. The community group is struggling. It does not have the time to go to law because it is digging to put in fibre and running it into people’s homes, and it is training people to use superfast broadband’s potential. Businesses ask me where B4RN is going with 1 gigabit speed because they want to relocate into that area. High-tech companies want to relocate to the highest and most rural part of my constituency to have access to speed that is not available in any major town in this country, but BT seems determined to hem in that little bit of competition.
The remaining roll-out is critical to the north and my rural areas. Will the Minister ask his Department to take a serious look at BT’s behaviour in north-west Lancashire and provide what help it can to the big society and community groups that are doing their best to provide 1 gigabit speed to every household, which BT cannot even dream of doing? I have recently had meetings with BT, which has promised to provide maps of where its network will be, but I have still not received them. Even when it covers an area, it will not guarantee that every household there will be linked up to its boxes and receive high speed.
BT is taking the edge off a fundamentally successful Government project and it should be straightforward to sort it out. It involves 2,500 households that BT may not be able to link into, but it seems to have won the contract in every part of the country. My request to the Minister is that he has a serious look at what is going on before someone takes what is happening in north-west Lancashire—the matter went to the European Commission—to the new competition authority and asks what is going on with Government funding.
Helen Goodman (Bishop Auckland) (Lab)
It is a pleasure to serve under your chairmanship this morning, Mr Sanders. I congratulate the hon. Member for Harrogate and Knaresborough (Andrew Jones) on securing this important debate. He made an excellent speech, and I want to pick up some of his points and perhaps embroider them a bit.
I know from my constituency in rural County Durham how true the hon. Gentleman’s comments are. Furthermore, it is right that he raised the issue of broadband roll-out for the whole of the north of England. I do not hold out much hope that the Government will pay significant attention to the north of England or to building infrastructure there. We have seen a repeated pattern of capital projects that are very significantly well funded in the south but not in the north. That is borne out by the map that Ofcom produced, which shows the overall performance in different counties of the broadband roll-out. There is a central belt of London, the south and the west midlands, where things are looking quite healthy, but in your area of the south-west, Mr Sanders, things are not good, and things are certainly not looking at all good in the north of England. I am grateful to the hon. Gentleman for drawing that to my attention.
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr Edward Vaizey)
Cornwall is widely regarded as having the best superfast broadband in Europe. As my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) pointed out, North Yorkshire was the first place to start the rural broadband roll-out.
Helen Goodman
All I can say to the Minister is that he should look at the map produced by Ofcom. I am sure that he will quote Ofcom’s report back to the Chamber in a minute, but he should look at that map, because it also shows significantly worse performance of the broadband roll-out.
The points that the hon. Member for Harrogate and Knaresborough made about the rural economy were absolutely spot on. Indeed, I would say that roll-out of broadband is even more important in rural areas than in urban areas, because for businesses in rural areas, transport accounts for a very high proportion of their costs and without broadband connectivity, they can do little to bring down those costs, so securing effective roll-out in rural areas is particularly important.
I agree entirely with the hon. Gentleman’s complaints about the treatment of farmers and other small businesses by the public sector under this Government. It is completely disgraceful that farmers are expected to record their cattle movements online, that they have to deal with the Rural Payments Agency online, and that they have to upload their tax returns—their VAT returns—online, when they simply cannot do it. I find it astonishing that the Government think that is an appropriate way to treat farmers and rural businesses.
Andrew Jones
I thank the hon. Lady for her warm comments, but I do not think the Government are saying that it is acceptable. I think they are saying, “We know this matters and we are trying to roll it out.” The points I was making were a bit on the more positive side than she is suggesting. The problems did not just start in 2010; this has been a gradual growth of the digital economy and the opportunities it presents. The point I am trying to make is that we need to grab it. The Government have done well to grab it and we just need more of it.
Just as a further point—
Helen Goodman
I have two criticisms: one is of the way in which broadband has been rolled out; the other is of the behaviour of the Department for Environment, Food and Rural Affairs and Her Majesty’s Revenue and Customs, because they are now demanding that people deal with them solely online. That is a new development under this Government. The Government are encouraging them—in fact, instructing them—to deal solely with the citizen online. In the first-tier tribunal, for example, the tribunal judge ruled that the requirement to submit VAT returns online and the failure to take into account a person’s ability to comply on grounds of computer literacy, age, or the remoteness of location was a breach of the European convention on human rights. We need to see a change in the Government’s attitude on that.
There is an overall problem and it is twofold. The Government prioritised speed over access. When we left office, we had laid out a plan for securing universal broadband roll-out by 2012. The Government abandoned it and set out twin objectives in 2011. They were the provision of a superfast broadband network to 90% of the population by 2015 and the ability of every household to receive at least 2 megabytes download speed by 2015. Both those targets will be missed by the Government and the target is now to reach 95% of the population by 2017.
What the Government did was invest a large amount of money, for example, in the super-connected cities programme, instead of prioritising the roll-out to the rural areas. The super-connected cities programme produced a legal challenge. What the Government did was highly controversial.
Julian Sturdy
Does the hon. Lady not agree that the UK has the highest uptake of superfast broadband across the whole of the EU? Superfast North Yorkshire is a prime example of a beacon of success, showing how to deliver superfast broadband across the north and in rural areas. The issue with rural areas, of course, is their rurality, which makes it hard to bridge that last bit. That is why we need the investment in new technologies, which is what the Government are doing.
Helen Goodman
I am sorry to tell the hon. Gentleman that the Government have put a large amount of money into the super-connected cities programme—it ran into a rural challenge in Europe—instead of putting money into and prioritising rural areas such as his constituency and mine. I wish that what he is saying was true, but it is not. Will the Minister tell us in his winding-up speech what the spend in the super-connected cities programme is? It had a mammoth underspend a year ago and we have not had an update from him on the precise profile of what is going on with that programme, which I think is an extremely important point.
Twice the Government have been criticised by the Public Accounts Committee for their roll-out of broadband. All hon. Members and all Departments should take seriously criticisms that come from that Committee. Last July, it pointed out that the broadband delivery programme will be 22 months late and that the programme, because of the way in which the contracts have been set up and the geographical areas have been designed, was not promoting market competition.
As the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw) pointed out, British Telecom now has even greater dominance in this area than it had previously. It is expected to win all 44 contracts being put out to tender by local authorities. The Public Accounts Committee also cast doubt on the transparency of the costs in BT’s bids and said that because there was a lack of transparency in the process and in the bids, it was impossible to tell whether we have achieved value for money. That is before we move on to the questions that have been raised not only by the hon. Gentleman, but by other hon. Members in the House about the behaviour in specific small locations.
This is not a success story; it is a story of promise and disappointment. The Minister admits that contracts are now being signed with late delivery dates. He has moved the goalposts on several occasions.
Helen Goodman
Perhaps the Minister is going to move the goalposts again now.
Helen Goodman
Well, at the time when the objective was to reach universal access by 2015, the Minister said that he was signing contracts with delivery dates of 2016. He then shifted the goalposts and announced a target of 95% roll-out by 2017 and 99% roll-out by 2018.
Furthermore, the Chief Secretary to the Treasury announced last summer a £250 million spend on rural broadband. We have asked—we have not been given an answer—why this was cut from the £300 million that the Government are top-slicing from the BBC licence fee to put into rural broadband. Where is this £50 million going? Why is it not being used to prioritise the needs of rural areas and, in particular, the north of England, to which Government Members have referred?
There was a second report from the Public Accounts Committee in March 2014. It was not satisfied with the initial response from the Department and made further criticisms and further recommendations to the Department. I hope very much that the Minister will be able to tell us what the Government are doing about those recommendations.
First, the Committee raised the issue of a lack of information about not spots—precisely the point raised by the hon. Member for Lancaster and Fleetwood—and a lack of information about areas to which the rural broadband programme would not reach. The Committee said:
“The Department should work urgently with all local authorities to publish detailed mapping of their implementation plans, enabling searches down to full (7-digit) postcode level. The information should include speed of service, as soon as that is available.”
I hope that we will hear from the Minister on that.
Secondly, the Committee found that the Department had failed to act on its recommendation to secure a higher standard of cost transparency before the remaining contracts were signed. It had recommended that the Department
“collect, analyse and publish costs data on deployment costs in the current programme, to inform its consideration of bids from suppliers under the next round of funding.”
I hope that the Minister will tell us what he is doing about that.
Thirdly, the Committee reiterated its previous conclusion that the Department’s procurement approach failed to deliver meaningful competition. This was the recommendation:
“Before the next round of funding is released, the Department should work with local authorities to identify opportunities to promote competition and value for money; including considering alternative solutions, joint working and fair capital contributions from suppliers.”
I hope that we are going to hear from the Minister about that as well.
Helen Goodman
The Minister can say that in his winding-up speech, so that it is fully audible and on the record for Hansard and the great British public.
The Department has committed another £250 million to spend beyond 2015 and it is working on the assumption that, as in the first round, when it was spending £530 million of central Government money, that will be matched by local authorities, but I want to ask the Minister how realistic he thinks that is, following the very tight squeeze that has been put on local authority spending by his colleagues in the Department for Communities and Local Government, whether he thinks that it is still a realistic expectation, and what he will do if the local authorities find that they are not all as well resourced as North Yorkshire, which has clearly done a very good job for its local businesses, its farmers and its citizens.
The plain fact is that the north of England is particularly badly served. For example, in North Lincolnshire, superfast broadband availability is only 54%. In Lincolnshire, it is 49%. In the East Riding of Yorkshire, it is only 21%. In Cumbria, it is only 26%. These are serious problems. They are raised by our constituents and by the Country Land and Business Association and they are absolutely clear to everyone who is not sitting in the Whitehall Department, the Department for Culture, Media and Sport.
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr Edward Vaizey)
It is a great pleasure to serve under your chairmanship, Mr Sanders, and to respond to this important debate, called by my hon. Friend the Member for Harrogate and Knaresborough. I am delighted that he is happy with our programme. It is always a great pleasure when one of the asks from someone introducing a debate is for us to keep on doing what we are already doing so successfully, but that is not to say that I will not take into account the other serious points that he made. I also thank my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) for his contribution, which was perhaps more of a critique than that of my hon. Friend the Member for Harrogate and Knaresborough.
Let me begin by giving an overview of the national programme. I have to say, without wishing to attract too much opprobrium, that as far as our programme is concerned, my glass is very much half full, as opposed to half empty. The Government came into office in 2010 determined to do something about the digital divide—determined to bring broadband to millions of homes that were not going to get it under a commercial deal. Let me explain that BT itself has delivered superfast broadband to something like two thirds of British homes commercially, without a penny of taxpayers’ money. In addition, its main competitor, Virgin Media, delivers very fast broadband to millions of homes—it covers about 50% of the country—without a penny of taxpayers’ money.
However, we are talking today about delivering broadband to areas where commercial companies simply will not go, because they would not get a return on their investment. That applies not just to BT, but to Virgin and any other competitors. We therefore put £530 million on the table. That is not an insubstantial sum and it has been matched by local authorities. It has also been contributed to by BT, which is putting its own money into this programme; it is not simply taking all the taxpayers’ money and spending it without any contribution of its own.
BT expects a return on its investment in about 14 or 15 years. This is not a get-rich-quick scheme from BT. It is true that it has won every contract. We went into partnership with local authorities, because we thought that local authorities were best placed to help to co-deliver this programme with us. They would know the best places to go and be able to do the joining up on the ground, particularly in relation to planning.
On the commercial roll-out, we have had numerous cases in which BT and others have wanted to go where local authorities simply were not prepared to give planning permission for the cabinets, so to have the planning, the power and the local co-ordination on board was going to make a difference. I think that it does make a difference.
When we put together the original framework contract, we had nine potential competitors lining up against BT, but most of them dropped out. At the end, when the first contracts were being let, there was a significant competitor—a consortium led by Fujitsu—but it did not beat BT on those contracts and it has now fallen away, although it provided useful competition.
Why did those people drop away? If Virgin Media, for example, already has 50% of the market, in terms of footprint, why did it not compete? The reason is state aid rules. State aid rules require that if people accept public money, they have to accept certain obligations, and the obligation that lies on BT as it rolls out this network is that it must provide access to any other retail telecoms provider. In shorthand, that is, for most consumers, TalkTalk or Sky, which are the most well known providers, but obviously there are numerous others as well. If people compare our market with any similar market in Europe or elsewhere, they will see that BT, as the incumbent operator, the former nationalised state monopoly, has the lowest market share of any incumbent operator. People can compare with Deutsche Telekom, France Télécom and so on—BT has the lowest market share.
We recently overtook Germany in broadband roll-out. We now have more availability and take-up of superfast broadband than Germany—and, in fact, all the other major European economies. The reason is that we have competition as well; we have not only the infrastructure, but competition, which keeps prices down. People can look across at America. There, they will pay twice as much as they will here to get the same broadband. That is because BT is regulated by Ofcom. Retail providers’ access to BT’s network is, and will continue to be, regulated. When BT builds out under the rural broadband programme, the customer will not be obliged to take a BT service. They can take a service from TalkTalk, Sky or any other retail provider that uses the network.
I happen to think that the rural broadband programme is going very well, and the Chancellor agrees with me, because he put in an extra £250 million. We are accused of moving the goalposts, but that is not the case at all. We have a £530 million programme, which is actually some £1.2 billion when local authority and BT money is taken into account, to bring superfast broadband, by which we mean about 24 megabits a second, to 90% of British homes. We want to go further, so we have found another £250 million. With match funding, which we expect most councils to be able to provide, we expect that 95% of British homes should get superfast broadband by the end of 2017.
Finally, there are the remaining 5% of homes, such as the isolated farmhouse or the house in the middle of a moor, which could cost thousands and thousands of pounds to connect up to superfast broadband. We could do a rough, back-of-the-envelope calculation of that cost, and we might end up with a figure of £1 billion or even £2 billion. We do not want to do such a calculation; we want to try out different technologies and see what will be effective. We have set up a £10 million fund, for which we have asked people to bid, to trial the latest and newest technologies that might bring down the cost of reaching the final 5% in the hardest-to-reach areas.
Jason McCartney (Colne Valley) (Con)
I think the Minister is describing my constituency. Milnsbridge and Slaithwaite have already benefited from the BT fibre broadband roll-out, which is fantastic. Villages such as Hade Edge, Marsden and Holme, which have been isolated by heavy snowfalls in recent years, are, we hope, on track to get the broadband that they need. The Minister’s statistics are absolutely right. We have a broadband take-up of 83%—one of the highest in Europe. I believe that we are on the right track, and it is great to hear his plans for our rural communities.
Mr Vaizey
I thank my hon. Friend for that intervention. Although some of us may disagree about the detail of the Government’s plans, we are all united in understanding the importance of broadband, and we are doing our very best. Believe me, if I could wave a magic wand tomorrow and deliver superfast broadband to every home in the country, I would, but it is an engineering project and cannot be done overnight.
We are hitting our targets. Let me explain that we measure superfast broadband homes passed on the basis of those who actually receive it. So it is not about simply putting up a cabinet and saying, “That is delivering superfast broadband to 2,000 homes,” because some of the homes in that cabinet area might be 1 km away and not get such speeds. We audit every quarter, and we estimate that by the end of February we had passed 370,000 homes with superfast broadband. We are well on track to get into seven figures some time this year. We were passing 10,000 homes a week and we are now on track to pass 40,000 homes a week, so the programme is accelerating all the time.
North Yorkshire is a brilliant example of how well a programme can be run when there is a go-ahead local council with a real appetite for it and it works very well. As I understand it, there are now 118 live cabinets in the constituency of my hon. Friend the Member for Harrogate and Knaresborough, which serve almost 34,000 premises. In North Yorkshire, we have met all seven of our time and deployment target milestones. We have deployed 462 cabinets out of an overall programme of 673, and more than 120,000 premises have been passed, 100,000 of which receive superfast broadband. We also have significant take-up. My understanding is that the average take-up is some 20%, with two cabinets exceeding 30% take- up. In the next phase, we expect to reach another 17,000 premises under the superfast extension programme. Those programmes are going well.
Another area that has been mentioned is Lancashire, which is receiving £10 million under the broadband delivery UK programme. We are aiming for 95% superfast coverage under the existing programme. In North and North-East Lincolnshire, we are aiming for 90% coverage and targeting almost 40,000 premises. It would be a travesty to say that we have forgotten the north of England; nothing could be further from the truth.
The hon. Member for Bishop Auckland (Helen Goodman) mentioned the super-connected cities programme, which is separate from our rural broadband programme. It is perfectly possible for the Government to run two programmes at the same time. We set aside £150 million for the super-connected cities programme, which is designed to help our small and medium-sized enterprises to connect to superfast broadband. At the most recent party conference in Manchester, I was lucky enough to visit a local business that had received superfast broadband through the scheme, and to visit a business broadband provider that had benefited from selling connection vouchers to businesses and developing an ongoing relationship with them. We estimate that up to 30,000 small businesses will benefit from the programme, and it is well on track. Another important aspect of the programme is the support it provides for public and community wi-fi, which we are installing in 21 areas and which will benefit, for example, libraries, museums and art galleries.
Helen Goodman
Before the Minister moves on, would he care to tell us how much of the £150 million set aside for the super-connected cities programme he expects to have been spent by this time next year?
Mr Vaizey
We expect to spend a substantial proportion of it. We want cities and councils to work with local businesses and encourage them to take up the money. I am not one to oppose underspend in a Government programme, but the money is available if businesses want to use it. We will not spend money for the sake of it, however.
My hon. Friend the Member for Lancaster and Fleetwood raised B4RN and asked whether he could get a map of Lancashire. We strongly support rural community broadband schemes. At the outset of the programme, we put aside £10 million from the BDUK money and £10 million from the Department for Environment, Food and Rural Affairs to create a £20 million fund to support community broadband schemes. There is a reason why it can be difficult to get such schemes off the ground, because we are dealing with state aid and a complicated process for accessing public money in compliance with Commission guidelines. I am confident that we are ready to help when problems arise, however.
My understanding is that Superfast Lancashire, which is responsible for delivering the programme, is in discussions with B4RN about the footprint where it wants to bring its community network. Superfast Lancashire is also in discussions with BT about how BT can accommodate B4RN’s commercial desires. Nobody is trying to stop B4RN doing what it is doing. My understanding—my hon. Friend may correct me if I am wrong—is that Dolphinholme, the village that he mentioned, was part of the contract with Lancashire when it was signed, and Lancashire county council decided where that broadband should go.
Mr Vaizey
Before my hon. Friend responds to that point, if that is what he wants to do, it is important to stress as a matter of principle that the broadband roll-out is dictated by the county council. Obviously, it is done in association with BT, because BT will make recommendations to the county council about where it is cheapest to go and where it will get more effective spend for its money, but the county council is in charge. It is also in charge of the map, and there is one on the Superfast Lancashire site that shows, broadly speaking, where broadband is due to be delivered.
Eric Ollerenshaw
I thank my hon. Friend for giving way. He is right to say “broadly speaking”, because the map does not tell me which villages are in or out. I said that there was some confusion right at the beginning, on both sides, about Dolphinholme’s position in the original agreements, but it has only 181 inhabitants. It is right in the hills between the villages that B4RN is covering.
Does the Minister agree that it seems remarkably odd that a company as large as BT should suddenly move into that village in the hills, when it is saying that other villages—Glasson Dock, for example—and other parts of the Lancaster urban area are still waiting for connectivity? Why should BT suddenly concentrate on that particular area? That is what questions are being asked about. I will repeat myself: I would prefer a much more detailed map.
Mr Vaizey
I must say to my hon. Friend that my understanding was that Lancashire county council decided that Dolphinholme should get superfast broadband, so that is a matter for Lancashire county council. If I am wrong about that, I will apologise. I will double-check that with the county council and get back to my hon. Friend, but that is my understanding.
As far as the map is concerned, we are dealing with expectation management, if I can put it that way. I do not think that BT has made any attempt to stay under the radar to ambush local community providers. The local authority is in charge of the map, and there is nothing to stop it publishing a map, however detailed. It is also in charge of expectation management. When on the ground delivering broadband, circumstances can change. When the van and tools arrive in a particular area, it might turn out that it is going to be three times more expensive than expected. Another area might turn out to be twice as easy as expected.
If someone told a Mr Ollerenshaw, for example, that he was going to get superfast broadband in September 2014, but they then discovered either that that was not going to be economical and they were going to go somewhere else or that he was not going to get it until March 2015, they would have to manage his expectations. It is true that the Superfast Lancashire map gives some details, saying, “We are currently mapping this area and looking to come here”, but it does not give every single address, and it allows people to know when they are going to get superfast broadband only once the roll-out has been started in a particular area. I understand that people can type in their postcode or telephone number.
Helen Goodman
Is the Minister saying that he is going to ignore the Public Accounts Committee’s recommendation in its March 2014 report and just hand responsibility for maps over to local authorities?
Mr Vaizey
It is not a question of handing over responsibility for the maps to local authorities; they are our partners in delivery and we respect their right to manage their local broadband roll-out plans. We provided the framework contract, which means that local authorities do not have to reinvent the wheel when negotiating a contract with a broadband provider. We provide the money, which they use in partnership with us, and they are the ones on the ground delivering broadband. Although I would like to take a lot of the credit for the success of the broadband programme, it is important that North Yorkshire, Lancashire and other county councils across the north of England also take credit for the excellent job that they have done on delivery.
The hon. Member for Bishop Auckland keeps saying that the north is forgotten, but I well remember my recent visit to Durham, where Digital Durham is showing that that is a fantastic local authority with a huge hunger to deliver superfast broadband to its residents.
Eric Ollerenshaw
I thank my hon. Friend for giving way a second time. No one is questioning BT having won all these contracts, but I do not think that there is another historical example in local government of one company winning every single contract in every single local authority. Does that not suggest that we might need a new mechanism for comparing BT’s performance in one area with its performance in another? It is currently impossible to make such a comparison. The Minister says that the maps are the responsibility of the local authority, but the local authority has a contract with BT, as does the neighbouring local authority and the one after that. Who is going to manage BT’s performance? It seems to be becoming a sole provider.
Mr Vaizey
We are managing BT’s performance in the sense that BDUK audits what it is doing. It is important to stress that, for example, BT has already effectively delivered a Government-enabled programme in both Northern Ireland and Cornwall. I cannot swear to the exact figures because they are not in my briefing, but from memory BT was originally planning to reach about 80% of homes in Cornwall. However, because of the success of the programme—the costs on the ground were lower and take-up was higher than expected—my understanding is that BT will now probably reach about 90%, if not 95%, of homes in Cornwall under the same programme with the same money.
We audit everything that BT does, and local authorities do not pay the company until they get a receipt for work done. BT has already spent money, up-front, for which it has not yet been remunerated. The National Audit Office said that our plans were good value for taxpayers and reduced risk. I went on the record and did the media rounds with the Chair of the Public Accounts Committee, the right hon. Member for Barking (Margaret Hodge), when her original report was published. I challenged every finding of the Public Accounts Committee and continue to do so. I did not appear in the media the most recent time around because the BBC did not invite me to challenge the right hon. Lady’s views and she was given a free ride to put across her point of view about our broadband programme. I will go on any television or radio programme with her, at any time, to debate the issue, because I am utterly confident that our programme is complete value for money.
This ill behoves the Labour party, given that we had to write off £50 million from the programme put in place in South Yorkshire under the previous Government. We had to write off that money because they built an infrastructure but did not get any customers. Under the current programme, we have passed almost 400,000 homes and will soon pass 40,000 homes every single week.
I do not resile from praising BT as a great British company doing a great job for Britain. I do not think that we praise our home-grown companies enough. By the way, it is interesting that the BT trade unions did not agree with the Public Accounts Committee report—that is worth noting. I have been told about BT engineers, up to their shoulders in water over the winter, still trying to get the job done as the floods were coming in. It is testament to the BT engineers delivering the programme on the ground that although the floods have had an impact—you will know about that from your local knowledge, Mr Sanders—they have not knocked the programme off course.
Everyone in the House agrees about the importance of broadband and superfast broadband. The figures speak for themselves: the programme is well under way, all the contracts are signed and the issue is now about delivery. There will always be concerns about value for money, about where broadband is going and about community programmes, which deserve their opportunity to deliver broadband. We continue to address all such concerns, but no one can deny that we are now delivering one of the best broadband programmes in the developed world. In the weeks when we have overtaken Germany in availability of broadband, we should, as I said at the beginning, be looking at a glass that is very much half full, rather than half empty.
Antisocial Behaviour (Stag and Hen Parties)
(10 years, 7 months ago)
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Mr Robert Syms (Poole) (Con)
It is a pleasure to have this debate on a matter that concerns my constituents and causes great anger and distress. I know that the Minister, who has been delayed, will be here in a moment. I have already had a conversation with him, so he is aware of these real concerns and will have no trouble responding to the debate.
I represent Poole, which is a great constituency. It is mixed: it has areas of poverty and deprivation, but also some exclusive areas with quite high-status housing. It has posh blocks of flats and some big houses. Branksome Park, Canford Cliffs, Sandbanks and Penn Hill are strong residential areas lived in, generally, by professional people who have worked hard all their lives. There are few pubs. Indeed, it is difficult to get a drink; there are one or two wine bars and two or three hotels, but by and large it is not historically an area where someone would go to have a pub crawl or a night out drinking—they would either go to the quay in Poole or the centre of Bournemouth. Excitement for the area is normally a car alarm going off or a fox getting into the dustbins of a home and making a noise. It is not a high-crime area, generally. It is a very peaceful area, in which people enjoy living. Constituents sometimes have to work very hard to buy a place there.
In recent years, however, we have seen residential property being used inappropriately as party houses for stag parties, hen parties, raves and family parties. There are seven or eight homes in the area that are rented out for several hundred pounds a night over a weekend through the websites of a number of businesses. Some of those properties are at the smaller end, with three or four bedrooms converted internally to take 14 or 15 revellers, and others are slightly larger and can take 40 or 50 revellers, who turn up on a Friday to have a good time.
I do not particularly blame the people who want to have a good time. They see the houses on the web and clearly want to enjoy themselves. The economics are that renting a private house and buying all the booze at a supermarket is rather cheaper than staying in a hotel, but the reality is that that spills over into causing trouble in a residential area. Apart from car doors slamming and noise, people play football in the garden and there is music at all hours of the day. There have been stories of people playing football at 3 o’clock in the morning in the gardens of some of these homes. Bottles have been chucked over fences. Constituents next door to some of the properties find that people, having had quite a lot to drink, jump into their garden and start trying to climb their trees. These parties are causing a real problem.
An agency that lets out some of these homes provides other services, such as shuttling the people to clubs in Bournemouth. It goes quiet for an hour or two and then they come back at 2 or 3 in the morning and continue to cause a nuisance. Those who rent these places out get the people to sign a document saying that they will be peaceful in a residential area, but the reality is that there is no real policing. If 15, 20 or 30 people want to have a good time and drink to excess, that leads to a spill-over of antisocial behaviour. It upsets constituents, who fear the onset of a weekend when people will come into the area.
I had a meeting on Saturday where 20 to 30 people turned up to represent various houses in the area and to set out their concerns. The reality is that we have to do something about the issue, because it is making people’s lives a misery. Constituents are fearful to look at these homes on Friday afternoon and see the number of cars that have come in. They pray for rain because people will stay inside. They know that there will be antisocial behaviour. Some of the websites letting homes have associated services. If it is a hen party, a naked butler can be rented, which is a cause of concern if they are serving drinks on a hot afternoon in the garden and are visible to neighbours. The issue impacts on many families. A constituent told me on Saturday that he arrived home with his young daughter of seven or eight to find that the house next door had blow-up dolls bought from a sex shop all the way around the veranda. He had to tiptoe over and ask them to take the dolls down, which they did.
Most of what goes on is high spirits and youngsters wanting to have fun. We were all young once—even me—but the reality is that what is happening is inappropriate in a residential area, and it spills over into very inappropriate activities. One of my constituents wrote in an e-mail to me:
“There is so much I could write about the screaming, shouting, prostitutes being delivered well into the night, loud bass music thumping day and night, car doors banging through the night, taxis coming and going at all hours, bottles thrown into our garden. I truly don’t know where to begin and we are exhausted already.”
I hear stories of elderly people barricading themselves into their homes because of the noise. A retired solicitor and his wife have bought a caravan so that they can get out at weekends and get a night’s sleep. The issue is causing real distress. The environmental health people in Poole have been doing their best with noise, but with several homes, shift systems and a limited number of machines for measuring disturbance, it is difficult, because the target is moving. They are doing their best and have been serving some notices.
One issue is whether what happens represents a change of use. I understand that there is some case law in Sussex under which people can apply for a change of use, but there are a variety of properties. One or two have been bought to be party homes, because they are a good investment that can generate £2,000 or £3,000 for a weekend. I know of at least one case where a constituent lives in his home Monday to Thursday, then moves out to a caravan and lets out the home for parties for £1,000 or £2,000 a weekend, and that would not qualify as a change of use.
The police put most of their focus on central Bournemouth. They try to stay out of the residential areas, but occasionally they get called and have warned people to be a bit quieter. I am glad to say that the police commissioner has been alerted and the police now have a designated officer to keep an eye on the issue. They have difficulty, because the parties are in private residential dwellings.
As a Government, we have moved a whole raft of antisocial behaviour legislation to a slightly lower threshold point, and that should be a more efficient way of controlling the situation. I will fire a number of questions at the Minister on that. This is a real problem for my constituents and it is ruining people’s lives. They are fearful when the weekend comes that they might face further disruption.
Legislation on the statute book makes the matter a legal thing in London. Section 25(1) of the Greater London Council (General Powers) Act 1973 concerns temporary sleeping accommodation and outlaws it. This issue could not happen in Bromley, Harrow or Westminster. Indeed, with the Olympics, most local authorities were keen to uphold that legislation to stop people letting out their homes for weekend parties. It does happen, however, in Poole. I understand that it is a bigger problem in Brighton, but that city is more used to parties at weekends. It is becoming a problem in Bournemouth and Poole because the homes are available.
If someone is trying to sell a home and it is on the market for five or six months, they can benefit by generating another £15,000 or £20,000 through weekend parties, but that is at the expense of upsetting their neighbours’ lives. I have been aware of the issue for a little time, because I have exchanged e-mails with my constituents on the growing problem, but it is only in the past few weeks that I have really become aware of how difficult it is for constituents and of the number of homes involved. It is changing the nature of the area.
There are appropriate areas that would welcome stag dos and hen parties to generate money and get young people in. However, in residential areas such as Canford Cliffs or Sandbanks, such things are inappropriate. Also, people cause antisocial behaviour when they have drunk a lot, and that is of great concern to my constituents. The situation needs to be acted on; otherwise it will get worse, and I fear that the anger of my constituents is such that some of them will take the law into their own hands, because they have spent all their life working for a home and they find that it is being disturbed weekend after weekend after weekend. The situation is running people down and they are very angry indeed, which is why I have secured this debate today.
I want to find something out from the Minister. We have got rid of the antisocial behaviour orders, mainly because most of them were ignored and they had become discredited. We now have a raft of new antisocial behaviour legislation. Clearly, the behaviour of some of the partygoers is inappropriate, but they bought a proposition. I do not particularly blame them; they are coming down to have a party. However, I blame the people who are promoting these sorts of parties.
Michele King runs Deluxe Holiday Homes—I think she has had a chequered past—and she is renting out these properties. The owners of the properties are making a lot of money out of this situation. I would have no problem with these people running these events in an appropriate area, and I know that sometimes there are places in rural areas where there are fields and noise is not such a factor. However, in a residential area, in a tree-lined area such as Poole, in a quiet residential neighbourhood, this is the most inappropriate activity and we need to take some action. By taking action either against the agents or the owners—some of whom are also my constituents, I am sorry to say—we need to nip this activity in the bud, because it is having a very detrimental effect on my constituents in Poole.
When I began representing Poole—I have represented it since 1997—I did not expect, after a few years, to be having a debate on this particular topic, because I did not think that this would be the sort of thing that would come up locally. Several homes being used for this inappropriate activity could easily become 10, 12, 14 or 15 homes, and the reason is, of course, that there is an awful lot of money in this sort of weekend activity. A constituent sent me some information from the net the other day, which showed that these homes are hired for about £700 a night and sometimes in the summer some can go for £1,200 a night. Well, two or three nights is a nice earner for somebody; there are big incentives for people to do this. However, they are sailing very close to the law and we have to find a way, either by using antisocial behaviour legislation, change-of-use legislation or the environmental health people, to crack down on this activity and give my constituents a break, which they so rightly deserve after working so hard to retire in what they hoped was a peaceful neighbourhood, rather than living next door to stag dos, hen parties, raves and sometimes the most outrageous behaviour.
The Minister for Crime Prevention (Norman Baker)
Mr Sanders, may I first apologise both to you and to my hon. Friend the Member for Poole (Mr Syms) for being a minute or two adrift at the beginning of the debate?
It is very helpful that my hon. Friend has raised this particular matter, and I congratulate him on doing so. It is a relatively new phenomenon but it can affect people and communities in quite profound ways, as he has indicated. Consequently, as well as listening to his informed contribution today, I have seen his letter to the Home Secretary on behalf of Councillor May Haines of Poole borough council, in which he highlighted the issue of houses being rented out for hen and stag parties, and their effect on the community in the Canford Cliffs ward.
Current noise regulation is complex and can be difficult for councils to deploy, but the new powers in the Anti-social Behaviour, Crime and Policing Act 2014 will help councils to prevent and stop noise nuisance quickly and simply. I will expand on that shortly.
By way of giving some background, it is worth saying that the coalition Government has, of course, overseen a fall in crime of more than 10% since 2010, according to the independent crime survey, and that fall is mirrored by and large by the fall in the police’s recorded crime figures. Alongside that reduction, there has been a significant drop in the number of antisocial behaviour incidents reported to the police, from 3.2 million in 2010-11 to 2.2 million last year. However, that figure is still far too high, and is probably only the tip of the iceberg. My hon. Friend has drawn attention to one particular manifestation in his speech.
We know that the police, councils and others are there to help, but it is also clear from the hundreds of responses to our consultation on antisocial behaviour in 2011 that those agencies can feel constrained by the tools currently available to them. Many of those tools are overly bureaucratic and costly to apply for, and others are so behaviour-specific that they are inappropriate in all but the most straightforward cases. Nowhere is that starker than in the example raised in this debate, which is one reason why we have moved away from behaviour-specific offences to more general offences that give councils, the police and others more flexibility.
Tackling noise nuisance can be challenging and time-consuming, but some powers are available to local authorities. The Noise Act 1996 gives councils powers specifically to tackle noise from houses at night. If noise exceeds a certain level between 11 pm and 7 am, an officer can serve a warning notice on the person responsible for the noise. The notice requires them to reduce the noise within a specified time. If that does not happen, the officer can issue an on-the-spot fine of up to £100, seize any equipment used to make the offending noise, such as music systems or televisions, or choose to prosecute the person. If convicted, the person can be fined up to £1,000 by a magistrate.
Local authorities also have power to tackle noise nuisance under the Environmental Protection Act 1990. If the noise is emitted from premises, is unreasonably loud and substantially interferes with neighbours’ enjoyment of their property, it can be classed as a statutory nuisance and local authorities can serve an abatement notice requiring those making the noise to stop. In fact, local authorities have a duty to serve an abatement notice where they find a statutory nuisance. The abatement notice is served on the person responsible for the nuisance, but if the person responsible cannot be found—for example, because they have left the premises—it can be served on the owner of the premises. The notice relates to noise emitted from the premises. Environmental health officers have wide discretion about what they include in the notice to ensure that the noise nuisance stops and does not recur. The notice remains in place on the property until the council decides to withdraw it. Breaching an abatement notice can lead to prosecution and large fines.
Too often, though, police and councils are prevented from taking swift and effective action by the limitations of the powers. In particular, in the case of so-called party houses, it can be difficult to apply the noise nuisance legislation in every situation. For example, noise from people inside a premises might not exceed the specified level in the Noise Act 1996. Serious noise nuisance from people in the street who are causing harm to others—in other words, outside a premises—is not covered by current noise legislation. In addition, the notices can impose only requirements that are reasonable, and ultimately, breaching an abatement notice is subject to a defence of reasonable excuse, so an owner may argue successfully that it is not reasonable to expect them to control the behaviour of everyone in the property, particularly when they are staying for only one or two nights.
My hon. Friend and I had a brief conversation yesterday in which I promised to look into planning matters for him to see whether there were any planning controls. I am advised that where landlords allow such behaviour to occur, it can be difficult to hold them to account. Some areas look to planning rules to address the issue, but except in a few specific areas, planning cannot control the short-term letting of a property because that does not amount to development as defined in planning legislation. I am advised that the only trigger for planning legislation is if the use of the house falls within the “different use” class, for example if it is used as a house in multiple occupation or a bed and breakfast. However, I have asked my officials further to investigate whether, if a house is used regularly over a period of weeks so that that it becomes a standard feature for that house to be used, that might qualify for a change of use. Effectively, it is being used as a business, particularly if the person renting out the property receives a financial reward for doing so. That is a matter on which we have not yet had an answer from my colleagues at the Department for Communities and Local Government, but I have asked officials to take it further, and I will write to my hon. Friend about it specifically.
It is clear that the current system is fragmented, complex and sometimes inadequate, and is not working for communities in Poole and many other places, not because agencies do not want to help but because it is difficult for them to find a way to do so. Obviously, we want that to change. The impact of antisocial behaviour on victims and communities must become central to their response. My hon. Friend referred to fields—although I caution him that raves in fields sometimes generate opposition—as an example that what might be considered antisocial in one situation might be perfectly acceptable in another, and that location is therefore important in such matters.
We must give professionals tools that are flexible enough to adapt to each situation where antisocial behaviour is being committed. That is what we have done in the Anti-social Behaviour, Crime and Policing Act 2014, and I hope to make some comments that are helpful to my hon. Friend in that regard. As a member of the Public Bill Committee, he will be more aware than most of the reforms introduced by the coalition Government in the Act. The specific form of antisocial behaviour that he has raised today was not discussed in Committee, but I assure him and the House that there is, in my view, sufficient flexibility in the new powers to allow the council to deal quickly with the situation he described. In fact, such is the flexibility that not just one but two powers might be used, so the council and the police would be able to design their response to any situation on reasonable grounds.
First, there is a new closure power, which is the one that is likely to bring victims swift respite and to be most effective. The current closure powers can be effective in some cases, but they have never made it possible to close non-licensed premises quickly out of court, acting preventively on the likelihood of antisocial behaviour. Police and councils have been limited in what they could do. The new closure power will deal with that loophole. If a police or council officer has reason to believe that the use of premises has resulted in nuisance to members of the public, or that that could happen if a notice is not issued—an important distinction—or that there has been disorder near the premises, or could be if a notice is not issued, the premises can be closed immediately.
Those who habitually reside in the premises cannot be excluded for the first 48 hours, but members of the stag or hen party would not fall within that definition and so could be excluded completely from the property. Because the power can be used preventively, it means that the local community need not suffer while waiting for action, so the harm caused by the party could be prevented altogether. Moreover, where the issue persists, the council or police force could apply to the local magistrates court to have the closure extended for up to a maximum of six months, ensuring that the local community would be properly protected from serious nuisance and disorderly, offensive or criminal behaviour.
I mentioned another power that might be used: the community protection notice. That out-of-court notice is available to councils, the police, and in some instances social landlords to deal with persistent, unreasonable behaviour that has a detrimental effect on the quality of life of those in the locality. The kind of behaviour that has been discussed today, from noise to drunkenness, could fall within the definition in the test. What is more, the definition of “persistent” is open to the interpretation of the council or police officer. For instance, if the issue is loud music accompanying a barbeque in the garden, it would be perfectly reasonable, if the officer had asked people to turn it down and they had not done so, to consider that persistent. First, a written warning has to be issued to someone who can reasonably be expected to control or affect the behaviour, explaining what the issue is. Once they have been given sufficient time to change the behaviour, which could be minutes in the case of turning down loud music, a community protection notice can be issued forcing them to comply with the request. If they do not, they commit an offence and can be arrested.
Successful prosecution involves not only a criminal record but also the potential for a £2,500 fine. Furthermore, the community protection notice could be used against the home owner who was allowing the people attending a stag or hen do to act antisocially. My hon. Friend has rightly drawn attention to the people who facilitate the holding of such parties, as well as those who turn up for them, and I agree that that is an important distinction. The community protection notice could involve any requirements that the council or police thought appropriate to prevent the antisocial behaviour, such as passing on to local agencies the details of those attending, so that the situation could be monitored, or requiring the home owner to warn those attending the party that acting antisocially could result in the premises being closed.
Currently, councils are the lead force in dealing with such cases, even though victims regularly turn to the police. That is why the new powers will be not just for council officers, but also for the police and, in the case of the community protection notice, even police community support officers, so that the right person can act every time without needing to refer victims from one agency to the next, which is inefficient and time-consuming. Councils and police forces have the same objective—to ensure that the communities they serve are protected and safe—and by working effectively together they can achieve that. The new powers that we are introducing encourage agencies to solve problems together to ensure that victims and communities get the best results.
I believe that the new powers being introduced later this year will allow councils and the police to deal with the kinds of situations that my hon. Friend described this morning. However, I want to make it clear that the kind of short-term renting arrangements we have been considering do not always result in antisocial behaviour. The additional tourism boost to the local economy from holidaymakers looking for short-term lets can be positive for areas and communities and should be encouraged. That is why the powers are flexible and enable people to make a judgment based on what happens.
Norman Baker
I am very grateful to my hon. Friend; I am glad that he feels that way. I will be interested to see how the situation develops, particularly when the new powers are in force.
In conclusion, I make it clear that when people’s behaviour goes beyond what is acceptable and the result is harm, misery and discomfort to innocent parties, local agencies should be able to act and act fast. I believe that the new powers that the coalition Government will introduce later this year under the Anti-social Behaviour, Crime and Policing Act 2014 will encourage those agencies and deliver on our promise to simplify the existing powers available to front-line professionals by putting victims at the heart of the response to antisocial behaviour.
Military Credit Union
(10 years, 7 months ago)
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Mr Gareth Thomas (Harrow West) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mrs Riordan, for what I think is the first time. Given your past and present, you seem to be a particularly good choice of Chair for this debate, although I recognise that that will not save me if I deviate from the usual rules and conventions. In that spirit, I should say that I am one of 8 million ordinary members of the Co-op Group; I have accounts with Nationwide; I belong to the M for Money credit union in Harrow and the Rainbow Saver credit union; and I am privileged to chair the Co-op party and to be one of its MPs in the House.
This month marks the 50th anniversary of the first two credit unions in the UK. Now would be a good time for the Government to facilitate the establishment of a new credit union for our soldiers, sailors, Air Force personnel and their families. Hornsey Co-operative credit union was one of those first two 50 years ago; it is now part of the London Capital credit union, which is directly taking on payday lenders throughout the capital, charging only £12 interest a month on a £400 loan, compared with the £120 charged by a typical payday lender for the same loan over the same period. That is one of many examples of how credit unions can offer a powerful alternative to payday lenders.
I am grateful to Mr Speaker for the opportunity to press the case for the Government and the senior ranks of our armed forces to do more to facilitate access to a military credit union or to credit unions more generally, which can serve the needs of our armed forces personnel. Those personnel often face particular challenges in accessing financial services and sometimes have limited opportunity to develop financial management skills. In addition, as Lord Ashcroft has pointed out, transitions from military to civilian life are often hard and there is the potential for worry about debt to be a life-threatening distraction.
I hope that the Minister will commit to a feasibility study to establish a military credit union, to report by the end of the Parliament, and that he will say what he will do in the meantime to facilitate and encourage access to credit unions by members of our armed forces. I recognise and welcome the interest that a number of Ministers have shown in the idea of such a union, but I hope that this Minister will be able to do more than merely repeat interest and that he will demonstrate a more tangible commitment.
A credit union is a financial co-operative, which provides savings, loans and a range of other services to its members. It is owned and controlled by the members, and each member has one vote. Volunteer directors are elected from the membership of the credit union, by the membership. Credit unions are owned by their own users and not by external shareholders or investors, so the emphasis is always on providing the best service to members, rather than on maximising profits from their customers.
Such financial co-operatives exist throughout the world, as well as in the UK, and there are some 200 million members in 56,000 credit unions in more than 100 countries. Indeed, in the USA, Canada, Australia and Ireland, more than a quarter of the population are credit union members. Such a target is achievable over time in the UK and, if 25% of the British population were members of a credit union, I suspect that payday loan firms would have fewer customers. More than 90% of the British population can join a credit union because of where they live, which is in no small part thanks to investment by the previous Labour Government, which, to be fair, is continued by the current Department for Work and Pensions credit union expansion plan.
I pay tribute to the many hundreds of volunteer board members and to the staff helping to drive a slow expansion in credit union members in the UK. I hope that the House will indulge me if I take the opportunity to praise Graham Tomlin of M for Money, which serves my constituency, and the board of the excellent Rainbow Saver credit union. I hope that the Government will do more to increase awareness of credit unions generally, but in particular among the military, because Whitehall, local government and housing associations could do much to make military personnel and others aware of the benefits of credit union membership. Crucially, credit unions, including any new military credit union that might be set up, are authorised and regulated by the Prudential Regulation Authority and the Financial Conduct Authority.
As I set out in my ten-minute rule Bill on the same subject last year, my inspiration is the success of Navy Federal in the United States, which since 1933 and its first seven members has grown to have almost 4,700,000 members, with $44.5 billion in assets. Based in Vienna in Virginia, it is the world’s largest credit union, with 220 branches and almost 9,000 employees. It offers savings accounts, car loans, credit cards, 24/7 telephone access, internet and mobile banking, budget counselling and more than 45,000 ATMs, among other services, to people as diverse as navy SEALs and army cooks.
Ian Paisley (North Antrim) (DUP)
Does the hon. Gentleman agree that one of the other services under that regime in the United States is insurance? That is incredibly attractive to service personnel, who recognise that they will get a very good insurance package if something terrible happens to them or their loved ones.
Mr Thomas
The hon. Gentleman makes a good point. If I remember rightly, through a subsidiary Navy Federal offers specialist insurance services as well. In short, it offers highly competitive services to those who put themselves in harm’s way for the United States. It provides tailored services to military personnel, supporting their specific needs, including the commitment to cover pay during the threatened US Government shutdown last year. The president or chief executive of Navy Federal is not perhaps the most obvious missionary for co-operation. Cutler Dawson is a graduate of the US Naval academy and served for 35 years in the US navy. He ended up as a vice-admiral, commanding four ships—the Enterprise battle group—and was the commander of the US second fleet.
Other significant military credit unions in the US include the Air Force Federal credit union, which charges no fees on its regular savings and cheque accounts. It requires a minimum deposit of only $5 and, for example, offers 60-month car loans with an annual percentage rate, or APR, of only 1.6%. The Pentagon Federal credit union has 1.2 million members and $1.7 billion in assets. Australia, too, has a credit union for its service personnel; the Australian Defence credit union has been providing banking services to defence personnel and contractors, and their families, since as long ago as 1959. It now has 34 branches, assets approaching 1 billion Australian dollars and more than 47,000 members. Again, each member of that credit union has an equal say in how it operates.
Credit unions provide a responsible alternative for savings and loans and an inclusive service for all people, as well as being a crucial alternative to high-interest lenders. They are owned by their members and, because they have no external shareholders, they can offer competitive borrowing and savings rates.
I realise that establishing a new credit union dedicated to the military could take some time. It would involve some cost and, crucially, would not immediately be able to offer the lowest alternatives to payday loans that better capitalised and more well established credit unions are providing. I hope that, as well as committing to the specific feasibility study for a dedicated military credit union, the Minister will consider working with existing credit unions that may be able to offer our armed forces personnel access to the best credit union products and services straight away.
One such credit union, the Plane Saver credit union, has approached me directly and I believe it has written to the Secretary of State for Defence offering its services to do just what I have suggested. I am sure that other credit unions—and, indeed, the Association of British Credit Unions Ltd, the excellent trade body for the credit union movement—could help the MOD to think through how to provide more immediate access to the benefits of a credit union while cracking on with a feasibility study for a dedicated military credit union.
One crucial requirement if credit union services are to be accessible to our soldiers, airmen and women, and naval personnel, is for the Ministry of Defence to be able to put in place payroll deduction, just as payments are made directly from wages for all sorts of reasons already. It should surely be an employee’s right to be able to make payments from wages into their local credit union account. Many employers in other public services already allow that simple process, which in turn strengthens credit unions and helps to build their sustainability, enabling them to pass on to their members benefits in the form of better loan rates and dividends. ABCUL has said:
“Payroll deduction is an easy and convenient way for employees to get a savings habit and access affordable credit.”
There would be some additional work and, therefore, costs for the Ministry of Defence in running such a payroll deduction service. For example, regular payments and information and details of leavers, as well as of those joining the credit union, would need to be provided to the relevant credit union or unions in a timely manner, but payroll deductions are not a new concept and the MOD should be more than able to take that in its stride. Will the Minister set out whether he and the Secretary of State are willing in principle to allow payroll deduction for credit union membership? If not, will he say why?
Some of the many credit unions that already exist in Britain and internationally have strong links to particular groups of employees, as a new military credit union clearly would. That enables them to provide services to a range of employees, highly paid and lower paid, earlier or later in their careers, and allows the credit union to build a balanced portfolio for all. Such credit unions can offer extremely competitive terms. For example, the Police credit union serves a similar uniformed service and offers savings returns of 2.5% on instant access cash ISA accounts alongside small short-term loans at 25% APR or larger, longer-term loans from 4.3% APR. ABCUL tells me that similar examples exist in the passenger transport, airline, NHS and local government sectors.
Sadly, colleagues on both sides of the House will be aware of the many shocking statistics on the increasing use of payday loans in the UK. The Money Advice Service reported that some 1.2 million people took out payday loans to get through Christmas last year. The Debt Advice Foundation found that one in four people who took out payday loans did so to buy food or other essentials. Particularly worrying, perhaps, is that some 44% of people used payday loans to pay off other debts, thus sinking even further into the quicksand-like trap of ever-increasing debt.
Research from the Office of Fair Trading found that 50% of the industry’s profits come from refinancing, with those who take loans out repeatedly creating the largest return for the industry’s big boys. Some 19% of the industry’s profits came from just 5% of loans that were rolled over four times or more. That is a growing problem. Research from Citizens Advice shows that in just two years there has been a fourfold rise in the number of people seeking its advice with debt problems as a result of taking out payday loans.
Last year, I spoke to the chief executives of several Citizens Advice branches located close to military bases, and they said a pattern was clear. Soldiers and sailors were facing real financial difficulties because they had taken out one payday loan for a small sum and soon found themselves in ever deeper problems as one loan became two, two became three, and the interest mounted up and up.
The problem is clearly not limited to armed forces personnel—far from it. R3, the Association of Business Recovery Professionals, is the body representing insolvency practitioners, and published data in December 2013 showing that some 47% of British adults are worried about their debt levels, with 44% struggling to make it to pay day. Interestingly, R3’s research found that 71% of British adults blame the rising cost of living for their struggle to make it to pay day, but I digress.
Payday loans are a real and growing problem for our armed forces. The Royal British Legion published research warning that one third of all of the debt problems it deals with relate to people struggling with payday-style unsecured loans. In 2011, its money and benefit advice service was helping 11,000 servicemen and ex-servicemen with debt problems. That is a huge increase from when the service started back in 2007, when it helped just over 2,000 people. ABF, the soldiers’ charity—formerly the Army Benevolent Fund—does important work in many of our constituencies and has said that it gives half the money it raises directly to individuals to help in areas such as debt relief. That figure is remarkable by any definition.
There is a real problem. Payday lenders should have to signpost those taking out payday loans to debt management services, a little like cigarette packets having to carry health warnings. My right hon. Friend the Leader of the Opposition has set out some steps we should take to tackle the damage done by payday loans. Some lenders make as much as £1 million a week in profit, and he has called for a levy on the profits of payday loan companies to raise capital for alternative and affordable sources of credit such as credit unions. That could raise an additional £13 million, allowing credit unions to offer more financial support to people in need of credit. Perhaps a little of that sum could be used to help to develop a credit union for military personnel if the Government were so minded.
My right hon. Friend made clear his support for the banning of payday loan adverts during children’s TV programmes, which would be a very sensible step forward. Just as importantly, he set out how he would take steps to allow local councils to decide whether they want to place some premises in a separate planning category, giving communities more control over payday loan outlets in their high streets. Sadly, many local authorities and communities feel increasingly powerless to shape their town centres or do anything to halt the tide of payday loan firms. We want to change that.
I understand that there is cross-party support for a payday loan charter setting out what effective regulation of payday lenders and high-cost credit might look like. Such a charter could call for better affordability checks, a crackdown on advertising, and real-time data sharing within the industry so that lenders can check whether a borrower already has other plans. A military credit union could support such initiatives.
I welcome the written answer from the Under-Secretary of State for Defence, the hon. Member for South West Wiltshire (Dr Murrison):
“Although commanding officers retain discretion to decide which advertisements are appropriate for their bases, guidance has been issued to each of the services that advertisements from payday loan companies should not be carried in their internal publications.”—[Official Report, 24 February 2014; Vol. 124, c. 63W.]
That guidance was given once it was brought to the MOD’s attention that payday loan companies were seeking to entice people to their products; soldiers and sailors in particular were being targeted rigorously using military publications. Payday loan companies that were particularly targeting our soldiers, sailors and Air Force personnel include Forces Loans, which claims to be the No. 1 lender to the military. Its loans are currently being advertised with an APR of 3,351%. Another company, QuickQuid, regularly advertises on the apparently popular militaryforums.co.uk with a rate of 1,362% APR.
A quick search online will find other examples of companies that have sponsored links to forces sites or to information that forces personnel can easily get access to: 1st Stop charges nearly 2,000% APR; Quids Today charges more than 2,000% APR; and The Money Shop charges nearly 3,000% APR—I could go on. A quick check of payday loans widely available online shows loans available at APRs ranging from nearly 900% to more than 7,000%. A military credit union could, over the medium to long term, provide a powerful competitive financial services offer to those who put their lives on the line for us, in ways that best meet their particular needs.
Let me underline the questions that I hope the Minister will answer today. Will he undertake a feasibility study into the establishment of a dedicated military credit union? Will he ensure that that feasibility study reports by the end of this Parliament? In the short term, other credit unions could help to offer such services now, with positive support from the Ministry of Defence. Will the Minister commit to meet ABCUL, credit unions such as Plane Saver and possibly me to discuss how that might happen?
Will the Minister commit now to the principle of payroll deduction to help any member of the armed forces or supporting staff to join a credit union more easily if they want to? Will he encourage military publications to carry adverts for credit unions that armed forces personnel can join? Will he support an explicit ban on payday lenders advertising in military bases? Will he consider discussing with other ministerial colleagues a requirement on high-cost lenders, such as payday lenders, to signpost their borrowers towards free debt management advice services?
Credit unions have a long history. They are increasingly building capacity and membership. They are a powerful demonstration of the values of co-operation: working with others to help oneself; giving equal voting rights and an equal say in the running of a business; and being committed to a fair distribution of any profits or surplus in the form of better, cheaper services. Sadly, no such clear, distinct service exists for our armed forces, and I gently encourage the Minister to back our campaign for a military credit union.
Jim Shannon (Strangford) (DUP)
I had anticipated that a large number of other Members would be here to speak about this issue, because of its importance. I congratulate the hon. Member for Harrow West (Mr Thomas) on bringing the matter to the House. The Minister is in his place and has heard a lot of what he said, and I will be adding to those comments. Other Members might have contributions to make and the shadow Minister will be making a valuable contribution, too.
I am very pleased to come along today and give my wholehearted support to the hon. Gentleman for bringing the issue to the Chamber for our consideration. We are aware of such issues not only as elected representatives, but because of previous service. I served in the Ulster Defence Regiment for three years and in the Territorial Army for 11-and-a-half years in the Royal Artillery: in the UDR, in a terrorism role—or an anti-terrorism role, I should say—and in the Royal Artillery in a role that had a more global and European impact. That is where my interest in the issue comes from.
I represent Strangford, which is renowned for service in Her Majesty’s armed forces. The largest town in my constituency, Newtownards, is to host the Armed Forces day in Northern Ireland this year. I have no doubt that the streets will be thronged to capacity with people coming along to express the high esteem in which they hold service personnel and veterans. As I meet each of those veterans and personnel, I will do so with the knowledge that I support them in every way that I can. This debate is a way of doing just that. It reflects some constituency issues that I have had over the past four years as a Member of Parliament, and before that, as a Member of the Northern Ireland Assembly. I seek to help the personnel’s families at home while they are serving and when they return home from their service. Some return home with not only physical and emotional but financial issues, as the hon. Gentleman highlighted.
What the hon. Gentleman presented was about support for service personnel and their families. I completely agree that the fluctuation of pay of those serving due to the different rates depending on where they are serving means that some payday lenders can take advantage of our armed forces personnel. Serving personnel get an allowance on active duty, but some find it hard to get by without the top-up cash. Sometimes, there is a change of financial circumstances. Will the Minister indicate what help is given to service personnel when it comes to managing money and their wages better? I believe that there is some, but sometimes it takes more than a bit of paper; it takes a one-to-one, and if that is possible, has it been done?
A regular soldier’s wage is £17,767, and when they become used to the uplift in cash, it takes time to go back to a smaller budget. I am privileged to be in the armed forces parliamentary scheme, which has given me a chance to visit army camps. Catterick is one that sticks in my mind because it offers accommodation to soldiers who are single and have no families or dependants. The officers told me that many of those young men in uniform perhaps have a level of cash that they did not have before, and they very quickly spend it and frequently run into debt. Will the Minister say what help is given directly to service personnel to ensure that they manage their money and wages much better?
I have spoken in this place numerous times about the difficulties with payday loans, as have others. We are all aware of the story in the press in the past week or two about the lady who borrowed £500 and suddenly found, before it was all finished, that she owed £120,000. That is an extreme example, but none the less, it indicates the serious problems that people can have when they get into borrowing from payday companies. I have spoken about the number of people who come into my office seeking help to get themselves back on an even keel due to the high interest of these loans. We are fortunate to have debt advice organisations such as Citizens Advice, Debt Action, and Christians Against Poverty, just to think of three in my constituency that deliver specific help to those who need it most. Increasing numbers of ex-Army personnel come with their families to seek help for their circumstances. They are real issues and they show why today’s debate is so important.
Many people are seeking to get themselves back on an even keel, due to the high interest of the loans, as they try to manage their money in relation to their wives and children and to their new circumstances perhaps of not being in the Army. It is a vicious circle that is so difficult to get out of. Citizens Advice has said that it is dealing with an increasing number of cases where military personnel and their families had run into financial problems after taking out high-cost payday loans. Research by the Royal British Legion has found that about a third of veterans experience financial difficulties, including almost half of those who are recently injured. That is, again, a pointer to how important the issue is. We all greatly respect those soldiers who serve and those who come back injured, either emotionally or physically. It is a terrible tragedy when half of the recently injured and a third of veterans, as the Royal British Legion found, experience financial difficulties and need help, which lead many of them into very high levels of debt.
I place on record my thanks to the organisations that work in my area. Obviously, I thank the Royal British Legion first, but I also thank the Army Benevolent Fund, to which the hon. Member for Harrow West referred, and the Soldiers, Sailors, Airmen and Families Association, which does great work with serving personnel or ex-personnel and their families. I hold a coffee morning once a year for SSAFA—it is basically coffee, tea and sticky buns—and last year we were very pleased because people from the town gave £4,500. That immense contribution was an example of the good that people can do and of their generosity. We never fail to be overwhelmed by people’s generosity. That contribution was an indication of the good that the people of Newtownards and district can do.
Last year, the Royal British Legion’s benefits and money advice service—this information is from the Royal British Legion—helped 11,000 Army personnel. That was in its second year. It was an increase of 8,600 on its first year. That clearly shows the magnitude of this issue and the need to respond. It is clear that there is an issue. It is equally clear that we have a role to play in providing the solution. The proposals were outlined by the hon. Gentleman. I am sure that the Minister, in his response, will be able to give us some indication of the importance of that and how he will address the issue.
At home, I always encourage people to use their local credit union, which allows money to be borrowed only when money has been saved. That has helped many people to get loans at an affordable rate of interest. The fact that the American military run a successful version in Navy Federal shows that such a service would be of use to our personnel.
I want to touch on the options or solutions that are available. Like other MPs, I would say that when people come to see me with their problems, it is about solutions. It is not about the problem; it is about how we make the situation better, how we can help the people. I believe that we have a solution here today if the Minister is minded to give us the response that we seek.
Navy Federal is the largest credit union in America, with more than 4 million members. It has branches on every military base in the country. My hon. Friend the Member for North Antrim (Ian Paisley) spoke to me last year when he had the chance to be in America and speak to some navy personnel. He was aware of the good work that they do. Army personnel and navy personnel were depending on payday loans and creditors, so Navy Federal moved in and ensured that there was a branch on every military base in the country. The payday loaners used to target the military bases to hook American sailors and soldiers with their high-cost financial services. However, legislation and the low-cost financial products that credit unions offer have led to the Navy Federal credit union having branches on every military base in the United States of America and offering a very direct and personal service to its members. It is greatly utilised by service personnel.
According to the Library debate pack, a meeting took place of the all-party group on credit unions last October. The Minister for the Armed Forces used that meeting to express the Government’s interest in exploring the idea of a service personnel credit union further, so perhaps the Minister today could tell us where we have advanced since October, whether we are any closer to having this type of scheme in place—I hope that we are—and, if not, whether we have a programme that will lead to that happening. Like the hon. Member for Harrow West and other hon. Members present, I genuinely believe that this proposal could be the catalyst for a scheme that can change things round and help our soldiers, sailors and Air Force personnel to manage their money better.
Abbie Shelton, policy and communications manager at ABCUL, said:
“Payroll deduction is an easy and convenient way for employees to get a savings habit and access affordable credit and we welcome any support for new partnerships which will help more people access credit unions in this way.”
I will not express a preference for any one building society. None the less, getting into the habit of saving is a good thing to do. If we do get into the habit of saving early and start to save regularly, that becomes a discipline in itself. Again, perhaps the Minister could comment on this issue in his response. The hon. Member for Harrow West focused greatly on payroll deduction, and I think that it is a tremendous idea, because it enables people to save directly. It is important that we all try to manage our money as best we can.
Ian Paisley
Does my hon. Friend agree that if such a scheme were introduced, the Government could make a forward calculation as to how much money could reasonably be expected and therefore underwrite the establishment of a military credit union for a period of five to 10 years to allow it to get established and thereby really give it the support that it needs to get off the ground?
Jim Shannon
I thank my hon. Friend for that very constructive intervention. Yes, I do believe that what he describes could be done. Again, perhaps the Minister can give us some idea of how he sees that particular scheme working. If we have a prediction, if we have an idea of what we will have coming in over five to 10 years, we can start such a scheme. When I visited Catterick camp in September two years ago, that was one of the things that the officers told me they wanted to see happening. I fed that back to the MOD in questions and I would like to know whether it has been activated and where it is going.
The example of the Navy Federal credit union in the United States is powerful. It shows what can be done. Where there is a will, there is a way, or, in this case, where there is a will, there must be a way. It can be delivered. We have a duty of care to our service personnel to help to support their families and to ensure that their sacrifices in service are acknowledged at home, and this is one way of doing just that. I wholeheartedly support the proposal and offer my help in any way possible to see this legislation being made in the House. It is critical, it is important and it is needed urgently. Everyone here is of that opinion. I know that the pledge that I have made is something that the rest of my party, the Democratic Unionist party, at Westminster will also support.
We have talked about the issue. Now it is time for action to be taken, for our serving personnel to become saving personnel and for them and veterans to see yet another tangible sign of our appreciation of and support for those who put their safety, mental health and lives on the line in service to the Queen and this tremendous country of the United Kingdom of Great Britain and Northern Ireland.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mrs Riordan. It is also a pleasure to follow the hon. Member for Strangford (Jim Shannon), who made a welcome and constructive contribution to the debate. I congratulate my hon. Friend the Member for Harrow West (Mr Thomas) on securing the debate. I am delighted to be able to follow him by speaking in support of the establishment of an armed forces credit union.
I pay tribute to the commitment and service of our armed forces, our veterans and their families. Without them, our country would not be as successful or as safe as it is. It is therefore my utmost belief that we have a duty to ensure that our servicemen and women and their families are treated fairly, protected from discrimination and supported in all aspects of their civilian life where necessary. That includes in their finances.
It is already hard enough for an individual or a family to save money and build up a strong credit history. For armed forces personnel, the struggle to become financially secure can sometimes be even more difficult. Military families face specific circumstances that can make it difficult to access financial services via the traditional routes, such as high street banks or building societies. Long periods spent outside the UK mean that some kinds of financial benefits, such as no-claims bonuses, are not easily acknowledged. It becomes harder to build up a credit history if someone’s address changes every two years as they move around. Fluctuations between an individual’s regular pay and deployment pay can mean that income is hard to predict. That is not just detrimental to the individual, who may be unable to develop a long-term budget but also influences things such as mortgage and credit card applications. Frequent relocations have a knock-on effect for partners, spouses and children, whose employment opportunities may be reduced, resulting in a drop in household income.
It can be hard for servicemen and women to save during deployment, but on leaving the military, the situation may become harder. More than 20,000 people leave the armed forces every year, and that number is rising as the Government reduce personnel numbers. Because of the institutional way in which the armed forces work, some of those people will have had little experience of budgeting, costing, saving or spending. Many people struggle with those things, and those in the armed forces are no different. That added burden can leave them at risk of financial difficulty. The 2012 issue of Homeport, a magazine distributed by the Navy and the Marines to naval families, said:
“The inability to manage personal finances is one of the single greatest welfare challenges facing members of the Armed Forces.”
Every one of those things makes our military personnel and their families more likely to search out alternative options for financing. When circumstances mean that they are refused assistance from high street banks or building societies, they become more susceptible to payday lenders offering sums of cash on the spot, as we have heard. Citizens Advice has reported dealing with an increased number of cases of British armed services personnel and their families being targeted by payday lending companies. A couple of payday lenders—I am struggling over whether to name the companies that I have in mind; on this occasion I do not think I will—have specialist sites aimed at the armed forces, and one of them has an interest rate of 1,734%. My hon. Friend the Member for Harrow West has outlined the interest rates of a number of other companies. In targeting armed forces families in such a way, they are exploiting for their own gain service personnel who have poor credit histories or difficulty accessing credit. Of course, payday lenders do not just target military families, and we have heard a good deal about that already. Which?, Citizens Advice, the Office of Fair Trading and the Business, Innovation and Skills Committee have all criticised payday loan companies for offering exploitative loans to people who are at their lowest ebb and charging extortionate fees that simply push those people into further financial difficulty.
According to the Debt Advice Foundation, one in four people who take out payday loans need the money to buy food or essentials, and 44% use them to pay off other debts. Some in the forces may turn to payday loan companies because they see them as a quick and easy solution to a lack of finance. Initially, they are a quick way of getting money, but unfortunately it does not turn out to be easy in the long run.
Establishing a military credit union would not only shield our military families from exploitation but help them to become more financially stable and financially literate, and to live a more secure and stable life outside the armed forces when they leave. That would reduce the need for intervention further down the line. I appreciate that the Ministry of Defence has already recognised that something needs to be done, which is why it introduced the MoneyForce programme last year to provide service personnel with advice and training on finances. Although the scheme is a good step in the right direction, it does not offer our armed forces an alternative to the arrangements on offer.
As we have heard, the Royal British Legion operates its own money advice service, which gives service personnel, veterans and their families impartial and non-judgmental financial advice. I believe that it has helped more than 35,000 people; worryingly, about 11,000 of them in 2012 alone, so the numbers appear to be going up. About 70% of those people are ex-service rather than currently serving, which shows that there is a problem here that we must look at. In addition, research by the Royal British Legion in 2011 showed that almost a third of the debt problems it deals with involve unsecured loans from payday lenders and other providers. That is yet another reason why we should be providing servicemen and women with another option.
Given the facts, and given that is not difficult to see where and how the problems arise, I hope that Ministers will take the opportunity to do something positive about the matter. In February 2013, the Minister with responsibility for international strategy, the hon. Member for South West Wiltshire (Dr Murrison), said that the concept of a credit union had been considered but that the MOD believed that it was
“likely to be too restrictive in how it might operate and what it can provide.”—[Official Report, 4 February 2013; Vol. 558, c. 440W.]
Earlier this year, however, he updated the position, saying that the MOD was considering the option of an armed forces credit union but a decision had not yet been made. I hope that the Minister can tell us where the Department stands and whether he has been convinced that a military credit union would offer a financial lifeline to thousands of serving personnel, veterans and their families. I back my hon. Friend the Member for Harrow West in calling for a feasibility study into the matter and into deductions at source from salaries.
As we have heard, the Department for Work and Pensions has supported the expansion of credit unions across the UK. The Department’s feasibility study found that some 7 million people fall into the trap of high-cost credit. As a result, a significant amount of money has been set aside to invest in credit unions, and I hope that that might be one way of moving forward. Tackling high-interest consumer credit is a priority for the Opposition, as is supporting our armed forces and their families. Unfortunately, too many people in the UK have been forced into using food banks and relying on welfare payments to try to deal with the cost of living crisis. The armed forces and their families are facing their own cost of living crisis, because they have had reductions in their allowances and their pensions.
Considering all the evidence, I cannot see a single reason why we should not move ahead with the policy. The armed forces covenant states that, where possible, disadvantages should be removed so that military personnel can enjoy the same opportunities and outcomes as the civilian community. When it comes to personal finance, there is clearly a problem that we want to address. Credit unions provide a fair and affordable alternative to payday lenders. They are an option for those who are otherwise unable to access mainstream sources of high street credit from traditional banks or building societies. They are also a way forward for people who want to take an ethical approach to personal finance. They are trusted by more than 200 million people across the world, who use them to manage more than £700 billion in assets. In West Dunbartonshire, we have three community-based credit unions, not to mention some hugely successful workplace schemes, which help more than 12,000 people to manage their money in the best possible way. I want that service to be available to our armed forces community as well. I cannot think of a reason why they, too, should not have access to a workplace credit union.
We have heard about Navy Federal, which is the biggest credit union in the United States with 4 million members, so it cannot be that our armed forces are too big to establish such a scheme. One of the unique selling points of a credit union is that it can offer specialised financial products and services that are designed to meet the specific needs of the community it serves. The hon. Member for North Antrim (Ian Paisley), who has left, spoke about insurance products, which I think Navy Federal offers. The specific circumstances and situations that military personnel face, such as families living apart, or moving house several times, could be factored into decision making.
The Co-operative party has launched the “Give Me Credit” campaign for a military credit union, with the simple expression: “Because service personnel and their families deserve better.” I could not have put it better. Like my hon. Friend the Member for Harrow West, I am proud to be a member of the Co-operative party and one of its Members of Parliament, because those are the sort of policies that make people’s lives better. I hope that the Minister and the MOD will commit to giving our service community what it deserves—an opportunity and an outlet by which they can become financially stable, through the establishment of a military credit union.
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
It is a great pleasure to serve under your chairmanship today, Mrs Riordan. For me, as for the hon. Member for Harrow West (Mr Thomas), this is the first opportunity to do so. I congratulate him on securing the debate. He has been a persistent advocate of an armed forces credit union—I think he presented a ten-minute rule Bill earlier in the year—and I am pleased that he has managed to secure a full 90-minute debate today. It is good to see colleagues from Northern Ireland supporting it.
There is no fundamental disagreement between us on the proposal. The Government have actively supported credit unions since we came to office and we have been working energetically to increase access to affordable credit by modernising and expanding the sector. That is why we are investing up to £38 million in the credit union expansion project, providing an increased range of financial services for up to 1 million more customers, which we anticipate will save them up to £1 billion in loan interest repayments over the period to March 2019. We also believe that credit unions have a role to play in supporting our armed services.
Financial pressures exist within service households just as they do in the wider community, as all those hon. Members who spoke explained. Indeed, many hon. Members may have received letters from members of the armed forces or their families who have been denied credit, have struggled with obtaining a mortgage or have been refused the opportunity to purchase a financial product as simple as a product warranty. Often that has nothing to do with their creditworthiness per se, but is due to the nature of a peripatetic career that can prevent some in the armed forces community from developing a consistent credit history in the area where they live; that is often used by credit referencing companies to determine credit credentials. We recognise that that is a problem within the structure of employment in the armed forces, and have been actively taking steps to ease the problems for service personnel, as an important component of the armed forces covenant, which the hon. Member for West Dunbartonshire (Gemma Doyle) mentioned.
Two years ago, in April 2012, working with credit reference agencies and the Royal Mail, we introduced “shadow” postcodes against British forces postal addresses, to try to establish consistency of address. That helps armed forces personnel serving overseas to maintain a UK credit history that is recognised by financial service providers and allows improved access to financial products. The MOD has also secured an important pledge from, among others, the UK Cards Association, the British Bankers Association, and the Council of Mortgage Lenders to treat
“applications for credit and mortgages...fairly and consistently with civilian counterparts”.
Last year, as other hon. Members have mentioned, we launched MoneyForce in partnership with the Royal British Legion and the Standard Life Charitable Trust. That has been providing training, briefings, resources and online support, helping the armed forces community to manage its money and financial affairs better.
Despite that support, there are still those in the forces, as there are among the public at large, who end up requiring a loan just to make ends meet. I am sure that the hon. Member for West Dunbartonshire was not suggesting, in her remarks, that armed forces personnel have increasingly become users of food banks, because I am aware of no evidence of that. If she has any I should be interested.
Mr Dunne
I think she is indicating that she did not mean that, and I am pleased to hear that, because there is no reason for it.
Citizens Advice has said that it is dealing with a significant number of cases of service personnel and their families who get into difficulty with debts at high interest rates owed to payday lenders. Those lenders appear to be specifically targeting the armed forces because some personnel have problems with credit ratings. The hon. Members for Harrow West and for West Dunbartonshire both mentioned some of those payday lender adverts, and the extortionate rates of interest that they charge. I searched the internet to see what claims those companies make. Entering “armed forces loans” into the search engine generates a list of companies promising no credit checks, rapid payment and 100% satisfaction. One website even depicts a smiling soldier in uniform giving a thumbs-up in front of the Union flag, with the claim that it is the
“Number One lender to the military”.
Mr Thomas
The Minister accused me of persistence, so as he is five minutes into what is, to be fair, a very interesting speech, will he tell me whether he will support a feasibility study on payroll deduction, and meet me to discuss how we might get quicker access to credit union products for armed forces personnel?
Mr Dunne
I am sorry that the hon. Gentleman seems to want to bring the debate to a premature conclusion. We have plenty of time left, and I am sure, given that he called the debate, he would like to use as much of it as possible. He already asked that question in his remarks, and I hope to deal comprehensively with all his questions before the debate finishes.
I referred to the website because of the impression that may advertently or inadvertently be given that websites directed at the armed forces carry some endorsement from the armed forces. That could not be further from the truth, but it highlights the risks for the Ministry and the service branches in any involvement in the provision of financial products, should personnel or their families get the impression that the military was endorsing a particular product. Such a financial product would carry the same kinds of risk as any other regulated entity, and we take that seriously.
Jim Shannon
The hon. Member for Harrow West and I cited the Navy Federal credit union in the United States as an example of something that is clearly personnel-oriented but is acceptable and does what it should: it does what it says on the tin, as we say. That is an example of what could be done.
Mr Dunne
I completely accept that there are examples elsewhere, as the hon. Member for Harrow West said—not just in the United States but also in Australia—of credit unions receiving support from the armed forces. I shall come on to that but I was just highlighting the level of associated risk.
Mr Dunne
Before the Division, I was explaining how credit unions must be properly regulated, and the fact that we need to be confident that any credit union established with military branding has some financial security. Credit unions offer access to good-value savings and loan products for a customer base that has historically found it hard to access such services. They are registered as industrial and provident societies and are regulated by both the Financial Conduct Authority and the Prudential Regulation Authority.
Unlike payday loan companies, credit unions are, in my view, a positive force for the community around them, benefiting members and local economies alike. Their role in developing alternative financial services for member groups has been well championed in this House, not only by the hon. Member for Harrow West but particularly by the all-party group on credit unions, which my hon. Friend the Member for East Hampshire (Damian Hinds) has chaired so admirably since he was elected, among his many other duties, including his support for me today, for which I am extremely grateful.
Of course, provided that they meet the common bond for membership, members of the armed forces and their families can already apply to join an existing credit union local to them in order to access the range of financial services on offer. However, coverage is not national and the services vary. As the hon. Member for Harrow West pointed out, the Navy Federal credit union in the US is a model of what can be achieved. It has around 5 million members and some £50 billion in assets. I agree with the hon. Gentleman that a well-managed credit union for our soldiers, sailors, airmen and women, as well as their families and veterans, could be of considerable benefit if established for United Kingdom armed forces.
However, there is a “but”. What makes credit unions unique and makes them work is their independent spirit. They are created by the people for the people, offering products that their customers want because their customers are also their members. Typically, credit unions grow steadily and organically from small beginnings, normally taking many years to cultivate their membership. To give one example, the Glasgow Credit Union was founded by two members in 1989 as the Glasgow District Employees Credit Union. In the following 25 years, it grew to a membership of 32,000 and now has some £100 million in assets. Although this is an excellent example of localism in action, it demonstrates the time that it can take a credit union to develop proper traction and critical mass. Also, it would not be in the interests of anyone—the taxpayer, UK financial services or credit union members themselves—to try to shoehorn an institution of this kind into a Whitehall Department. The organisation of credit unions has always been, and must continue to be, the remit of the private and voluntary sector. It is no small undertaking to establish one.
Gemma Doyle
Could the Minister explain, therefore, why the Department for Work and Pensions has put aside £38 million to support credit unions, because that does not seem to sit with the point he has just made, namely that supporting credit unions is not the business of Government?
Mr Dunne
The Government are keen to support the development of credit unions but we are not keen to be the operator. The funding is available to provide support. I am not familiar with all the detail about what the DWP funding has provided, but I can certainly look into that matter and write to the hon. Lady if she would like clarification. Nevertheless, as far as I am aware, it is not the business of the DWP to establish credit unions. I think that it is providing support for existing or start-up unions being established around the country on an initial basis, effectively like providing start-up funding for a business.
Mr Thomas
Of course the Minister is right that one would not want a military credit union to be run by the Secretary of State for Defence, or even by a talented junior Minister such as himself; one would want it to be run by its members. However, what the Ministry of Defence could do is help to facilitate the establishment of such a credit union and a feasibility study that was specifically focused on what role the MOD might play to help to achieve that objective.
Mr Dunne
Indeed, and not for the first time the hon. Gentleman is pre-empting just what I am coming to in my remarks; he is very prescient.
It is important that any organisation that undertakes the establishment of a credit union does so with its eyes wide open and is aware of the risks that might be involved. From our perspective, in the event that we were to provide support for an organisation, we have some responsibility for the savings of service personnel, to ensure that those savings are in an environment where they will be properly stewarded, managed and regulated. That said, we are minded to support any suitable organisation with the wherewithal to put in place a credit union to support the men and women who serve in our armed forces.
To that end, I will update the House on where the Department has got to in the discussions that were identified by the hon. Gentleman in his remarks. The Department has already brought together relevant parties to form a working group to look at precisely this issue. It includes the DWP, the Treasury and the Association of British Credit Unions Limited, as well as service charities such as the Royal British Legion and the three service benevolent funds. A number of those stakeholders were present at meetings hosted in January and February by the MOD. There was broad support for the credit union concept and a number of parties expressed their willingness to become involved, but unfortunately at that time none of the individual charities stepped forward to take the lead. Subsequent to those meetings, however, we have had further approaches from some of those organisations that attended them. ABCUL, which was referred to earlier, has been in touch and it has indicated that it is keen to take these discussions forward. We, too, stand absolutely ready to do so.
The hon. Gentleman has asked repeatedly about the prospect of the MOD funding a feasibility study into a military credit union. We are of a mind to support one or more organisations that wish to take the lead in investigating the feasibility of a credit union, but we do not think that it would be appropriate for us to take the lead. As and when an organisation steps forward, we are willing to work with it on how we can best support the establishment of a credit union, but we think that actually establishing a credit union would be best done by an organisation that is already one of those we have been talking to and that is already embedded with relationships with service personnel and their families.
Mr Thomas
I want to understand exactly the Minister’s point. If a charity or a credit union were to come forward saying that it believes it has the capacity or interest to provide such a dedicated military credit union and to get it up and running, would there potentially be the prospect of support in financial terms as well as in the crucial area of payroll deduction for a military credit union?
Mr Dunne
I am not in a position to commit the Ministry’s budget here and now. What I am willing to do, as I think I have already indicated, is to offer further support to explore the possibility of establishing a military credit union. If an existing credit union felt that it had the resources and the experience to bring to bear, that would be a very positive development; equally, if an existing service charity felt that this was an area that it wished to explore, that would also be very welcome. I am not closing the door to providing assistance for a feasibility study, but I will not commit at this point to conduct one without knowing to whom I might be making such a commitment.
Jim Shannon
Further to the point made by the hon. Member for Harrow West, I have a question. My hon. Friend the Member for North Antrim and I suggested that, by making payroll deductions during a five or 10-year period, we could build in the moneys that would be needed, while being ever mindful that it is a credit union that is being established. Would such a scheme be part of the feasibility study?
Mr Dunne
The subject of payroll deduction has been raised by a number of hon. Members. We make payroll deductions in certain areas. Insurance services were specifically mentioned as possible services for a credit union to provide and it was said that a payroll deduction might be a way of helping to fund insurance premiums. We already make such deductions for armed forces personnel. We have a payroll deduction scheme that is financially supported by the Government, over and above our merely facilitating contribution payments. That is to ensure that life insurance is available to armed forces personnel who are on operations, irrespective of their role. That is a specific product that is funded through payroll deduction.
Mr Thomas
I am grateful to the Minister for what he just said on that subject. However, may I specifically ask him whether the MOD now accepts that if there were a credit union that it had confidence in regarding the ability to provide financial services to armed forces personnel, it would be willing to facilitate payroll deduction for members of the armed forces to join, contribute to and pay into such a specific military credit union?
Mr Dunne
Again, we are talking about quite a number of hypothetical steps here. I am certainly willing to say that if we get into discussions with a serious, credible entity that is willing to establish a credit union, we can consider the possibility of payroll deductions as one means of providing either interest payments or investment through the union’s savings products. However, in the absence of knowing which party we would be dealing with and the suitable structures that would be placed around it, I cannot commit to do that.
The hon. Gentleman will appreciate that military payrolls are not a uniform or simple thing. The issue strays rather beyond my departmental responsibilities, so for me to commit other Ministers and other elements of the Department to things about which I am not expert would be career-inhibiting. I will not do that, but I certainly undertake that, if we pursue discussions with the credit union, the issue can be on the agenda.
Mr Thomas
I would not want to limit the Minister’s career in any way, given how helpful he has been in this debate. On payroll deduction, I gently suggest to him that the NHS has some equally complex systems, and many parts of the NHS are able to do it. My last specific question is whether he is willing to commit to asking the relevant Minister—I appreciate that he is filling in today—to meet ABCUL, Plane Saver and me. Those organisations think they might be in a position to offer a credit union service now, before a dedicated military credit union is established.
Mr Dunne
The hon. Gentleman referred to Plane Saver before, and I am not aware that it has directly approached us. We have clearly had an approach from ABCUL. It participated in meetings earlier this year and wrote again last week, perhaps prompted by sight of this debate. I am confident that the Under-Secretary of State for Defence, my hon. Friend the Member for Broxtowe (Anna Soubry), who has responsibility for defence personnel, welfare and veterans, would be willing to meet the hon. Gentleman and ABCUL. If he wanted to bring Plane Saver along, it would be welcome, too.
The hon. Gentleman asked some specific questions about the promotion of credit unions within military publications. Were the credit union to be established with support from the military, it would be more than welcome to take space in the military publications. I cannot, however, commit to the charging basis on which that space would be available; that would be a matter for the normal procedures for each publication. He asked whether we could institute a ban on payday lenders advertising in military publications. This Government are not in the business of prohibiting freedom of speech. Payday lenders might be unethical, but they are not unlawful, so we should not ban their adverts. We should, however, look to support the credit union going forward.
The hon. Member for Strangford (Jim Shannon) asked whether we could underwrite a scheme, but I have to disappoint him. The Ministry of Defence budget might appear to be large, but it appears from the inside to be somewhat constrained. We have to devote our budget to our front-line duty, which is protecting the nation. We are willing to provide opportunities to access military publications and that kind of thing, but we are not in a position to underwrite a financial offering to our personnel.
Jim Shannon
I also asked the Minister about giving advice to soldiers and serving personnel on how best to manage their money. I said that, often, those who did not have the level of income they currently have found managing their money overawing. Has offering that advice been considered?
Mr Dunne
Indeed. The hon. Gentleman raised the role of the Money Advice Service, which we established two years ago, and I am grateful that he gave it a positive endorsement. The advice is proving effective and, as the hon. Member for West Dunbartonshire said, the number of people taking advantage of the service in its first two years demonstrates that there was a need for it. We think that it is being delivered in the right way. I also thank the hon. Member for Strangford for the advert he gave to Armed Forces day this summer and the celebrations that will take place in his constituency. I wish them well.[Official Report, 28 April 2014, Vol. 579, c. 7MC.]
I conclude by confirming that the Government support the notion of establishing a military credit union. We are in active discussions with the credit union trade body and the service charities. I have indicated that we are willing to commit the Minister to meet them again, with the hon. Member for Harrow West, who takes such an interest in this matter. In closing, I encourage all parties with an interest in developing this kind of financial service for our armed forces personnel to get together, to pool resources and to try to find a way of making it happen.
Fairness in Pension Provision
(10 years, 7 months ago)
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Mr Brian H. Donohoe (Central Ayrshire) (Lab)
It is good to see you in your place, Mrs Riordan. You, too, have a great interest in pensions, in the fairness of the system and in applying that fairness.
Since I was a very young person, I have always accepted that pension provision is part of deferred income and should be treated by employers and Government as such. All my life, I have believed that fairness should be applied to the whole question of pensions. At the bottom of this debate in many respects, however, is the unfairness in the application of the state pension scheme over a great number of years. I commend the Government for some of the changes to the scheme, making it much simpler than it was, but there is still a long way to go in terms of how we see the future for some elements of the situation. I will cover that later.
I come before the Chamber mainly because of the many constituents who came to see me to complain about the system. None of the three I will mention is after anything for themselves. They all accept that they are at an age when nothing further can be done for them, but by making themselves available to public scrutiny they want to help and protect those who follow to have a more level playing field.
I want to talk first about Ann Aitken, a constituent of mine for some time. She, as well as the other two, has worked since she was 15. She worked for ICI locally in various jobs, and then went to a knitwear company. She took five years off employment to bring up her first child and afterwards worked in shops and factories, before going to a local computer company, Fullerton Fabrication. Since then, she has worked in Crown Paints for some 22 years. She retires this Thursday, so I congratulate her.
Ann wants to bring to the attention of the House what she sees as an anomaly. Over that whole period, she never put her hand out for any form of Government assistance, other than the credits available for the times off she took. That would be in connection with the additional state pension. She is a friendly person and, from talking to her friends, has discovered that her additional state pension is less than that of someone who has never worked. She receives something like £16.22 for the additional state pension, while others she knows receive £21. Although she took five years off, she got no tax credits, because no such thing existed, yet she is now facing the penalty. She has a simple question: what reward was there for her working? What reward has she had for all the years that she has given? She hopes that her situation will not be repeated in future. That is what Ann is concerned about and why she has raised the issue with me.
The second person I want to talk about is Jean Dickson, another constituent who has come to me about her position. She worked from the age of 15, for all her days. Sadly, she lost her husband in 1998, and was grateful for the widow’s pension she received as a consequence, but she has worked all her days, even taking five years out to improve her educational standards. Latterly, she was employed as a nurse in an acute surgical area of the hospital. She, too, says, “Look, I have a state pension, and I am very grateful for it”, and it will be £566 per month. In addition, because of the occupational pension, she is receiving £240 per month before tax. As a result of her husband having a pension, she receives another £300 per year. As a consequence of the unfairness that I will cover in the latter stages of my presentation, she receives £166 per annum for the state earnings-related pension scheme, SERPS. In her last job, she paid 6.5% of her pay towards superannuation, so she still feels that there is injustice in her situation. She retired in October 2012, but is being penalised for working all her days, compared with those who perhaps were not.
The third case is that of Lawrence Clark, who came to see me and whose case particularly caught my imagination. He started working at the age of 15, similarly to people such as myself and my colleagues—he is of our age group. He started as a trainee accountant at Hyster, a local company, and went on to work for various companies, including Simpson Turner as a toolmaker. He moved on to Wilson Sporting Goods, another local company, where he worked for 25-odd years. He then worked for Digital, a local company that went bust, and for Scottish Golf Cast, which again lasted a few months. He ended up at the charity Quarriers for 15 years.
After that working life, he has managed to accrue £97 a month from his Wilson Sporting Goods occupational pension and £223 as a consequence of his work at Quarriers. In addition to that, on the basis of advice he received—another point I want to address in my conclusion—he paid towards a private pension that gives him something like £14 a month. From November 2015 he is going to receive a state pension of £123 a week. He is saying that, after 47 years, as a consequence of all that, as well as of being unemployed—if that is the right terminology for him—up until that point next November, he gets £60 a week for his pension credit guarantee, whereas others are apparently receiving £140. If he had not paid something like £30,000 into a superannuation scheme, he believes that he would currently be better off per week until he retires. That seems very unfair, and it should be looked at. He thinks that, had he not taken out a private pension or been involved in superannuation, he would have been better off. That is the unfairness that those three constituents believe they face.
I have outlined three cases in which there are problems with the pension provision directly, but we can also compare other aspects of the life they have lived with those of other people. Others have had free dentistry, free prescriptions for glasses, and housing benefit has been part of their scheme. The situation may have changed in Scotland now, but some people had to pay for their prescriptions all their lives. I am not saying for a minute that it is wrong that unemployed individuals are receiving these elements, but those three constituents say that perhaps more concern should be given to how they deal with the situation and how the Government deal with their problems.
On that basis, I want to broaden the argument. That is the difficulty for each of those individuals, but the position is more general too. The problem is that the great mass of people in this country do not have a clue, when they are aged 25, 35 or 55, about what provision they are making. They do not know what the result of their contributions will be for their pension. This issue has plagued me over the years, and it still does. Even here in the House, there are hundreds of Members of Parliament who do not have a clue what their pension provision is, and I say that as someone responsible for trying to educate them about that. It is clear that there must be a fundamental shift—information must be provided to every individual in this country to make them aware of the provision and advice available.
I commend the Government, because at the very least, and on the basis of all-party agreement, we now have financial advisers who are independent—in every sense of the word—in the advice they are giving. It used to be that financial advisers worked for companies on commission. The same individuals now charge for their services. That, at the very least, is a bit fairer, or gives the impression of being fairer.
Mr Jim Cunningham (Coventry South) (Lab)
I certainly remember the early ’80s when people were encouraged to take out a private pension, but unless they worked for a reputable company it was not explained how a private pension could sometimes affect the state pension. There must be thousands of people in that situation in this country. Whatever my views about the Government’s pension proposals, at least they will explain them to people. When I worked at Rolls-Royce, it spent a lot of money trying to persuade us away from the state pension to a private pension scheme and to some extent we got reasonable advice, but I can think of other car companies in the Coventry area where even today there are still problems with pensions.
Mr Donohoe
My hon. Friend has focused on an issue that was dear to my heart and about which I argued forcefully when a previous Administration allowed people to contract out of their company’s superannuation scheme. I was a joint secretary of the Scottish Transport Group when, for the first time in about 1982, people were given the opportunity of opting out of its pension fund and going private. I argued forcefully with everyone and anyone that that was a big mistake, that they were leaving themselves open and that when they eventually retired they would find themselves in a different situation. We had what was recognised at the time to be the best pension scheme—perhaps not as good as that for MPs, but certainly a very good pension scheme. Some people are now in a worse position because they were pounced on by supposedly independent financial advisers who told them that they would be far better off in a private scheme, when the truth was the exact opposite.
Many years ago, I was a convener and shop steward in a shipyard where the blue-collar workers were not in a pension scheme. I argued with the employer and succeeded in persuading them to introduce a scheme. That company is still in my constituency and I still have people telling me, some 40 years later, that it was the best thing that was ever done and that they have never been better off after taking advice and voting overwhelmingly to join that scheme. I do not know whether I am an anorak in terms of pensions, but I believe that making provision for a pension is more important than anything else in life. People should understand that, and do so earlier.
I seek clarification on one or two points, but I want to make a plea to the Minister. How widely defined are “employees” and “new arrangements”? Are the self- employed, carers and the unemployed included? They exclude zero-hours contracts and people who may have two part-time jobs. That is unfair and should be looked at.
I have grave reservations about the new scheme because people will be able to take out money and go on a world cruise or buy a Ferrari. That worries me. It will send the signal to many people who do not understand pensions that they can draw on that money, but at the end of the day they will be a lot worse off. I want an assurance that they will be protected. Financial advice is important, and that must be stated clearly.
A business man came to me and said that every business man in the UK received a letter from No. 10 Downing street telling them about the advantages of the latest Budget proposals on national insurance from 6 April. Will the Minister have a word with No. 10 Downing street to see to it that every single person in the country is sent a letter telling them how fundamental it is for them to look after their old age, and telling them that if they were to die in service, that would be looked at as far as their families are concerned? If I get that assurance, I will go back to my constituents and tell them that the debate has been worth while. I look forward to hearing what the Minister has to say.
The Minister of State, Department for Work and Pensions (Steve Webb)
I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing the debate. We have a common interest in quality pension provision, fairness and making things simpler for people. I entirely accept the premise that we have allowed the pension system to become bafflingly complicated. I entirely accept his point—not only do not all of our colleagues understand the pension system, but why should a member of the public understand contracting out, guaranteed minimum pensions and all the rest of it? A central drive of the state pension reform—I am grateful to him for his positive comments on that—is to sweep a great deal of that away and to have a single, simple, decent state pension set at a rate that people know. They will get that pension for 35 years in the system, contributions or credits, with no contracting out and no differences if they have been in a company scheme. That is the world that we are moving to.
Clearly, the hon. Gentleman’s constituents have spent their working life in a very different world. I want to say a word about one of the reasons why some of them—without full details it is difficult to comment on individual cases—might be getting less state pension than their neighbour. They might think that that is unfair, but it may not be unfair, because there is something else going on that they are not really aware of, namely the whole business of contracting out, which is about to be abolished. A number of his constituents, whom he mentioned by name, worked for firms that had a workplace pension scheme.
Under the principle of contracting out, the operators of the scheme, not the individual, decided that the scheme would be contracted out of the state earnings-related pension scheme. As a result, the scheme would pay less national insurance and, crucially, the hon. Gentleman’s constituents would pay less national insurance than their neighbours who worked at a factory that was not contracted out. Imagine there are two factories side by side, one of which has a company pension scheme and the other of which does not. At the factory with the company pension scheme that chooses to contract out of SERPS, all the employees in the scheme pay less national insurance than the employees at the factory that does not have a workplace pension scheme.
Mr Donohoe
I am not talking about the person who is in another scheme; I am talking about the person who is in those schemes and who has everything coming their way, but who has never contributed anything to it. It is important to stress that I am not saying that we have to reduce the amount that they live on. I would not live on £130 a week, and I doubt whether the Minister would. The fact is that the situation is seen as unfair. If the new scheme will overcome that problem, it is a great idea.
Steve Webb
It will to some extent, for reasons that I will explain. When an individual is contracted out, they will receive a smaller state pension than they would have done, because they are building up only a basic state pension, not SERPS. However, they will not get a smaller pension than they would have done, because the company promises to match the SERPS pension that they would otherwise have received. When somebody retires and says, “I am only getting 16 quid of SERPS”, what matters is not the SERPS figure—in a sense, they might be getting zero SERPS—but the SERPS figure plus the occupational pension promise together.
Steve Webb
They have paid for it, but they have also saved by paying less national insurance. I take the hon. Gentleman’s point about people who have not worked, and I will come on to them. In a world of contracting out, if person A pays less national insurance but still gets the same pension as their neighbour who was not contracted out, that would not be fair either. Fairness has a number of dimensions. The fact that someone has a £16 SERPS pension does not tell us anything in isolation; it depends on whether they paid less national insurance than their neighbour for years and years, which is why they have got a lower SERPS pension, but they have got something else instead. That is part of the system.
The hon. Gentleman asked about the position of people who have done nothing, and I often hear from pensioners who say, “Why did I bother saving? If I had done nothing, I would have got everything.” Part of the point of the single-tier pension is to set the value of the state pension above the basic means test, not 30-odd quid below, where it is now. Automatic enrolment then takes people further above that figure. As a result, because they have saved, they are clear of the means test and they are better off than someone who has done nothing. That is a new feature of the new system, because we are trying to address that point.
The hon. Gentleman has said that people who do nothing get stuff for free. He is not saying that poor people should not get stuff for free, but we cannot have it both ways. If we think we have to look after people who have got nothing, and they get free prescriptions because they have no money to pay for them, we cannot then say, “But that is not fair to people who work, because they do not get them for free.”
Steve Webb
Well, temporarily they do. Unless we give everybody everything free, we must recognise that we sometimes do things for poor people because it is right to. Inevitably there will be an element of people who work and think, “It is not fair; I do not get that free.” However, as part of a civilised society I do not want people who have no income to be unable to afford medicines. That is just the way it is. If we give everyone free prescriptions and free everything, we will just tax everyone to the hilt. I understand what the hon. Gentleman says, and the new state pension system will start to address that point by setting levels of pension above the basic means test.
Automatic enrolment will be a huge step towards pensions for the millions of people who may never understand them, because the firm chooses it for people, puts them in for it, and puts money in. We put tax relief in, and people are free to opt out. Nine out of 10 are staying in, which is fantastic. Just as the hon. Gentleman got the pension scheme extended to shipyard workers, as I think he said, we are extending pensions to 10 million people, many of whom are low paid or part-time—many will be women or people on the edge of the labour market, and they are just the sort of people who would not otherwise have had a pension. That is a huge step forward in the spirit of what the hon. Gentleman achieved for his constituents all those years ago, and it will bring millions more in.
The hon. Gentleman asked about the scope of auto-enrolment. It is about employment and an employment relationship. There must be an employer to pay the employer contribution. The self-employed are not in auto-enrolment, but they do well out of the new state pension scheme, because at the moment the self-employed class 2 national insurance builds up only the basic pension, not the SERPS bit. In our new world, there is no distinction—there is just the pension; so every year in which a self-employed person puts in, in future, will be more valuable than now. That person will be building up 35ths of the whole pension, not 30ths of the basic state pension. So the self-employed will get better provision.
Carers, unless they are in a contract of employment, will not be auto-enrolled, because there will be no employer to put them in a scheme. However, they will be credited into the 35 years of full single-tier pension, so a carer will build up, every year, a 35th of the £144 pension—or whatever it will end up as. There is provision for carers in the new system.
Most people on zero-hours contracts work 20-odd hours a week, and as long as, at some point, they trigger auto-enrolment—as long as they earn above the threshold, ever—they will be put in. If I am on a zero-hours contract and work zero, zero, zero, zero, and then 20 hours over a pay period and go above the trigger, my employer has a legal duty to put me in. There are complexities about waiting periods and the rest, but the basic principle is that I must be put in once I am over the trigger. Once I am in, if there is a week when I have no earnings, of course no money goes in; but if there is a week when I do have earnings, money goes in. I do not fall out of the pension. Once I am in, I am in. Auto-enrolment happens once. It is triggered by earning above the threshold once in a pay period.
Mr Jim Cunningham
My problem with what the Minister has said about zero-hours contracts is that surely a situation is possible in which someone falls below the threshold because there is not continuity of employment. That is a “suck it and see” situation. How would the Minister deal with that, 40 years down the road?
Steve Webb
A zero-hours contract is a contract. If someone has a contract of employment, in the weeks or months—whatever the period is—when they are above the earnings threshold, money goes into the pension. We will not insist on pension contributions being made in weeks when people do not earn any money. How would they put money in?
I think the zero-hours contract argument is greatly overdone, in the sense that the typical person on a zero-hours contract does 20 hours a week, on average. It may vary—when they earn a lot in a good week, they will put a lot into the pension; when they earn less, in a bad week, less will go in. As long as they get work through the contract they will be in a pension, possibly for the first time. I think that many people on zero-hours contracts will do better, because employers would not generally have put them in a pension at all. We are making that happen.
As to people with multiple jobs, a small number of people have jobs that, taken together, would put them into the system, but, taken separately, do not. Sometimes they will have children, and if they do they are credited in the state system anyway. Only 35 years of contributions are needed for a full pension, so someone might not make contributions for a number of years and still get a full pension.
The House of Lords, in about half an hour, I think, is going to talk about the issue in the debate on the Pensions Bill. We will gather more data on it. We think the issue is small, but clearly we need to ensure that we know what is going on. The number of women, for example, doing multiple part-time jobs went down in the past 12 months, so we do not think that the assumption that the numbers are all going up and that it will all get worse is borne out by the data. However, it is a serious point and we will look into it.
The hon. Gentleman is right that people often do not have a clue. It would be lovely to think that one letter from Downing street would fix things. I have two views on the matter. We need to make sure that pensions work for people who do not get it and never will, because with the best will in the world, expecting tens of millions of people to understand all this stuff is a heck of an ask. For me, we have to make sure that the system works for people who do not understand it and do not make active choices. That is where the state pension reforms come in.
Steve Webb
We look at lots of different ways of communicating with people. The thing that we know most of all is that if we opt people in to pensions and they have to opt out, they stay in. We could have hand-printed 1 million booklets—I could have delivered them and sat down for half an hour with each person, and I would not have persuaded them. We have used the power of inertia and what we know about how people behave to get them in as 1 million Government advertising campaigns would never have done.
We are going to include financial education in the national curriculum. That is a good thing. Under the Budget measures that the hon. Gentleman referred to, people will have a guidance guarantee, so before they make their choices, they will have the right to a face-to-face conversation with somebody who is not trying to sell them anything, as he said. It is not independent financial advice—they can pay for that separately if they want; it is just a conversation that they have never had a right to before that will enable them to make informed choices. If they want to spend some of their pension money up-front, it is their money to spend, but we are making sure that there is a state pension system in place, so that even if they underestimate how long they will live—blow the lot, or whatever—they will have that floor of the state pension above the means test that they do not currently have.
I want to mention something else that may be of interest to the hon. Gentleman’s constituents who reach state pension age under the current system. We are allowing people to top up their state pension if they want to. If someone has a bit of savings and they want to pay voluntary national insurance, under a new category of national insurance for people who have already retired, or who will do shortly—we are calling it class 3A or the additional state pension top-up—they can pay national insurance and get an extra pension for the rest of their life. That will be index-linked. There will be survivors’ benefits if they die. We think that will appeal to a set of people who perhaps have very low interest on their savings currently and are getting nothing in the bank. From October 2015—there are helplines, websites and all the rest of it—they can make additional contributions and enhance their pension if they wish. That is another option that we have created for today’s pensioners.
The hon. Gentleman mentioned the guarantee credit. The constituent that he mentioned, if I understood him correctly, is above women’s state pension age, so qualifies for pension credit, but has not reached men’s state pension age. Clearly, in that period, we are saying to people who have no other income, “Here is an income that we think you need to live on, but if all you have is half of it, we will top you up to the full amount.” In theory, people could have nothing at all and get the full amount, which I think was the point that he made.
However, bear in mind conditionality on benefits. We do not allow people just to get jobseeker’s allowance for doing nothing all day. In a different debate, his colleagues might be saying to me, “We are far too strict with these folk. We are sanctioning them when we should not be”—and all the rest of it. The rules are pretty tight, so the option of sitting at home all day and doing nothing, and getting credits for a state pension, is one that we are essentially eliminating. People get credits for their state pension and so on only if they are actively seeking work, applying for jobs and doing the things we expect them to do. We do not have the system whereby people can just do nothing and then cash in. There are an awful lot of conditions and requirements on people receiving benefits.
We have tried to recognise that the system has been fiendishly complicated in the past—we accept that—and to simplify it so that it is simpler and fairer, particularly to older women, many of whom have done very badly out of the system. We have tried to ensure that everyone is in a workplace pension as far as possible and that that is good quality and good value, and to put new freedoms and guidance alongside that. I hope that, as a result, we will have a much fairer system in the future than we have had in the past.
Business Lending
(10 years, 7 months ago)
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Andrew George (St Ives) (LD)
It is a great pleasure to have secured this important debate, Mrs Riordan. The issue has been pressing for many businesses in my constituency, and it has been raised on a number of occasions by me and by others in the House because of concern about the change of relationship between businesses and what used to be trusted advisers and supporters in banks. Now that relationship has changed—I hope not irrevocably, but many people fear that it is irrevocable—because of the way in which banks have treated small businesses in recent years.
Banks should be business-friendly, but the evidence is that they have behaved like parasites and engaged in sharp practice by mis-selling complex interest rate hedging products or hidden swaps that they will have known were massively to the detriment of the small businesses that they flogged them to. Instead of doing what small businesses do well and what the Government, those on the Government Benches and others who support the Government want businesses to do, which is to grow the economy and create jobs, thousands of small businesses have been held back and others put out of business altogether. But their being put out of business suits the banks in these circumstances, because every company that they lend to and that they can drive into administration has assets that they can sell and becomes a company that, conveniently, cannot seek redress from the bank, particularly in the current climate.
Mr Mark Williams (Ceredigion) (LD)
I congratulate my hon. Friend on securing the debate. In his analysis of this problem, is he of the view that the banks were clearly targeting specific businesses—asset-rich businesses? I ask that because my experience in my constituency is that the hotel sector, people owning property, property management companies and, above all else, the farming sector were really hard hit, particularly in the sales of unregulated tailored business loans.
Andrew George
My hon. Friend makes a very acute point. It does seem to me that in the many cases that I have taken up—no doubt he has done the same in his constituency—there were these rather dodgy business loans and, of course, the swap agreements embedded in them. That is the critical thing. There do appear to be very significant assets within the businesses themselves, and no doubt that will have guided the banks as to which businesses to offer the loans to.
I gave my hon. Friend the Minister at least some notice of the areas that I would be covering. In particular, I would like to ask her how the Financial Conduct Authority can justify the exclusion of at least one third of the companies that were being looked at and that were mis-sold these products because they are deemed by the FCA to be “sophisticated”. What was the basis for that—in my view, it was an arbitrary basis—and how can it be challenged?
What view do the Government take of the reasonable claim, in my view, by companies to which the mis-selling of these products has caused detriment that they could seek redress for “consequential loss”? It is suggested that some banks are seeking to reinterpret the law in this area, so that it is difficult for those companies to pursue consequential loss.
What happens to those businesses that were in effect forced into administration or liquidation by the mis-selling? At present, they appear to have no redress at all. Surely that cannot be right. I hope that the Government will encourage the FCA at least to have that matter looked at again.
Does the FCA review and redress process take into account or exclude the matter of “ongoing facilities” provided by the banks—the ongoing facilities that are made available through the banks?
Will the Government now authorise an inquiry into the sale of all hidden swaps—the tailored business loans, the embedded swaps and so on—sold to small and medium-sized enterprises by the banks since about 2001? That is when this pattern of activity was identified.
This is a separate but no doubt related point. What assistance is there for entrepreneurs who are trying to secure a mortgage, or even complete a rent check, for a home now that the self-certification system has been scrapped? Many small businesses and, in particular, new businesses that are starting up—we want to encourage people in those businesses—cannot secure a loan to advance their business.
I fully appreciate that the Government have made significant strides in recent years with the establishment of the business bank, the enterprise finance guarantee scheme, the enterprise capital fund, funding for lending, the growth accelerator and many other initiatives, which have been significant and helpful to the business sector. I certainly hope that those will prove to be a success in the months and years ahead. My primary focus today, however, is that we still have a legacy of a problem, which ought to be erased from the business lending environment. I hope that when the FCA completes its review process, it will ensure that the banks engaged in such shoddy practices are brought to book as quickly as possible, so that the companies that have suffered detriment may resolve their redress equally quickly.
Inevitably, I come at the problem from the perspective of my constituency, so I probably need to paint a picture of the west Cornwall and Isles of Scilly constituency of St Ives. Not only is it the most attractive constituency in the country, but it has a large number of very small businesses. There are no major companies—no car plants, refineries, major manufacturers or head offices of multinational companies, as there are in many other constituencies—and there are instead about 7,000 enterprises. That figure depends on how we define a small business, but certainly includes sole traders and medium-sized enterprises. They are multifaceted and many-talented businesses; they not only throw pots and manage satellites, but engage in basket weaving and international website design, and they include hoteliers, caterers, bakers, farmers, fishermen and fishmongers.
In order to be successful, as well as having to work extremely hard, the people in those businesses often have to have many other talents, such as in marketing, customer care, bookkeeping, or IT and other skills. Few of them, however, are financially sophisticated. Most of them used to assume that they could trust the bank of which they had loyally been a customer, in many cases for decades, before they were mis-sold those products. Surely banks are there to help. Do banks not have a shared interest in businesses succeeding? Surely banks would not engage in sharp practice or sell a small business something that they knew it would regret. I am afraid to say, however, that I and many other Members have seen that that is simply not the case.
The banking sector seriously let down small businesses and completely demolished any of the trust that used to be fundamental to the relationship between them and their banks. Would the banks do the same to Tesco, BP or Unilever? Of course they would not, and we know that they would not; they are simply taking advantage of small businesses. The banks know that small businesses do not have the sophistication, and that they can run rings around them, bullying them into the kind of agreements that put some of the businesses out of business and left many of them struggling to survive. I have taken up many cases, as other MPs have done, and my eyes have been opened to the shady dealing.
Colin Phillips of the Coasters tea shop in St Ives, for example, was recently put out of business by that bank practice. He saw his business sold from underneath him, without any consultation, after he was mis-sold a loan by Clydesdale bank more than five years ago. There are many other examples, which I could name, as well as some I cannot name. They have been devastated and damaged by the banks in that way. One company, Seasalt Ltd, was started in Penzance in my constituency in 1981 by Don Chadwick and is now run by his three sons, Leigh, David and Neil. It is a successful UK company. It is the first business ever to have its clothing certified by the Soil Association and it has won the Queen’s award for sustainable development, making it the first fashion company to do so. It has been very successful, it has won many awards and it is growing.
However, Seasalt could have grown a great deal more. It entered into a five-year interest rate swap agreement for £805,000 in April 2008 with HSBC. I am told by Leigh Chadwick that the company did not have a choice about the swap; it was a condition of the loan that it took the “interest rate protection.” The bank failed to make proper inquiries to ascertain the company’s level of knowledge and understanding of the risk inherent in the IRSA. The company was led to believe that interest rates were going to rise. Although the company had never previously taken a fixed-rate loan, the owners wrongly thought that HSBC, its trusted banking partner for 17 years, was acting in their mutual interest; otherwise, the owners thought, why would it be making a swap agreement a condition of a loan?
At the time, there was significant equity in the business—that relates to the point that my hon. Friend the Member for Ceredigion (Mr Williams) made—and the company also had access to additional external funding. The swap agreement was unnecessary and the bank’s motive for making it a condition of the loan was profit, not risk mitigation. The cost of breaking the swap was never explained or illustrated. The bank knew that there was a possibility that the loan could be repaid early, and yet it of course made it difficult for the company’s owners to do so. It confirmed in writing that there would not be any early prepayment or early termination costs, which was wrong. The bank failed to disclose that the IRSA created a contingent liability that would affect the company’s credit line. The IRSA had a detrimental effect on the company.
The company complained in 2012, but HSBC has done its utmost to fight its claim, despite the strength of the company’s case. While the company is preoccupied with trying to get proper and just redress, it is of course not focusing on growing its business and creating jobs. It is an appalling waste of money for UK business, given that the Financial Services Authority found that 90% of the swaps had been mis-sold.
Mr Mark Williams
My hon. Friend gets to the nub of the issue affecting businesses that are within the Government’s redress scheme. The Financial Conduct Authority’s redress scheme is very welcome and it has led to resolution of some cases. However, I have constituents who have been waiting for more than a year now to have resolution. As he says, that puts a huge amount of pressure on their businesses, let alone the tailored business loans—the embedded swap products—that are not being considered yet.
Andrew George
I am sure that the Minister heard my hon. Friend’s comment and will take it into account in her response.
The fact is that Seasalt is still waiting for its interest swap issue to be resolved, more than 21 months since it lodged a complaint about it. HSBC has done its best, first, to resist the redress process and then to slow it down, although the company’s owners have been told that the matter will be reviewed by the end of next month.
This issue has unquestionably cost thousands of jobs. In the case of Seasalt alone, it has estimated that the cost to it is 20 jobs, which it could have created if it were not for the impact that this swap has had on a company of its size; we are not talking about a very large company. Not unreasonably, Leigh Chadwick asked me:
“When will criminal proceedings be brought…?”
The Tomlinson inquiry suggested that in some cases this matter should be a criminal matter. As Leigh asks:
“When will criminal proceedings be brought against the bankers who have perpetrated this fraud?”
Equally reasonably, Leigh makes the point that this issue needs to be related to the issue of bankers’ bonuses. He fails to understand how a business—particularly one that is, after all, taxpayer-funded—can continue to pay huge bonuses when it is making losses. He says that he is sure that the bank would baulk at renewing Seasalt’s facilities if it made a loss but started paying its owners huge bonuses in the process.
I fear that the process of establishing a decent relationship between businesses and banks may have changed irrevocably. Seasalt has said that instead of banks being trusted advisers to SMEs, their relationship is like that with an untrustworthy supplier. The Government, the FCA and other regulating authorities should look at whether the regulations need to be significantly stepped up. What are the Government doing to stop banks side-stepping the EU bonus caps? What steps are the Government taking to increase the FCA’s power and to ensure that it acts in the best interests of SMEs and customers, and not the service providers?
I could describe many other cases, but the Minister needs time to respond. I mentioned the difficulty that many small businesses in my constituency, particularly new businesses, face because of removal of the self-certification scheme for those seeking a mortgage. It seems wrong that businesses that are employing people cannot get a mortgage when their employees can. I hope that the Minister will look at that.
The relationship has clearly broken down. The banks have behaved very irresponsibly with sharp practices like parasites on small businesses. I hope that the Government will take the bull by the horns and ensure that the FCA drives the review process and that we get satisfaction for our small businesses.
The Economic Secretary to the Treasury (Nicky Morgan)
It is a pleasure to serve under your chairmanship this afternoon, Mrs Riordan. I thank the hon. Member for St Ives (Andrew George) for securing this debate. I am grateful for the opportunity to discuss this important issue. I know from previous debates that it is of great concern to hon. Members of all parties.
Towards the end of his speech, the hon. Gentleman mentioned the wider issue of the relationship between banks and customers. I hope he will understand that, if I do not tackle that broader subject, it is because I have only 12 minutes to deal with the matters he has raised. I am sure he will be able to apply for a further debate in this Chamber to explore those themes, but I have taken note of what he said.
The hon. Gentleman made a strong case on behalf of all the businesses in his constituency and others that have suffered from mis-selling. He referred to 7,000 small enterprises in his constituency, and I would like to start by assuring him that from the very beginning this Government have been clear that the mis-selling of financial products is unacceptable. We take extremely seriously the abuse that has taken place, and we are determined that any wrongs that have been inflicted on businesses should be righted.
Hon. Members will know that the Financial Conduct Authority’s review process was the subject of a Back-Bench debate on 24 October 2013 and focused on the speed of the review. The hon. Gentleman mentioned that in relation to a particular company in his constituency. My colleague, the Financial Secretary, noted that although the Government shared the disappointment at the progress that had been made then, we were confident that the review process would provide the correct level of redress for affected businesses.
I am pleased to say that considerable progress has been made during the intervening five months. All cases are now under review and almost half a billion pounds has now been paid to more than 3,400 small and medium-sized enterprises. I hope hon. Members agree that that is positive news and shows that the review is working.
It is worth noting that the majority of banks in the review will also now make an initial redress payment to businesses and then discuss consequential losses separately. I will return to consequential loss, which the hon. Gentleman mentioned. That will help those small businesses that have been at the wrong end of mis-selling to get back the money they badly need. I know from companies in my constituency that have approached me that cash and cash flow are tremendously important.
The FCA has published each bank’s projections for when it expects to finish the review process. All banks are expected to finish the review by June 2014, which is the month after next, with a number likely to finish before that date. I can assure the hon. Gentleman that Treasury Ministers and officials will continue to track progress closely against those projections.
The hon. Gentleman voiced concerns about the large number of businesses that have been assessed as “sophisticated” and therefore fall outside the scheme. The Government have been absolutely clear that businesses that lacked the necessary skills and knowledge to fully understand the risks of these products should receive appropriate redress. However, as the Financial Secretary made clear last year, we do not agree that all businesses should have access to the review. There needs to be a defined cut-off point where more sophisticated businesses take responsibility for understanding the products they purchase. There will have been organisations that took one of these products with a full understanding of the risks involved if interest rates fell. It is not for the Government to perform due diligence for such large sophisticated businesses. Any such action would weaken incentives for businesses to act sensibly when purchasing financial instruments, and I would be concerned that we could open the floodgates to any businesses that lost out from a financial transaction.
Andrew George
I am grateful for the Minister’s comments on that, but will there be an opportunity for appeal for those businesses? There will be circumstances in which businesses can show that this unregulated financial product was mis-sold and that they were misled through how the banks sold the product to them.
Nicky Morgan
As I understand it, the FCA has amended the sophistication test in the past few months. It started off with a broad test under the Companies Acts, and that has been refined. From a constituency case, I know that it is possible to ask the FCA to reconsider whether a business should be deemed to be “sophisticated”, but the FCA will ultimately make the judgment. Some push-back is possible, and there needs to be a defined cut-off point so that the right businesses are within the scope of the review.
I reiterate that the Government take extremely seriously the abuse that has taken place in many cases, and we are determined that any wrongs inflicted on businesses should be put right. I want a quick solution to the mis-selling of interest rate hedging products to allow the businesses to continue to operate and to contribute to the ongoing recovery of the UK economy.
The hon. Gentleman asked some specific questions. If I do not get to the end of them, the Financial Secretary or I will write to him on them. The hon. Gentleman asked about consequential loss and some banks, as he mentioned, seeking to reinterpret the law on it. Banks are required, where there is mis-selling, to provide fair and reasonable redress, and that means putting the customer back in the position they would have been in had the regulatory failings not occurred. That includes any consequential loss. The FCA has published guidance on consequential loss.
The hon. Gentleman asked what happens to businesses that are effectively forced into administration or liquidation by mis-selling. My understanding is that the FCA has confirmed that in those cases the administrator will take part in the review on behalf of the business. The business directors will be given plenty of opportunity to put their case on the sale of the hedging product. He asked about ongoing facilities, and I will have to write to him on that matter, because we have to check. I will return at the end to the self-certification regime, because it is slightly outside the scope of the debate.
Andrew George
I am grateful to the Minister for giving way once again. With those companies that go into administration, the administrator is in many cases acting on behalf of the creditors, including the bank. I cannot see how the administrator can in any sense represent the interests of the company seeking redress.
Nicky Morgan
The hon. Gentleman has raised an interesting point. At the end of the day, the administrator is there to get a fair deal for everybody. The directors of the business are given an opportunity to put their case on the sale of the hedging product to the FCA. The directors of the business, even if the business has gone into administration, will be able to put their case. In my business experience, in most cases, the administrator acts to get as much back for the business and the creditors as they can.
I turn briefly to embedded loans and hidden swaps, which the hon. Gentleman and the hon. Member for Ceredigion (Mr Williams) raised. The hon. Member for St Ives mentioned the difficulty faced by his constituent Mr Phillips and the Coasters company in relation to a fixed-rate loan, and I am sorry to hear about the problems that that caused. As the hon. Member for Ceredigion said, the FCA does not have regulatory powers over business loans, so its supervised review can cover only interest rate hedging products that were agreed separately from a business loan. The Treasury has secured a voluntary agreement through the British Bankers Association that banks will provide the same level of disclosure for features of fixed-rate loans, such as break costs, as for regulated interest rate hedging products. Most importantly, the banks will now ensure that break costs are fully explained and that worked examples are provided.
On self-certification, the hon. Member for St Ives asked about assistance for entrepreneurs who are trying to secure a mortgage. The Financial Services Authority conducted a wholesale review of mortgage regulation in the UK, the “Mortgage Market Review”, which was published in October 2012. The rules are to be implemented by the FCA before the end of this month, and as a result, lenders will not be able to offer self-certified or fast-track mortgages from 26 April. However, the FCA recognises that lenders should have flexibility to decide what evidence of income they can accept from self-employed customers, so it will be for individual lenders to decide what evidence they require as proof of income. I am sure that the hon. Gentleman appreciates that the new rules are being introduced in the context of wanting to ensure that we have stronger mortgage lending practices to avoid the problems that we have encountered in the past, which were caused by people borrowing more than perhaps they should have done.
On lending to small businesses, as the hon. Gentleman mentioned, the Government are determined to support small businesses and improve access to finance. The funding for lending scheme has provided incentives to banks and building societies to boost their lending to the real economy. Since the introduction of that scheme, bank funding costs have fallen to historic lows. As the hon. Gentleman said, there has to be confidence between businesses and their banks. That is why the major high street banks have put in place an independent appeals process that allows any business with a turnover of up to £25 million that is declined any form of lending to appeal against that decision, for any reason, to the participating bank concerned. Results show that, in the two years for which the appeals process has been running, in 40% of cases in which a decline was appealed against, a lending agreement with which both parties were satisfied was subsequently reached.
The Government announced in the Budget that the first results of a major new survey into how banks perform for small businesses will be published by the Federation of Small Businesses and the British Chambers of Commerce next month. Banks will be able to use the results to measure their progress towards becoming better banks for small businesses everywhere. The Government are very focused on that. We welcome that review, because we want to provide UK small businesses with a clear and credible way to judge how their bank compares with its competitors. We want Britain’s banks to do more to put Britain’s small businesses at the top of their priority list.
Hon. Members may know that the Government announced a package of measures designed to improve competition in the SME lending market, which included consultation on proposals to require banks to share more information on their SME customers with other lenders through credit reference agencies, levelling the playing field for challenger and non-bank lenders. Finally, the Government announced in the Budget that we would consult on whether to legislate to require SME lenders to release details of businesses that they reject for loans, so that alternative providers can discuss other options with them.
I am aware of the time, so I will conclude. I thank the hon. Member for St Ives for bringing this important issue to the House. I assure him that the matter continues to receive the highest level of attention from the Treasury and from Ministers more widely.
Question put and agreed to.