Money Advice Service

Baroness Coussins Excerpts

Thursday 12th March 2015 Lords Chamber

[Baroness Coussins (CB)]

My Lords, I am grateful to the noble Lord, Lord Stevenson of Balmacara, for securing this debate, and I congratulate him on his appointment as a financial inclusion commissioner. I must also declare an interest, as it is my pleasure to serve as president of the Money Advice Trust, the charity that runs National Debtline and Business Debtline. Some of the trust’s excellent work is funded, directly or indirectly, by the Money Advice Service.

As a strong supporter of free debt advice, I have been awaiting the outcome of the Farnish review with great interest and I, too, would welcome some clarity from the Minister on when the review and the Government’s response will be published. We might have had a much longer speakers list for the debate today if the review had already been in the public domain, and I regret that this is not the case.

It would be surprising if the review did not make a strong case for free debt advice and the benefits that it brings to debtors, creditors and society as a whole. This free advice is currently available through a whole range of channels. National Debtline and Business Debtline offer telephone and online advice, as does StepChange. An excellent face-to-face service is also available from local citizens advice bureaux and other locally based charities. The case for the value of free debt advice is clear—and “free”, of course, is the operative word here.

There is of course a large commercial debt management industry that charges for debt advice and debt management services. The bottom line is that these fee-charging companies are charging their clients high fees for a service that is available free from debt charities, which can be trusted to give the best, independent advice for each individual case. I hope that the Farnish review not only makes the case for independent, free advice but places this in the context of the need to promote free services over and above those of the fee-paying debt management companies to which all too many consumers currently turn.

The Money Advice Service also plays an important role in the co-ordination of debt advice, and I hope that the Farnish review will make the case that more consumers would benefit from telephone and online advice. I would certainly welcome this shift, but I must emphasise that this would not be to detract from the work of face-to-face advisers: far from it. A shift towards telephone and online advice would, in my view, help to preserve face-to-face advice for those who really need it.

While there is a useful role for the Money Advice Service to play in that level of co-ordination in the debt advice sector, we should also recognise the close partnership working that is already under way, in particular between the Money Advice Trust, Citizens Advice and StepChange. This partnership working increasingly extends to other organisations outside the debt advice space in recognition of the need for these services to be available to people in financial difficulty at the point of need in a wide range of venues and situations.

The Money Advice Trust, for example, is currently working with the Church of England to develop a resource to help parishioners raise awareness of free debt advice in their communities and to signpost these services where appropriate. We have also embarked upon an innovative partnership with Turn2us to link online debt and benefits advice through its “My Money Steps” tool, and we are exploring the potential for working more closely with food banks to make sure that people in financial difficulty receive the advice they need. We need to encourage the development of these new ways of working, and further innovations in this sector.

Money Advice Service research in 2013 showed that 8.8 million people in the UK are over-indebted. More recent trends show that consumer credit lending is expanding significantly, and the Office for Budget Responsibility predicts that the UK’s household debt to income ratio, which as I understand it is an aggregate measure of how much debt households have taken on relative to their incomes, is set to rise from 146% to 184% by 2020. This is significantly higher than its pre-crisis peak of 169% in 2008.

Furthermore, while expectations of a rise in interest rates continue to recede further into the future, we must none the less consider the impact on households with mortgages when it does eventually occur. Indeed, research last year by the Money Advice Trust and the Building Societies Association showed that 27% of mortgage payers are likely to fall into financial difficulty when interest rates rise. Many will fall into unmanageable debt as a result. Taking all these factors into account, it is clear that demand for debt advice is likely to rise in the future.

Noble Lords will be aware that the question of the appropriate level and allocation of the Money Advice Service’s budget is a central issue that the review has sought to address. The level of expenditure on some areas of the service’s work has of course met with controversy in the past. But if savings in some areas are to be made as a result of the review, I would strongly urge that consideration be given to a corresponding increase in the funding that is available to the service, but specifically for commissioning free debt advice services. Given the clear indications of future rising demand that I have described, an increase in funding for front-line free debt advice services would be a very welcome outcome of the review.

Financial Services Bill

Baroness Coussins Excerpts

Wednesday 28th November 2012 Lords Chamber

[Lord Flight]

My Lords, first, I congratulate the noble Lord, Lord Mitchell, on raising this issue and, as a result, getting something done about it, and on his research in the territory. Also, I greatly welcome the Minister’s response and I look forward to government proposals that address the problem.

I shall make one or two focused points. The right reverend Prelate the Bishop of Durham made the point that we used to have anti-usury laws. We used to have a money-lending licence. When I started my career, there were rules about the maximum rate of interest that you could charge. All that had been in place going back more than 100 years. I assume that it all disappeared with the big bang, but it is a failure of regulation that the problem has been growing and getting worse with technology, but no regulator, as far as I am aware, has been suggesting to this Government or the previous Government that it needed addressing.

It is in part for that reason that I have reservations about letting the regulator just get on with running it. There need to be written in law caps on the maximum rate of interest. They could be related to the rate of inflation, to deal with that obvious problem. I do not trust the regulator to get to grips with the problem by itself.

My next point is that it illustrates the shame that we go on turning generation after generation out of schools who are financially illiterate, who do not understand what they are taking on. I remember talking to a young lady at university and asking how she was going to fund herself. She said that she had so much by way of a student loan and the rest on a credit card. I said, “How on earth are you going to pay back the credit card?”. She said, “Oh, do you have to do that?”. It is astonishing that people simply do not understand finance. Until we get financial literacy into the national curriculum, people will go on being ignorant and unable to look after themselves adequately.

It is a moral issue. I object to usury. I am sure that if my noble friend Lady Thatcher were in the Chamber, she would speak more strongly than anyone in objection to usury. We dealt with it in the past; let us get on with dealing with it again.

[Baroness Coussins]

My Lords, I add my support to the amendment introduced by the noble Lord, Lord Mitchell. I declare an interest as president of the Money Advice Trust, which is a charity that helps people across the UK to manage their debts. It does that by offering free advice through the National Debtline and by supporting advisers in the free advice sector.

So far this year, the National Debtline has taken more than 15,000 calls already from people struggling to repay payday loans. In the whole of 2011, it took 10,000 calls for help with payday loans, so that represents a staggering growth rate. Indeed, over the past two years, there has been an increase of 268% in the number of callers asking for help on payday loans. A telephone survey conducted by National Debtline also showed that the OFT guidance is not being followed, notably the part that states that creditors should make a reasonable assessment of whether a borrower can afford to meet repayments in a sustainable manner. The same survey showed that 66% of clients said that their lender had not conducted an affordability assessment.

This is not the right time to go into detail about what the FCA rules should be, but I suggest that they should certainly include a mandatory breathing space, with a freeze on interest and charges, if people are experiencing financial difficulty and have notified their payday lender that they are seeking support from a debt advice agency. In practice, by contrast, there is evidence of letters and requests to cancel CPAs or to freeze interest and charges being ignored, and debt advice agencies bypassed. The recent Citizens Advice conference highlighted examples where payday lenders had routinely refused to engage with advice agencies, had not answered letters, had refused to freeze charges and had not stopped CPAs even when requested to do so. I have sat in as an observer on calls to the National Debtline and witnessed the distress of people in debt as a result of payday loans. The powers for the FSA being sought by this amendment would be a small but very important contribution to the prevention of yet more unaffordable debt that ruins lives.

[Baroness Kramer]

My Lords, almost without exception this House has spoken and is speaking with one voice on this issue. In the United States it is quite common, when an important piece of legislation goes through, to name it after its sponsors. Whether this is the Mitchell-Sassoon amendment or the Sassoon-Mitchell amendment, it will have a very big impact on people’s lives.

However, it is important that the FCA, in the language that is already in the Bill, has the powers to do the acts for which the amendment calls. An amendment such as this ensures that the point is highlighted—that it is understood and not lost—because the FCA will have a wide range of areas to address. In the Bristol study that was commissioned and which we will be reporting in the next few weeks, the FCA and the Government demonstrated a very high level of concern around this issue, and the need to get underneath it to really understand the dynamics.

The importance of ensuring that the clause is an enabling one was well illustrated by the noble Baroness, Lady Coussins, a moment ago. There are many very complex issues around this that will need very direct attention. The devil will be in the detail to ensure that the amendment is effective in the way that the House desires, and that it does not create the opportunity for loopholes. We are talking about an industry that will game legislation if it has the opportunity.

I will pick up the issue that was addressed by the right reverend Prelate the Bishop of Durham, because it is hugely important. Almost all of this will be for naught if we do not ensure that there are appropriate sources of credit for those who need it at a reasonable price. The issue that the House is facing today has been neglected over decades; it is a challenge that the Government are picking up. It means that the clauses have to stand together with those that lower barriers to entry and which enable the community—whether social enterprises, charities, businesses, local authorities or whatever—to come together and take the initiative to build up the sources of finance that exist in many other countries.

The noble Lord, Lord Mitchell, talked about the constraints on payday lenders in the United States. One of the most powerful constraints is that there are community banks where individuals can get credit on reasonable terms. That is a far stronger constraint on any payday lenders in the United States than legislation could be. That is what we need here: the opportunity for market constraint. However, I congratulate all sides on coming together to be effective for some of the most vulnerable people in our community.

Economy: Growth

Baroness Coussins Excerpts

Thursday 31st March 2011 Lords Chamber

[Baroness Coussins]

My Lords, the recent White Paper Trade and Investment for Growth contains one fleeting mention of the shortage of language skills. I declare an interest as chair of the All-Party Parliamentary Group on Modern Languages and urge the Government to strengthen their strategy by improving the UK’s language competence. None of the overarching objectives can be fully achieved without it.

UK companies do not seem to understand that the lack of language skills is an important barrier to growth. A survey in 2010 found that, across Europe, 33 per cent of businesses regard foreign language skills as “very important” when recruiting graduates, but the figure for the UK was only 5 per cent, with three-quarters of UK companies saying that they were “not at all important”. Can the Minister say what the Government can do to encourage businesses to invest in language training and to develop a better understanding of the benefits of language skills? We know that export businesses that proactively use language skills and the cultural knowledge that goes with them achieve on average 45 per cent more sales. Other research suggests that improving language skills could add up to £21 billion a year to the UK economy.

Another figure worth quoting, given the explosion in online sales, is that over 70 per cent of consumers require information in their native language in order to make an online purchase, while people who do not have good English are six times less likely to buy from an English-only site. It is self-defeating and inaccurate to think that English is enough. Only 6 per cent of the world’s population are native English speakers and 75 per cent speak no English at all. The relative amount of internet content in English is declining but that in Chinese is rising and there are more blogs in Japanese than in English.

Neither is English enough in the world of scientific research, which will inform commercial innovation. In China, there are 4,600 scientific journals, only 186 of which are published in English. Employers in the UK who are ahead of the game know that they do not just need people who can speak French and German, although these remain the most sought-after languages. Mandarin or Cantonese come next. With markets opening up in central Asia, Latin America and the Far East, employers also need Spanish, Russian and Arabic. If our school leavers and graduates are not able to offer these skills, employers will recruit overseas.

Sadly, our young people have less and less to offer in the way of language skills. Urgent interdepartmental work is needed between the Treasury, BIS and the Department for Education to make sure that the review of the national curriculum results in a better outcome for languages. Most state school pupils study no languages after the age of 14 and an OECD survey put Britain joint bottom of a league table of 39 countries in the developed world for the amount of lesson time spent on languages. This really is an important barrier to our potential for growth.

I ask the Minister also to speak to his colleagues in BIS to ensure that a further barrier is not created by abolishing the fee waiver for students spending a year abroad as part of their degree. This really would be a real own goal. Market reports consistently say that employers prefer to recruit graduates who have spent time living abroad as part of their course, whether they are linguists, engineers, lawyers or anything else.

It is ironic that we should have such a problem with languages when we have a hugely multilingual population. We should make more of this. Companies considering where to locate regard the availability of language skills as absolutely essential. The message about London’s linguistic diversity as an asset for attracting inward investment needs to be heard more loudly and proudly.

Finally, is the Minister aware of the EU report on the language industry itself, which is set to double in value to €16.5 billion by 2015? The report sets out ways for businesses, especially SMEs, to benefit from multilingual competence. Will the Minister encourage British businesses to take advantage of this potential for growth?