Budget Resolutions and Economic Situation

Justin Tomlinson Excerpts

Thursday 21st March 2013 Commons Chamber

[Justin Tomlinson (North Swindon) (Con)]

Given the time constraints, this will, obviously, be a bit of a whistle-stop tour. However, I will set out some of my Budget highlights and, with each one, something on my wish list to try to be constructive for the Government. First, I very much welcome the £10,000 personal allowance. As we know, that is a tax cut for 24 million people and 2.7 million people will be completely taken out of paying income tax. This is genuinely a reward for people doing the right thing.

Some excellent work by the TaxPayers Alliance has highlighted a chronic lack of understanding of the impact of changes to taxation in people’s own payslips. In this week’s The Spectator, I set out a request that when changes to pay-as-you-earn made by any future Government, of any colour, kick in, they should be explained on the employee’s payslip. In that way, we can get greater engagement. I know through my work on the all-party group on financial education for young people that because we now have so many direct debits and standing orders, people are disfranchised from their own bank accounts. Therefore, setting out the information I suggest will help.

I welcome the various measures to support business, such as the 20p rate of corporation tax and the £2,000 employment allowance. It will make a huge difference in the south-west, as 85,000 employers will gain and 40,000 will be taken out of paying national insurance altogether. Some 1.25 million private sector jobs have been created and a quarter of a million new businesses have started since we came to power. My constituency has seen the fastest increase in the number of start-up businesses in the south-west. It is also crucial that we continue to support businesses looking to export to emerging economies such as Brazil, India and China, so that we are not so exposed to the turbulence in the European Union.

I also want more to be done to help promote young entrepreneurs. We all support that principle, but young people face a challenge, as I find when I talk to business students. I was the only one of the 350 who studied business on my university course who ended up running their own business and employing people. When I ask business students whether they would like to run a business, all the hands go up and they are extremely enthusiastic; they have been enthused by “The Apprentice” and “Dragons’ Den”. When I then ask how many will do it, all the hands go back down, because they simply do not know how. When people choose to go to university or take on an apprenticeship—the number of which has increased massively—a clear, defined career path is laid out for them. If they tick the box, get the grades and pass the application process, that is what they will do. We need to do a lot more in that regard.

A couple of weeks ago, I set up a scheme with Swindon college to support a local charity, the Prospect hospice. Those who took part were each given £10 to raise money by trading in the Blunsdon market, a tough trading environment, and between them they raised more than £711. One team was so successful that the market has asked them to come back in the summer holidays to give it a go. Our town centre is looking to use the high street money provided through the Mary Portas scheme to set up pop-up shops, and has also made an offer to that team of very successful girls. Those who are interested might like to hear that they ran a 1950s tea shop-style café, dressed in 1950s clothes and played 1950s music; they understood customer service. My request is that we do more to set out clear career paths in business.

I welcome the good news on fuel duty. People have mentioned the 13p price difference—it is 59p if we use gallons, and sounds even more impressive. Whenever I use cutting-edge social media such as Facebook to conduct a “Fantasy Chancellor” poll and ask about the one thing people would do, fuel duty is always the most popular issue. I ask for no return to the 12 hikes in 13 years we saw under the previous Government. They regarded motorists as an easy hit, but the cost has a tangible effect on people.

The excellent news on beer duty is a credit to my hon. Friends the Members for Burton (Andrew Griffiths), for Nuneaton (Mr Jones) and for Leeds North West (Greg Mulholland). I am a proud member of the save the pub group and the all-party group on beer. I had a text from the wonderful Arkell’s brewery in my constituency, which very much welcomed the move. It is important to the sector.

[Andrew Griffiths]

I thank my hon. Friend for his sterling support for the campaign to scrap the beer duty escalator. Earlier, he mentioned the work of the TaxPayers Alliance. Will he join me in congratulating the TPA on its “Mash Beer Tax” campaign, and The Sun newspaper on its fabulous campaign to scrap the beer duty escalator?

[Justin Tomlinson]

Absolutely. I also commend the constructive and proactive way they lobbied politicians on both sides of the House, so that they realised what a benefit such a move would be to the local economy, as well as for those who enjoy the odd pint in their local pub. It is cause for rejoicing.

I have two further requests. A considerable number of pubs are starting to provide food as a mainstream part of their offer. More needs to be done to encourage hospitality and catering students to consider becoming landlords, as a lot of breweries are struggling to find younger landlords. Secondly, I urge the Minister to consider the excellent work of my hon. Friend the Member for Burton and to commission him to look more widely than the beer duty: to consider why we are losing pubs and what more we can do in that regard, just as we commissioned Mary Portas to carry out the high street review.

[Guto Bebb]

Is my hon. Friend aware that the increase in the personal allowance can be crucial for businesses such as public houses, which are often run by a husband and wife working in partnership? Our changes mean that such partnerships can make a profit of £20,000 without paying a penny in tax.

[Justin Tomlinson]

Absolutely. The industry can react quickly and provide flexible employment opportunities, and it is a major contributor to local economies across the country.

The Help to Buy scheme will provide £3.5 billion to help those wanting to get on to or move up the property ladder. I know that more details need to be considered, but we should think not only of the people who will benefit directly but of the huge numbers of people in the house building industry. Over the past 20 years, Swindon has been pretty much the fastest growing town, and a huge number of local residents are connected to that industry. They will welcome any measure to help restore confidence in the housing market.

We come up with these fantastic schemes, and I was challenged on local radio last night about whether this scheme would catch on. As entertaining as we all think we are, our wonderful debates in the Chamber often pass the public by. As the scheme comes into force in 2014, it would be nice to promote it in the annual council tax bill. The councils have already paid for the postage, so let us put a little information flyer in with the bill so that people can see what opportunities there are and whether they apply to them.

Finally, I want to talk about business rates, on which I would have liked a little more to have been done. Our high streets are struggling and business rates are becoming a bigger burden, with landlords lowering rents and so on. I was fortunate enough to become a member of the Public Accounts Committee, but one of my biggest disappointments is that that happened 24 hours after Starbucks and Amazon had their hearing. Amazon kindly came to meet me yesterday and it is fair to say that we rowed. Its actions over tax and transferring money to Luxembourg are disgraceful. The company is not operating on an even playing field. We have to investigate some form of internet consumer tax for such organisations, but with every single penny ring-fenced to subsidise the business rates of the traditional high street. If the high street struggles any more, Amazon will also struggle because the high street is the shop window. I have spoken to a number of independent retailers who provide the customer service—and consumers then simply pick up the phone and order from Amazon. Let us create a fair playing field for all retailers.

The Economy

Justin Tomlinson Excerpts

Tuesday 11th December 2012 Commons Chamber

[Justin Tomlinson (North Swindon) (Con)]

I congratulate the hon. Member for Croydon North (Steve Reed) on a powerful maiden speech—I cast my mind back to the nerves I felt during my first speech—which he delivered in an exceptionally articulate way. It is clear that his local government experience—championing the future of public service, along with understanding and delivering much needed improvements—will be a great asset to this House. I also congratulate the hon. Member for Rotherham (Sarah Champion), whose exceptional experience in children’s services will be a vital asset to us all in Parliament.

Let me turn to a few key messages in the autumn Budget that I picked up on, having spoken to a number of my constituents. On fuel duty, I pay tribute to my hon. Friend the Member for Harlow (Robert Halfon), who has championed the campaign with huge support across the country and among MPs. It was absolutely essential that we froze fuel duty, because it is the most tangible tax there is. We all pay all sorts of taxes, and although people will have a rough idea how much council tax, income tax or national insurance they pay—they will not know exactly—everybody knows exactly what it costs to fill up the car. That impacts on consumer confidence, which is something we desperately need to protect in this country, so this move by the Government was welcome.

I also welcome the further move on the income tax threshold. It is a principle of ours to ensure that work pays, and what better way to incentivise people than to leave more money in their pockets? By the end of the Parliament, those on the minimum wage will be paying half what they were paying in income tax when we came to power. That stands in stark contrast to the 3.9 million workless households we saw under the former Government. Some 24.4 million people will benefit from the changes we have made to the income tax threshold by an average of £247 per person, but I would like to see a further change. Whenever any changes are made to pay-as-you-earn—whether by this Government or future Governments —they should be shown on employees’ payslips. We get excited in these debates about such changes, but more often than not they fly past the public. If we are going to get the public to take ownership of the tax system, those changes should be displayed clearly. I welcome the move to introduce an annual tax statement. I was one of the 10 MPs who supported the private Member’s Bill on that subject. Any notification of changes to PAYE on people’s payslips would make a big difference.

I am also delighted to see further measures to support business. Before I became an MP, I was a small business owner in Swindon. We now have 4.2 million self-employed people in this country, which is a record number. That shows that we are truly open for business. The cut in corporation tax takes it down to the lowest rate in the G7, and the extension of the small business rate will make a huge difference to small traders. I would also urge the Government to continue to look at the principle of the rates system, because to a certain extent the golden goose has been killed. High street businesses in particular are facing further threats from internet companies, which benefit from not having high street rate bills to pay. That is something that we must take into account.

The £250,000 annual investment allowance will also make a huge difference. I know that my hon. Friend the Member for Dudley South (Chris Kelly) has championed that cause for a long time. The need for this measure reflects the fact that businesses are nervous. For the first time in history, businesses are holding more money in their current accounts than they are borrowing. That is partly because of the perception that they will be unable to borrow money, and they want to stay in control. I hope that the increase in the annual investment allowance will open up the coffers, and that the effects of that will filter through to the election.

[Mr John Redwood (Wokingham) (Con)]

Given the warm welcome in the House, particularly on this side, for all tax freezes and reductions, will my hon. Friend urge those on our Front Bench to do more of that, so that we can get the economy growing more quickly?

[Justin Tomlinson]

I thank my right hon. Friend for that important suggestion, which I endorse. We would all welcome such measures being taken whenever possible, given the financial constraints that we inherited.

I also welcome the extra investment in UK Trade & Investment in relation to exports. The Office for Budget Responsibility has recognised the challenges involved in exporting to the eurozone. Honda, the biggest employer in my constituency, has faced challenges in exporting cars to a declining market, although the UK market has experienced an 8.6% increase. We have seen our exports to emerging markets double, however, and the investment through UKTI will make a big difference. I have attended lots of events with the Government and with banks to encourage businesses to consider exporting to those markets, and that extra help to remove barriers will make a big difference.

I want to make a plea for a greater push promoting young entrepreneurs. The Government have launched the £2,500 start-up loans. I have been working with Young Enterprise, Virgin Media Pioneers and the National Association of College and University Entrepreneurs. Even the Scouts have a young entrepreneur’s badge now, and my wife and I had a very enjoyable evening helping to judge that. They even offered us free cake and cups of tea to try to influence our decision. I was the only one of the 350 students studying business at my university who went on to run their own business. I believe that that university education taught any entrepreneurial flair and risk-taking out of us. We need to encourage more young people who have boundless energy and enthusiasm, and enough cheek to question the accepted ways, to find new niche markets.

I have been working with New college and Swindon college in my constituency to try to set up further opportunities for young people. This will involve not only the traditional young enterprise scheme set up in the main foyer in which the students sell to their friends but the opportunity to set up a pitch in the local market. They will have a wooden table and do three days’ trading. If they are not set up by 9 o’clock in the morning, they will lose that day’s trading. Those who are successful will then be offered cheaper pitches in the summer holidays, after they have finished college, and we hope that they will be the next generation of entrepreneurs. Many famous business people, including Lord Sugar, Richard Branson and the founders of Marks & Spencer and the Superdry clothing brand, started on a market stall. If we can get those young people to take that risk, we can create the next wave of jobs, and I encourage the Government to do what they can on that front.

On the banks, we all welcome the fact that we still have record low interest rates. That is due in no small part to the fact that the tough decisions we have taken have protected our triple A credit rating. That has made a huge difference to businesses that are borrowing money and to mortgage holders. However, we still need to do more to encourage access to finance from banks. Whenever I talk to banks, they tell me that they have money and that it is available to borrow. Whenever I talk to businesses, they say that there is no such money. There is clearly a perception problem.

The Government should help to provide information on the funding that is available, whether from the Government, from the banks that say they have money or from the national loans guarantee scheme. I am told time and again that everything possible is being done to communicate such information but that it is difficult to get hold of the businesses that need it. That is not the case, however, because once a year the Government send out a business rates mailer to every business. It might simply say that they do not have to pay anything because the small business rate relief has been extended, but the Government still have to write to them to tell them that. My suggestion is that we should include something in that mailer—we have already paid the postage, so the taxpayer will be no worse off—outlining what funding is available through the banks and through the Government, what opportunities there are to employ and offer opportunities for apprentices and about the business mentor scheme. Some 40,000 business mentors are there to help and I have seen them make a big difference when I met Mentorsme, an organisation that has helped a number of businesses in my constituency. Let us use the business rate mailer to spread the opportunities that are available. Those measures will make a big difference to us all.

[Several hon. Members]

rose—

Financial Services Bill

Justin Tomlinson Excerpts

Monday 10th December 2012 Commons Chamber

[Stella Creasy]

I shall speak to amendments 78, 137 and 148, which deal with the role of the Office of Fair Trading. Before I do, I want to place on record my gratitude to Members in the other place who, along with the hon. Member for Chatham and Aylesford (Tracey Crouch) have been so supportive of the sharkstoppers campaign. I mention Lord Mitchell, Lord Kennedy, the Right Reverend Welby—I think that is the appropriate term; apologies if it is not—Baroness Howe and Baroness Grey-Thompson. They have all been fantastic in championing a measure that I know has widespread support across the country.

I also put on record my gratitude to many organisations that have been helping make the case for action on high-cost credit, whether it be R3, the insolvency practitioners, the co-operative movement and co-operative party, Unite, Community and the thousands of concerned citizens who been involved in part of the campaign. I thank the hon. Member for Chatham and Aylesford for her kind words and for using the term “tirelessly” rather than “tiresome”, which is how some people might have interpreted the doggedness with which we have persisted in campaigning on this issue. In that sense, this amendment and the damascene conversion of the Government to the need to act on the cost of credit is very welcome. Throughout this campaign, we have all said that when the Government accepted that we were right all along, we would be grateful and would take it within the spirit of cross-party agreement that something needs to be done about these companies and about the impact of debt on our constituents.

With that in mind and in genuine appreciation of the fact that this moment has happened, I now want to press the Minister, as have many others, about the nature of the amendment and what will happen in the next year. Many of us are concerned that there is still a window of opportunity driven both by the delay in the implementation of these powers for the Financial Conduct Authority until April 2014 and by the continuing pressures that many in our constituencies will face, which might mean a bonzer Christmas for many of the legal loan sharks.

We started to campaign on this issue because we could see that toxic mix in Britain of a crisis in the cost of living, of families struggling, having lost jobs or facing wage freezes in Britain and, indeed, of the lax regulation in the UK of the cost of credit. We know that those pressures have got worse, not better, for British families over the last couple of years, so we know that one in three of those families in Britain have suffered a pay freeze over the last 12 months at the same time as they have seen the cost of basics rise and continue to rise. We know that many consumers have borrowed about £2,000 on top of their secured debts—their mortgages—to try to make ends meet in the last year, but only a quarter of them have managed to pay that money back.

The concern I bring to the House tonight is that when we look ahead to 2013, many of those pressures will not just increase, but explode over the course of the next year. The consequences for many, particularly those in the poorest communities, will be severe. We know that the pressures on the cost of living are not evenly distributed in British society. We know that the poorest 10% spend up to a quarter of their incomes on basics such as housing, fuel and energy, and we know that the prices of those commodities will become higher, not lower, in the coming year. Today we heard from E.ON—the last of the big six companies to announce it—about the increase in the cost of energy that consumers will face in the new year. The companies’ average increase of between 6% and 11% means that the average annual household energy bill will reach an all-time high of £1,300 next year.

I started to campaign on this issue because I could see the impact of debt on my community in Walthamstow, in north-east London. It gives me no pleasure to say that over the past 18 months many Members on both sides of the House, representing a range of communities, have approached me to discuss cost-of living issues, but I also know that London is a harbinger of the pressures that are to come. I know, because I have seen research-based predictions that London rents will increase by 26% over the next five years, that unless we do something about the cost of credit—unless we do something to help those who are struggling with the everyday cost of living—we shall face a society in which debt is just a way of life, with all the consequences that that will have for people.

However, this is not just about the cost of housing or, indeed, the cost of energy. It is also about the everyday cost of getting to work, which is having a great impact in my local community. I have talked to people in Walthamstow who have managed to secure apprenticeships but are forced to travel around London because there are so few apprenticeships in my area. A travelcard covering zones 1 to 3 costs £35 a week. Only people who are able to live at home can afford to take the opportunity to become an apprentice earning £100 a week, and we now learn that rail fares are to rise next year.

Those are pressures on the working poor in our community, but so are changes in the benefits system. Given that there is no spare supply of housing, it does not take a genius to recognise that the 1,000 families in my community who have been told that their housing benefit will be capped in April will have to borrow to make ends meet and keep a roof over their heads. The pressures that the legal loan sharks have decided to increase are the pressures that the amendment seeks to address.

It is clear that these companies are stubbornly resisting what are now widespread concerns about them and the profits they are making. Last year the industry was worth £1.7 billion in the UK; it is predicted that next year one company alone, Wonga, will be worth £1 billion, and it is just one of more than 200 companies that are now operating here. Moreover, the companies are clearly targeting young people, including students, and they have begun to change the terms of their loans. We became aware this week that Wonga is now offering what are supposed to be short-term loans on a 60-day basis. As the Office of Fair Trading has pointed out, the companies are abusing even the most basic consumer protections in the industry. That is why we need the amendment as a starting point, but it is also why we need to look at what else the OFT can do in the year ahead.

If we allow the pressures on consumers and their cost of living to continue and do nothing to curb the legal loan sharks now, we shall see another year in which millions of people are pushed into debt by them. We already know that a third of payday loan users take out loans that they know they cannot repay, and that 50% of people who have taken out loans have missed a payment. Given the additional pressure that those people will face next year, it will be a disaster for Britain if we do not act, and that means that we should think about what the OFT itself can do. I hope that the Minister will tell us tonight whether he will support measures enabling action to be taken now.

We know that the OFT will present new proposals in the new year, and that will present an opportunity for change that could set the tone for the new Financial Conduct Authority. I agree with my hon. Friend the Member for Nottingham East (Chris Leslie) and my hon. Friend the Member for Harrow West (Mr Thomas)—who is not in the Chamber now—that there should be regular meetings with the FCA to consider the industry now, but let us use the OFT to put down those markers.

First, as was pointed out by the hon. Member for Chatham and Aylesford (Tracey Crouch), we must pin down the question of irresponsibility in lending. What is an irresponsible rate at which to lend to people? The irresponsible lending guidance should be redrafted to make clear precisely what the cap should be and precisely what constitutes consumer detriment, in terms of both duration and the amount lent and including the total cost of a loan. Secondly, it should be made clear that it is irresponsible for lenders not to use a real-time credit register and ensure that every loan is recorded.

[Justin Tomlinson (North Swindon) (Con)]

The hon. Lady is delivering a categorical and passionate speech about a very important subject, and she has just made one of the most important points that can be made about that subject. Does she agree that the sharing of credit information in the UK car industry has, to an extent, transformed what was a very murky market, and that lessons can be learned from that?

[Stella Creasy]

I pay tribute to the work that the hon. Gentleman has done in raising issues about debt and credit, and about the way in which companies such as this operate. We know that many of them use a get-out clause, arguing that they could not possibly have known that someone had eight or nine loans at the same time. That is partly because there is no register specifying rates of interest and the number of loans that people are taking out. The OFT should make it clear that that constitutes irresponsible lending, and that loans should be made on a real-time basis. It is no good for supposedly short-term credit to be provided on a monthly basis. I also agree with all those who have expressed concern about continuous payment authorities. I hope that, in the new year, the OFT will make it clear that we must end both the fraud and the debt that they cause.

--- Later in debate ---

[Damian Hinds (East Hampshire) (Con)]

It is an honour to follow the hon. Member for Walthamstow (Stella Creasy), and to speak in favour of the spirit of Lords amendment 78.

The problems of high-cost sub-prime debt are widely acknowledged. Although they have come much more to the fore through opinion-formers of late because of payday lenders, they are not, of course, new, and by extension—this is somewhat at variance with what the hon. Lady said—it is not new that Government are not capping the cost of problem credit. It worries me slightly that we use the term “payday” as a catch-all shorthand for all these problems, and I hope that the Minister will reassure us that we are not just talking about payday lenders.

Dealing with problems of this kind requires an integrated approach involving financial capability and the provision of alternatives for people who need access to credit, but it also requires regulation. Disclosure is not enough in this market, especially as it often involves very vulnerable consumers and the ready, easy availability of credit. It could be said that supply sometimes creates its own demand. Some people tend to opt not for the solution that best suits their needs, but for the most recent that they have seen. In seeking to address these costs, however, we need to look at costs in the broadest sense. This is not just about interest rate charges.

[Justin Tomlinson]

On the question of percentage charges, if we displayed everything in cash terms it would be far easier for even the most vulnerable consumer to make an informed decision.

[Damian Hinds]

Yes, total cost of credit information is a good way forward—although, ironically, that would please a lot of payday lenders because, relatively speaking, they would not look quite so bad.

This is not only about interest rates; it is also about ensuring that credit is eventually paid down, and about behavioural charges, which can be difficult to pin down under the annual percentage rate as they apply to some consumers, but not others. An APR cap on its own might seem like a panacea, but, as Members on both sides of the House realise, it is not. Unfortunately, there are ways around caps. The experience of some states in the United States where there has been a 30% cap on payday loans is that the rent-to-own sector gets a great boost, because money can be made in another way: by whacking up the base price of the goods.

If there is to be a cap—and I think there can be a place for a cap—we must talk about what sort of cap it will be. I have always argued that a blunt general cap is a bad idea, because it can only be set either so high as to make no difference or so low as to put some parts of the market out of existence entirely and thereby run the risk of driving more people into the unlicensed part of the market, where someone’s idea of a late payment penalty is a cigarette burn to the forearm.

Beer Duty Escalator

Justin Tomlinson Excerpts

Thursday 1st November 2012 Commons Chamber

[Charlotte Leslie]

Absolutely. My hon. Friend has made an extremely good point. A tourist’s picture of Britain always includes the beautiful and the great British pub. The trouble is that once such institutions have gone, they have gone for ever. We are currently overseeing the decimation of the keystones of our culture and heritage, which not only have social and morale value, but are massively important to our economy.

I am probably not the only Member present whose first job was in a pub. In my case it was the Fox, in the constituency of my hon. Friend the Member for Filton and Bradley Stoke (Jack Lopresti). I was not brilliant behind the bar, so I moved swiftly on.

[Justin Tomlinson (North Swindon) (Con)]

My hon. Friend is making a very interesting speech. She has just mentioned first jobs in pubs. Having spoken to representatives of my local family brewery, Arkell’s, I know that they are crying out for young people—graduates, and those with hospitality management skills—who have the potential to become pub landlords. The pub sector is very important for young people.

[Charlotte Leslie]

That, too, is a good point. More than a million people are employed in the pub industry in this country, and more than half of them are young people. Pub employment not only constitutes an important first step on the jobs ladder, but provides a great opportunity for career progression. People learn a multitude of skills that will be useful in future careers.

I think that the Government have done quite well. The appointment of a pubs Minister was a very good move—I am sure that we all wish to pay tribute to the previous pubs Minister, my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), for the work that he did, and to welcome the new Minister—and, having produced the Live Music Act 2012, localism and the right to buy, we are now making progress with minimum pricing. All that is good stuff. However, pubs are still closing at the rate of about 12 a week, and we need to do more.

Given that beer represents about 60% of sales in community pubs, it is not very surprising that the beer duty escalator is having such a dramatic impact. It is true that there are other factors, such as social and demographic changes and the fact that, as my hon. Friend the Member for Leeds North West pointed out, it is so easy to sell a pub and turn it into a Tesco—we have probably all seen that happen—and issues involving pub companies and pub ties also need to be considered. However, the escalator is a major component of the problem. Given that all the beneficial elements are being stripped away as pubs close, and that beer sales fell by 5.6% in the third quarter of this year, it is hardly surprising that the Treasury’s own figures show that the escalator is not doing what it is supposed to do and raising funds.

Finance Bill

Justin Tomlinson Excerpts

Monday 2nd July 2012 Commons Chamber

[Mr Gauke]

The hon. Lady asks what research we have. I am holding it in my hand: the document produced by HMRC, which sets out a thorough analysis. I urge her to read it and to see that it is far from speculative; it is a thorough piece of work, which shows that as a result of the 50p rate total income fell by between £2.9 billion and £4.4 billion and GDP was between 0.2% and 0.3% lower. There has been not just a loss of tax revenue, but a loss to the whole economy through lower productivity and lower economic activity.

[Justin Tomlinson (North Swindon) (Con)]

If Labour Members felt that the 50p rate was so good, why did they introduce it as only a temporary measure?

[Mr Gauke]

My hon. Friend is absolutely right to make that point. As I asked earlier, why did they wait 13 years to introduce it?

Financial Services Bill

Justin Tomlinson Excerpts

Monday 23rd April 2012 Commons Chamber

There are, as the Minister said, important issues in this group of amendments—absolutely, there are. For me, new clause 10 is one of the most important, but I commend them all to hon. Members.

[Justin Tomlinson (North Swindon) (Con)]

I shall speak briefly to a number of amendments that are inter-linked, because the protection of vulnerable consumers cannot be taken in isolation. A series of measures needs to be taken to protect those who need the most help.

Members on both sides of the House will support the principle of amendment 40, on the total cost of loans, but it is important that through the review we find a way of making it work. We do not want to push people into the hands of illegal loan sharks, and the review, which has been going on for 18 months now, needs to conclude so that we can start to make progress, but we need to look at all the variables, including the need to limit the amount of roll-overs.

The shadow Minister described how people might use such loans in exceptional circumstances, but there are two aspects to that. First, there are some people who, through consumer choice, might wish to take out such loans, so to my mind we should have compulsory credit checks. If people who can afford to service such debts make a consumer decision to be relatively inefficient with their money, that is up to them, as long as they can afford to do so, but if vulnerable consumers get trapped in a cycle of debt and need protection, a limit on the amount of roll-overs will be absolutely essential.

I talk to a number of high-street lenders—including The Money Shop—which look at people’s bank statements, but it is not unusual for people to have more than one bank account, and the reason I am so keen on credit checks is that although people often look after one bank account in an orderly manner, that is the one they present when applying for a loan, not the one that is in financial chaos.

[Nick de Bois]

My hon. Friend refers to the review, but alongside other points he has made, would it be worth considering lending techniques such as doorstep lending and similar?

[Justin Tomlinson]

My hon. Friend makes an important point. In previous debates, I focused my anger on the techniques of doorstep lenders, who build up a relationship with the consumer, pop by once a month and, over a cup of tea, suggest items for which they might want to borrow money, trapping them in a lifetime of expensive, high-cost debt. For example, they might pop round at Christmas to ask, “Have you organised your Christmas presents for your children?” The householder says, “No, I’m not sure I can afford it,” to which the lender replies, “No problem. We’re here. We can lend you that. It’s only £3 a week. I’m sure you’re going to be having relatives to visit, so why don’t you get your carpet sorted at the same time.” Those nudge-nudge techniques, which encourage people to take on high-cost debt, need to be looked at.

Amendments 37 and 55 seek to empower consumers, and there are important factors, such as the need to access impartial advice, that need to be looked at. I found through my work as chair of the all-party group on financial education that 91% of people who got into financial difficulty would have made a different decision had they known otherwise. Hindsight is a wonderful thing, but through our casework as MPs we see that some people make the wrong decisions and get themselves into difficulty. Of the three ways I would like to see that tackled, one is by the provision of easy access to advice through organisations such as the Consumer Credit Counselling Service, Citizens Advice and the Money Advice Service. To my mind, if a debt management service offers a high-cost loan, it should provide links to those organisations, just as when somebody buys a packet of cigarettes, there is a health warning on it. There is then no excuse. It relies on consumer choice, but if somebody chooses to, they can take up the advice.

It will also help if all consumers have financial education in the first place so that they understand the advice. In the case of the Money Advice Service, one needs to know something about the products in the first place. Obviously, face-to-face advice would be ideal. I would also like all loans to be displayed in pure and simple cash terms, so that every consumer can make an informed decision. I am sure that even Treasury Ministers would struggle to work out what is meant by an APR. I will not embarrass individual MPs by carrying out a test, as I have in previous debates.

Finally, I deal with clause 10. I was interested in the Minister’s comments about advice being given to consumers six months in advance. As we all recognise, that presents a challenge, because if somebody could predict what will happen in six months’ time, they would be very wealthy. The principle is right: we need to protect consumers from sudden changes. The evidence shows that the majority of people who fall into financial difficulties do so because of a change of circumstances such as the loss of a job, a family bereavement or a divorce. One could extend that to a sudden change in the cost of a loan because of the interest rates.

Although this is often derided, I think that we need to encourage a savings culture. If one has money in reserve, one is better equipped to deal with a sudden shock to one’s circumstances. I welcome the moves of the Nationwide building society for first-time buyers, because they are among those most at risk from a change in circumstances owing to a change in their job or in their interest rates, because they extend their borrowing to the absolute limit to get themselves on the housing ladder. Nationwide has introduced a linked savings account into which people have to put regular savings for the six months to a year that they are trying to get their first mortgage. It encourages them to carry on doing so, so that if interest rates and the cost of their loan go up suddenly, they have a financial buffer. More could be done to encourage the industry to promote such products.

[Katy Clark]

It is a pleasure to speak to new clause 12, which I tabled along with many other hon. Members. It would require the Financial Policy Committee to

“carry out and publish a review of the operation of consumer prepayment schemes to consider whether existing protection for consumers is sufficient.”

It would require the report to include

“an analysis of whether consumers of prepayment schemes should be made preferential creditors for the purposes of the distribution of the realised assets…in the event of insolvency.”

I come to this issue as a result of the experiences of my constituents when the Farepak Christmas savings club collapsed on 13 October 2006. Many hon. Members will be well aware of the background to the Farepak issue, which has been raised in this Chamber on a number of occasions. More than five years after the collapse of the company, almost none of the 120,000 people who lost out have received a penny of their money back. Those 120,000 savers lost about £38 million. Some money was distributed as a result of a response fund, which was set up in the lead-up to Christmas 2006, but the people who lost out have not received any money from those who are dealing with Farepak’s assets.

In my constituency, hundreds of families were affected. I pay tribute to my constituents Louise McDaid and Jean McLardy, who, along with many others, set up the Farepak victims committee, which continues to campaign for justice for those who lost out as a result of Farepak’s collapse.

--- Later in debate ---

[Stella Creasy]

Borrowing has always been a part of the British way of life and part of our debates in the House as long as I have been an MP, but as we argue how best to tackle the nation’s debt, we forget at our peril the need to help our constituents to manage their debts. As the Minister pointed out, amendment 40 is our third attempt to help our constituents to manage their debts and to give them the kind of protections from such toxic credit that others around the world take for granted.

I hope I can convince the Minister that this is not a political whim, but a matter of deep importance to many who are struggling with such companies, not just in my constituency, but in constituencies across the country. If he is not convinced, I urge him to come to one of my surgeries, or to come with me down my high street, which now has 16 such companies, to see the problem and understand the urgency of action. I am sure the hon. Members for Enfield North (Nick de Bois), for North Swindon (Justin Tomlinson) and for South Swindon (Mr Buckland) have the same problems in their constituencies. The amendment is about urgent action. Too many in our communities cannot afford to wait for the outcome of research in the summer, let alone for future legislation at some unknown point.

Let me start by finding common ground. I welcome the development of the Financial Conduct Authority and its role in managing consumer credit, and the statement that it will be more willing to intervene to address problems with financial products. The question we must address today—it is what the amendment speaks to—is whether the new authority will have the teeth to deal with the problems our constituents face and act in their interests. The amendment is designed to end any uncertainty on that by giving explicit authority to the FCA to act on one aspect of our consumer market that many hon. Members are concerned about. I want to put on record my thanks to those on both sides of the House who have co-signed the amendment. That speaks to the disquiet that many have that no alternatives have been put forward.

We know why there are problems, but it is worth repeating the reasons. As the costs of food, energy and transport soar and as unemployment continues to bite family households, and as wages freeze, British families are struggling and borrowing to manage their daily needs. Aviva’s work shows that UK families owe on average £10,500, which represents nearly half the average annual household income of £23,000. That level of debt will only increase, because there is no end in sight to the financial pressures people face. One in six of our nation is now a “zombie debtor”, which means a person who is able only to service the interest on their debt and not reduce it, and a third of us have no savings at all.

Since the start of the recession, mainstream lenders such as high street banks have been much less willing to lend money, but the truth is that for many, banks are making things worse, not better. Average overdraft fees in this country have simply been reduced from £25 to £12 a day, which is still a huge sum for people who have no money. Credit card rates have soared by 2% recently, taking the average interest rate to its highest level in 13 years, despite the Bank of England base rate remaining at 0.5% for 25 months. It is little wonder that many people are turning to the high-cost credit market to make ends meet.

Last year, the payday loan sector in this country was worth £1.7 billion, a fivefold increase in a year. Research by R3 tells us that nearly 4 million people will take out a payday loan in the coming months alone. The annual percentage rate—it is a misleading term, but it is still worth looking at—can begin at 444% and escalate to 16,500% or more. Home credit lenders, about which the hon. Member for North Swindon has warned us, can charge £82 in interest and collection charges for every £100 loaned.

It is little wonder that Payplan, a debt charity, is seeing a deluge of people in financial difficulty as a result of the payday loan market. It says that nearly half its clients had six or more payday loans in the last year alone. More than half owe more than £500 to those companies and, crucially, 61% had more than one loan at a time. Eighty-six per cent. of Payplan’s clients used their loans for basics such as food, transport and the everyday costs of living, not luxuries.

Such lenders are exploding across our towns and cities. Dollar Financial underpins Money Shop. Money Shop had just one store in 1992; it now has 450 shops across the UK. There are two in my high street in Walthamstow. Meanwhile, our friends at Wonga have secured £73 million from the Wellcome Trust to expand their operations; the Provident Financial share price has risen by 16% since the comprehensive spending review; and BrightHouse, which provides hire purchase agreements at hugely extortionate rates, has announced plans to nearly treble the number of stores it operates in our country.

The FCA has many toxic practices in the market to address. As the high-cost credit industry admits, a quarter of home credit users and a quarter of payday users have no other form of credit. As consumers, therefore, they do not have the power to shop around for more affordable forms of credit. That many of those firms do not do credit checks means that customers who borrow regularly from them cannot build up a track record to show to other lenders to prove that they are credit worthy so that they can borrow at more acceptable prices.

High-cost credit companies have high fixed costs, so they make their money by repeat lending, meaning that their entire business strategy is geared towards repeat borrowing and the “rolling over” of loans, about which many hon. Members are concerned. Thirty-two per cent. of payday loans are refinanced—the average is twice—and 15% of doorstep loans are refinanced before the end of their term. All hon. Members know what “rolling over” means: it means that interest can be charged on interest accrued as well as the initial amount loaned.

Such companies also engage in aggressive marketing campaigns to encourage that repeat borrowing, persistently offering customers the opportunity to extend their loans and take out new ones. There is strong anecdotal evidence that many of those companies lend consumers more money than they can afford to pay back in a month to ensure that they have to roll over their loan.

Above all, the rates charged by high-cost credit companies often do not reflect any economic rate, meaning one that reflects competition in the market or the cost of lending. That is why rates vary so substantially, from 4,500% with Wonga to a mere 2,500% with Uncle Buck, 1,700% with Kwik Cash or 1,200% with PaydayUK. There is simply a lack of competition in the market to drive the price down in the way Ministers expect.

[Justin Tomlinson]

There is a lot of competition, but because people cannot understand APRs, it is irrelevant. If repayments were displayed in cash terms, competition would kick in and help consumers.

[Stella Creasy]

The hon. Gentleman slightly pre-empts me. I was about to say that the doorstep market, 67% of which is owned by Provident Financial, is not competitive. Nevertheless, his point about APRs being difficult to understand is well understood.

The amendment is not a panacea. We need total cost caps on credit charges so that consumers have an explicit amount beyond which the cost of any loan will never go—interest rates, administration charges and late repayment fees included. I also agree strongly with the hon. Member for North Swindon about financial education and investment in debt advocacy services to give consumers help to negotiate with creditors and the support needed to make good decisions.

We also need an expansion in alternative sources of affordable credit through credit unions and social finance. The idea that the market will somehow reduce prices where there is disparity between the consumer and supplier belongs in the textbooks, not real life. We also need a proactive regulator to ensure effective competition and protection against consumer detriments. The amendment would address those problems and provide the opportunity, presented by the FCA, to take action as quickly as possible and to prevent the problems in our communities created by these loans from becoming worse.

I agree with the Chair of the Treasury Committee, who said about replacing the FSA:

“The creation of the FCA is an opportunity to create something much better. If we are not careful, the FCA will become the poor relation among the new institutions. But it is the one that will matter most to millions of consumers.”

However, for the FCA to be that better institution, its power to act on toxic financial products needs to be made clear. The financial services practitioner panel stated:

“We acknowledge that it will be useful for the FCA to have tighter powers to control any product that can and does do harm.”

The amendment is in that spirit. It would give explicit powers to the FCA to cap, where it sees appropriate, the charges firms can apply.

I understand that the Government have been briefing people that those powers are not needed because the FCA already has product intervention powers. The Minister seems to think that that could happen, but he must address two questions: first, can it intervene; and, secondly, are its powers of deterrence or sanction appropriate to the toxicity we all want to prevent? Clearly, there are good grounds to fear that the first is not the case. In his speech today and in the document setting out the FCA’s powers, there are somersaults and loops worthy of the Olympics gymnastics team. The document states:

“The government has said that the FCA will not be an economic regulator in the sense of prescribing returns for financial products or services. The FCA will, however, be interested in prices because prices and margins can be key indicators of whether a market is competitive. Where its powers allow, the FCA will take into consideration more positively the cost of products or services in making judgements about whether consumers are being fairly treated. Where competition is impaired, price intervention by the FCA may be one of a number of tools necessary to protect consumers.”

I am sorry to disappoint the hon. Member for Vale of Glamorgan (Alun Cairns), who is not in his place, but that is part of the Government’s thinking.

The problem, however, is that the Government’s thinking is fuzzy. Lawyers in this area have highlighted the lack of clarity about whether the FCA is intended to be a price regulator and about whether the legislation proposes such a thing. John Odgers, the lawyer for Which?, highlighted that point in his written evidence to the Treasury Committee:

“It seems to me to be desirable that a power of price intervention should be spelled out, if it is intended. Financial services regulators have not in this jurisdiction previously exercised that type of power, and might in future be loth to do so without a specific statutory authority, as the use of such a power would be particularly likely to attract a challenge.”

The Minister should talk to the OFT. It is particularly well placed to tell the FCA about the problems that the fear of legal scrutiny places on consumer credit regulation. As it admitted, that fear has defined its work in this field and its lack of action against these firms. It has feared the cost to the public purse of unsuccessful legal actions. In his evidence to the Public Accounts Committee on 5 September last year, the chair of the OFT stated that

“there are companies now pursuing particular practices that 10 or 15 years ago perhaps would not have employed the most expensive lawyers and taken every point under the sun. Now, however, that is happening with an increasing number of cases where you might have otherwise expected the party to throw in the towel after the first round. They do not do that, and therefore we have to take very careful assessments. We have a particular case at the moment that I have in mind where, much to my surprise, the parties have involved the most expensive City lawyers, and we know perfectly well that we are at substantial risks on costs if we lose.”

It is little wonder that Google has a stronger track record on taking action against such adverts and firms than the OFT, which, in the past eight years, has managed to take action against one brokerage firm only.

--- Later in debate ---

[Sheila Gilmore]

I think financial education is extremely important, but on its own, it will not necessarily equip people to avoid the enticements of the lenders.

[Justin Tomlinson]

I cannot resist intervening on this specific point. With financial education, consumers can make informed decisions. If people are financially savvy and well financially educated, they can carry out the actions that they would otherwise have to pay a debt management company to do.

[Sheila Gilmore]

That is indeed the case. I am not suggesting that we should not have financial education. What I am suggesting is that we also need regulation. My hon. Friend the Member for Walthamstow eloquently outlined the various forms that high-cost credit takes, so control over it is also important.

Jam Jar Bank Accounts

Justin Tomlinson Excerpts

Tuesday 28th February 2012 Westminster Hall

[Damian Hinds (East Hampshire) (Con)]

It is a great pleasure to see you in the Chair this afternoon, Ms Osborne.

For most of us, using a current account is as natural and normal a part of modern life as indoor plumbing, but it was not always so. Many hon. Members will remember their parents coming home with weekly wages in cash, in an envelope with little holes in it so people could count the money when it was given to them. On arrival at home, the cash would be divided into amounts for the rent, the bills, housekeeping and, hopefully, savings for an unexpected bill, school uniforms or Christmas. The sub-divided amounts would typically be kept in separate boxes, tins or jam jars, from which this debate takes its title.

Most households have changed a lot since then, and there are many advantages to that evolution. For most jobs now, people need a bank account to accept their salaries or wages, and people also need an account to pay the rent or the mortgage. People’s money is also safer in a bank than on the kitchen windowsill. As payments through direct debits and standing orders cost less for financial institutions to process, bank accounts give people access to better deals. A bank account also becomes a gateway to other financial services.

Much progress has been made over the last number of years on that front. The number of people without a transactional bank account, including a basic bank account, fell by about a half between 2003 and 2010 to just 1.5 million households.

As I said, there are many advantages to the transition, but there are also some drawbacks. For a start, there is loss of control, particularly with things such as direct debits. Although people set them up, they happen subsequently without people actively having to do anything.

[Justin Tomlinson (North Swindon) (Con)]

My hon. Friend has secured a fantastic debate.

Our extensive research in my all-party group on financial education for young people highlighted loss of control as a particular problem. Some 91% of people who got into financial difficulty did so because they kind of lost control, and my hon. Friend has highlighted exactly why that is happening.

[Damian Hinds]

My hon. Friend goes right to the heart of the matter. There can also be a feeling of being rather flush on payday and a danger of people not making provision for unexpected, or sometimes even expected and known, subsequent liabilities.

Although most of us enjoy free in-credit banking, nothing in life is free; there is a cost to operating bank accounts. The point made by my hon. Friend the Member for North Swindon (Justin Tomlinson) also goes to the heart of that issue. The provision of free banking relies on people making mistakes and incurring penalty charges. Research for the financial inclusion taskforce has shown that low-income families that move to have a bank account in order to save money through direct debits and so on found that those savings were entirely wiped out by penalty charges, which averaged £140 in the first year. That combination of factors, as my hon. Friend says, can lead to people tripping into debt, which can then spiral. I mentioned people who do not have a transactional bank account, but many choose to manage in cash even if they have a bank account.

Communities and Local Government

Justin Tomlinson Excerpts

Tuesday 20th December 2011 Commons Chamber

[Justin Tomlinson (North Swindon) (Con)]

Thank you for this opportunity to raise the subject of financial transparency in local government, Madam Deputy Speaker. I would also like to extend my thanks to the TaxPayers Alliance and the Local Government Group for providing some of my research notes.

This is an important issue, because we would all agree that we should be doing everything we can to ensure that council tax is affordable, especially against the backdrop of pressure on front-line services, particularly adult social care, which is piling on costs for local authorities. With that in mind, I welcomed the Secretary of State’s announcement in June 2010 calling on councils to provide financial transparency by publishing online information about spending over £500 by the end of January 2011; all councils except Nottingham city council have now done so. Such financial disclosure will act as a trigger, enabling local taxpayers to see how councils are using public money, shine a spotlight on waste, establish greater accountability and efficiency, open up new markets, and improve access for small and local businesses and the voluntary sector.

To strengthen that, the Government published their “Code of recommended practice for local authorities on data transparency” in September 2011. The code stipulates that the provision of public data should become integral to local authority engagement with residents, so that it drives accountability to them, it should be promoted and publicised, so that residents know how to access it, and it should be presented in a way that encourages residents to use and compare such data. Despite all that, however, we have not been overrun by a fully mobilised army of armchair auditors seeking to identify savings. This is a real opportunity that has been missed. To my mind, that is because although a vast amount of data has been put into the public domain, much of it is hard to comprehend.

I believe that the focus should be on the quality rather than the quantity of what is available. Three examples highlight this. First, most councils publish their expenditure to comply with the guidelines, but that does not necessarily mean that the publication is clear. Individuals are therefore often unable to challenge expenditure. Secondly, we have seen examples in which, when the data are printed off, font size 2 is used. Those data are technically accessible, but they are not exactly readable. Thirdly, the information is often hidden away on websites. A good example is provided by Birmingham city council. To access its data we have to go to the homepage, then click on “Council and Democracy”, then on “Services”, then on “Featured Services”, then on “Corporate Resources Directorate”, then on “Invoices and Payments”, and then on “Payments to suppliers over £500”. The process takes us through seven different pages, and it is not signposted in any way. The information would be very hard to find without going through the DirectGov site—or being Columbo. Chris Taggart, the founder of OpenlyLocal.com, has said:

“Public sector data is still being treated as an asset to be sold, rather than an underlying infrastructure of a modern democratic society, and with this approach people and the innovators who seek to empower them are marginalised and disenfranchised.”

There are, however, many good examples of local authorities providing data in innovative and eye-catching ways. Examples are Kensington and Chelsea, and Northamptonshire, which map the data so that residents can understand at a glance where the money goes. The Chartered Institute of Public Finance and Accountancy says that councils should set out reasons for particular spending decisions so that a more informed judgment can be made. It also highlights the need for effective feedback mechanisms, so that people can comment on spending and have their views taken on board.

Information needs to be accessible, transparent and understandable. I therefore welcome the five steps to fully open data that are set out in the code, but they need to be more robustly enforced. Guidelines could be altered to ensure that local authorities published their expenses in a comprehensible manner. A number of small and medium-sized enterprises are also working with open data, including OpenlyLocal, Spotlight on Spend and Armchair Auditor. Those private enterprises are all developing new ways of presenting council data. I would urge central Government to encourage local government to make use of such sites to break down its spending and make it more easily digestible and comparable.

I also have a recommendation. I would like to use incentives to encourage residents to become that army of armchair auditors. There is a fear that any savings that residents identify will simply disappear back into a council black hole. Perhaps 50% of the savings could go back to the council for it to spend as it wished, with the other 50% being spent on the front-line service of the resident’s choice. That could involve improving the local school, the local community library or a local sports club. This could be processed by a committee of back-bench councillors and finance officers, who would weed out the majority of suggestions. Probably 95% of the expenditure identified would be justifiable; it might just have been badly explained on the council website, for example. The remainder of cases could be passed on to the lead member for finance to bank, which would help the taxpayer and improve front-line services. CIPFA has also pointed out that when expenditure is found to be justifiable, a letter should be sent to the resident to explain what the money is being spent on.

A number of arguments have been made against this proposal. Some councils have said that they would be embarrassed if residents found that they were not spending money efficiently. I say that they should embrace that, because if a saving is identified, the council will have the opportunity to spend the money on something that people will reward it for. Nottingham city council says that the process would cost too much money. I do not think that that is an excuse when there is so much pressure on council tax bills. It has also been suggested that it would be too difficult to provide answers, but I find that unacceptable. Surely someone is signing off those budgets, and therefore owns them. A further argument is that much of this would involve one-off expenditure, but I believe that local authorities should still learn from such experience. This is a real opportunity to enthuse local residents and to deliver much-needed savings.

Summer Adjournment

Justin Tomlinson Excerpts

Tuesday 19th July 2011 Commons Chamber

[Justin Tomlinson (North Swindon) (Con)]

Before turning to the exciting subject of Swindon town centre regeneration, may I congratulate the hon. Member for Inverclyde (Mr McKenzie) on his excellent maiden speech?

We in Swindon have had our challenges. For the past five years there has been an annual drop in footfall in the town centre of about 22%. Swindon has dropped 10 places to 65th in the league table for the best places to shop, with our neighbouring competitors Bristol in 12th place, Reading in 15th, Bath in 22nd, Cheltenham in 27th and Gloucester in 107th. In 2010, 17% of retail units were empty and local Labour politicians had seemingly given up on any hopes for town centre regeneration. But fear not: all is not doom and gloom, because we have seen some dramatic recent improvements.

The local council has introduced cheaper car parking, focusing on a flat £2 for four hours. That has reversed the fall in footfall; there is now a 10% increase. Crucially, there has been a significant increase in dwell time as well. Instead of shoppers popping in to do one task, such as banking, they are now staying and spending. Café Roma in the Brunel centre has reported an 18% increase in its business, and I salute it for helping refuel our shoppers. The new £10 million central library has been delivered on time and on budget. There has been significant private sector investment, which shows that there is a belief in our town centre, with a £20 million investment in the Parade, and new BHS, Topshop and River Island stores opening. The dirty old canopies have been removed from the Parade and replaced at the Brunel centre, and we have a refurbished Debenhams. Some £2.8 million has been invested in public open space, improving the shopping experience to Canal walk, Regent street and Wharf green.

In Swindon, the town centre business improvement district company, which is responsible for helping traders improve their business, is making a real difference, such as through marketing support for retailers, the town centre website, the four-page monthly promotional newsletter in the Swindon Advertiser, the events it organises—including the 2010 Christmas campaign, partnered with Walt Disney World, when 20,000 visitors came to the turning on of the Christmas lights—and additional street cleaning and security. I wish those people the best of luck in their re-election campaign for a further five-year term in early 2012. There has also been a significant fall in the number of empty units. The vacancy rate in the Brunel shopping centre is now only 4%.

Turning to the future, as developers once again gain confidence and access to funding, it is essential that we are first in the queue to secure further regeneration, in particular for Union square, a £350 million scheme which is one of the largest non-Olympics construction programmes in the past 10 years, and for the College site, which was delayed at the last minute due to Labour’s wrecked economy. To help achieve that, Swindon borough council set up the arm’s-length urban regeneration company Forward Swindon.

We must also embrace the Mary Portas high street review. In particular, I fully support Mary’s mantra that customer service is king. For example, the Forum, an independent clothes store in the Brunel centre, has traded from strength to strength for over 20 years. It has managed to survive the economic cycles and relentless competition as it focuses on providing an alternative with exceptional customer service.

We can all play a part in delivering Swindon town centre regeneration. As the local MP, I will continue to champion all that is good about Swindon, and through my work on the all-party parliamentary groups on retail and on small shops, I will continue to push opportunities for retailers. Swindon borough council must remain committed to town centre regeneration as set out in the central area action plan. Local traders must continue to focus on customer service and offering alternatives to our neighbouring competition. Finally, as local residents, where possible we need to continue to support and use our town centre, building on the encouraging recent increase in footfall.

Finance (No. 3) Bill

Justin Tomlinson Excerpts

Monday 4th July 2011 Commons Chamber

[Mrs Chapman]

That is an excellent point, with which I shall finish my remarks. I am aware that many colleagues would like to contribute and, having heard my hon. Friend’s comprehensive speech, I will allow others to do so.

[Justin Tomlinson (North Swindon) (Con)]

I welcome the opportunity to debate this new clause. I have worked with the hon. Member for Walthamstow (Stella Creasy) on a number of occasions to highlight the need to protect the most vulnerable people in society, and we have been supported by hon. Members from both sides of the House. Let us be clear that a consensus is essential, as has been said by the hon. Member for Scunthorpe (Nic Dakin) and my hon. Friend the Member for Macclesfield (David Rutley). This is an extremely complex and challenging issue, and although we all agree that action must be taken, we need to be careful not to make the situation worse. I will set out a number of reasons why that could happen.

The new clause would require the Government to review how taxation could be used to penalise high-cost credit that is detrimental to consumers and competition. However, the current consumer credit review is examining all the options through which we can hope to secure a measured and effective response. I first wish to highlight the need to use credit reference companies, because it is unacceptable that so many of these loan companies do not even simply check whether the person borrowing the money can actually service the debt. We would all agree that we are not against people borrowing money if that is what they wish to do, but they should have the opportunity to be able to service that debt. Secondly, we need to limit the number of customer extensions and roll-overs, as a number of hon. Members have said. It is unacceptable that people can be trapped into a cycle of increasingly expensive debt. Thirdly, there needs to be a cut-off point, when fees and the interest stop being accumulated. Too often we have seen people borrow a relatively small sum that has built up over many years. Many horror stories have been related in previous debates.

[Mr Robert Buckland (South Swindon) (Con)]

Does my hon. Friend agree that there has been far too much of a rush to litigation by credit companies and that a far better approach would be to seek mediation before pressing the button to go to court? Such an approach would relieve a lot of the burden and pressure on the hard-pressed consumers.

[Justin Tomlinson]

My hon. Friend makes a very important point, with which I absolutely agree. Help should be provided at the point where we freeze that debt, and there should be an examination of the reasons why a consumer was unable to service the debt before that debt gets even further out of control.

Another crucial element is to make sure that those who can pay early are not penalised for doing so. That would mean that if circumstances change to benefit them, they would be able to break away from high-cost lending. A number of hon. Members have mentioned the need for there to be greater access to credit unions, and I know that my hon. Friend the Member for East Hampshire (Damian Hinds) has highlighted the issue on a number of occasions. Interestingly, and aptly, the hon. Member for Darlington (Mrs Chapman) made the point that we should be encouraging those organisations that will lend with the consumer’s interest at heart.

The particular issue I wish to discuss, which was mentioned by my hon. Friend the Member for Chippenham (Duncan Hames), is the need to examine the techniques that are being used. In previous debates, I have directed the majority of my anger at doorstep lenders and their nudge-nudge sales techniques. They build up personal relationships, face to face, in the homes of vulnerable consumers, suggesting ways in which people can borrow money. For example, in the run-up to Christmas the lender will ask people whether they have organised the Christmas presents for their children, the consumer will say that they are not sure whether they can afford them, and the lender then says, “It’s lucky I’m here. Just add another £3 a week and you can get the presents that your children want.” These lenders continuously build up people’s dependency on high-cost lending, so we really have to look at these techniques.

--- Later in debate ---

[Stella Creasy]

Is the hon. Gentleman saying that it is not acceptable for banks to do what he just described? What does he make of the evidence suggesting that one of the challenges in this market is the fact that a quarter of their customers cannot borrow from banks, so even if they wished to use unauthorised overdrafts, they could not actually do so and the only source of credit available to them are predatory lenders such as Wonga?

[Justin Tomlinson]

Absolutely, and that highlights my first point about using credit reference checks. These people should not be getting money from high-cost lenders. Many of the more reputable high-cost lenders will not lend to them, but many of them do and prey on these people—that is particularly true of the doorstep lenders. We have to try to ensure that more people have access to the affordable banking arrangements—the credit union arrangements—but we must not fall into the trap of thinking that the banks always get things right because, as in the example I just gave, they can prove a lot more expensive—

[Stella Creasy]

indicated dissent.

[Justin Tomlinson]

The hon. Lady may shake her head, but my interest lies in ensuring that people get the clearest information and the cheapest possible price. I will not defend any organisation that is going to exploit the most vulnerable people.

Unsurprisingly, the final item on my tick-list is the need for financial education. I chair the all-party group on financial education for young people, and I thank the 224 Members who are now signed up to the group. People do not understand APR and, as I have argued, it needs to be removed and replaced by a transparent approach. In addition, we need consumers to be able to understand the implications of what they are signing up for, its true cost, how to source alternatives and the best way to address the situation if they get into difficulties.

I am conscious of the time so I will conclude. We are all agreed that action is needed—nobody, from either side of the House, disputes that. I welcome the consumer credit review, but we must not fall into the trap of a quick fix to chase political headlines which simply makes matters worse. We need a measured and wide-ranging response that puts the vulnerable consumer first. Let us not chase a fix that makes things a hell of a lot worse for the most vulnerable people.

[Jon Ashworth (Leicester South) (Lab)]

May I commend my hon. Friend the Member for Walthamstow (Stella Creasy) for her tenacity in pursing this issue and say that her speech was a tour de force? Equally, I commend her for getting this issue discussed on Twitter, as this must be the first new clause on a Finance Bill to have generated this much interest on that site.

I wish to make only a few brief remarks, because a lot of what I wanted to say has been covered by my hon. Friend the Member for Darlington (Mrs Chapman), in particular, and by some Members on the Government Benches. Early on, I want to pick up on one point made by my hon. Friend the Member for Walthamstow in her speech and at business questions last week, which is the suggestion that some funny business is going on and that the Government are deliberately delaying making a decision to help the Deputy Prime Minister at the party conference—[Hon. Members: “Rubbish!] Some hon. Members are shouting from a sedentary position, so I would be grateful if the Financial Secretary, who will, I presume, respond to the debate, could guarantee that the Deputy Prime Minister will not make an announcement on this matter in his conference speech. That would help Opposition Members—[Interruption.] I invite the Financial Secretary to make a few remarks on that point in his closing speech.

There is some consensus on this issue on both sides of the House. I was not a Member of Parliament when it was debated in February, although I have read many of the speeches. Many Members, on both sides of the House, take the issue very seriously—and rightly so. Before the general election campaign, the then Leader of the Opposition took it very seriously. When he was rebranding the Conservative party, he did not only hug hoodies and huskies. The party launched a campaign about resisting—I hope this is not unparliamentary language—your “inner tosser”, which encouraged people not to fall into the trap of personal debt that we have discussed. At the time, the current Prime Minister said that—and I paraphrase—although the campaign was provocative, we needed to do something about personal debt. The Opposition agree.

Today I visited a money advice centre in my constituency to talk about some of the issues faced by many of my constituents who are getting themselves into trouble. I was told stories about how Wonga and quickquid.com target many vulnerable people in my constituency. Members might not be aware that my constituency contains some of the most deprived estates in the country and we have had many examples of such companies targeting people such as single mothers, as in the cases mentioned by my hon. Friend the Member for Darlington, when they have no choice but to sign up to such deals. Such people end up in great difficulty.

Another issue mentioned at the centre, although it does not fall within the narrow confines of the new clause, was illegal loan sharking. The problem is that many people who find themselves in deep trouble through legal loan sharking feel that they have no alternative but to turn to illegal loan sharks. I hope we will be able to debate that in future. I was told many tragic stories about people who have fallen foul of illegal loan sharking. Such people might be in work—it is not always a matter of gangs preying on vulnerable out-of-work people on estates. One example involved somebody who took out a loan from an illegal loan shark for £7,000, which soon became £70,000.