Financial Markets: Stability

Lord Bishop of St Albans Excerpts

Thursday 3rd November 2022 Lords Chamber

[The Lord Bishop of St Albans]

My Lords, we are living in challenging times, with inflation rates at a 40-year high. Turbulence in the financial markets, with higher interest rates and larger mortgage payments, is adversely affecting people in all walks of society. With the wholesale price of energy and gas increasing due to Putin’s appalling and illegal invasion of Ukraine, it is vital that His Majesty’s Government do all they can to protect renters, those with mortgages and, of course, pensioners.

To put a human face to this debate, I thought it might be worth while just quoting one of a number of emails I have received from communities in my diocese this very week. One person emailed me on Friday: “In my role as chair of a food bank, we are having to make decisions around both frightening increases in demand and a growing decline in donations. This summer, we increased our warehouse capacity to handle food for somewhere around 500 food parcels a day. The problem is in-work poverty which is growing substantially. In the past few weeks, we have been approached by a hospital, a large business, schools and a local council about whether they can refer low-paid staff to us.” He went on: “Apparently, employers are not prepared to talk about the problem of in-work poverty, feeling ashamed. They would like to raise wages and want the best staff welfare but can’t because that would move them into a deficit budget.” The human reality of what we are facing is stark. Unfortunately, the mini-Budget of 23 September made a challenging financial climate much worse.

I want to say a few words about the challenges facing pensioners. Statistics show that more than 2 million pensioners are living in poverty, with this figure increasing by around 200,000 in the last year. Age UK has suggested that one-quarter of elderly people are being forced to choose between heating and eating. These pressures are being felt particularly by those who are reliant on the state pension alone. I know many of us are hoping that in the forthcoming Budget we will be given some assurances about the commitment to maintain the level of state pensions.

I turn to private pensions for a moment and particularly raise concerns about the use of LDIs, which other noble Lords have mentioned. According to the Pensions Regulator, 60% of defined benefit pension funds incorporate LDIs. Without the Bank of England’s promise this September to purchase £65 billion in government debt, it is near certain that some of these funds would have been imperilled—that is perhaps a very mild description. The Bank of England has described this scenario as capable of

“driving a potentially self-reinforcing spiral and threatening severe disruption of core funding markets and consequent widespread financial instability”.

I understand why LDIs are being used. Nevertheless, as in many things, the issue is how and to what extent they are being used. I have heard reports that some of the funds were using too much leverage with too little protection and in so doing potentially causing a great deal of danger not only for themselves but to more responsibly managed pension funds and markets. We have to ask, and I hope the Minister will give some reassurance on this: are these LDIs being properly regulated? Are the risks really understood so that we are protecting pension funds? Are they subject to adequate stress tests? Indeed, I am tempted to throw in the question: if we are worried about LDIs, are there other financial investment mechanisms that might threaten the long-term stability of pension funds?

The Government must ensure that pensioners, some of the most vulnerable in our society, are protected from the riskiest of investment policies adopted by some pension funds. Will His Majesty’s Government investigate the use of LDIs by pension funds and ensure that pensions are properly protected?

Money Advice Service

Lord Bishop of St Albans Excerpts

Thursday 12th March 2015 Lords Chamber

[The Lord Bishop of St Albans]

My Lords, I am grateful to the noble Lord, Lord Stevenson, for initiating this timely and important debate on a subject which is affecting all parts of society, sometimes with devastating social effects. While the Farnish review has yet to be published, there is no doubt that attitudes to finance and debt in the UK are a matter of real concern. It is not always easy to get precise data on what exactly is going on, but there is evidence that levels of personal debt are continuing to rise, with reports this January of new consumer debt climbing to heights that have not been reached for nearly seven years. The £1.25 billion net increase in unsecured borrowing seen in November 2014 was the third month out of five when consumers had taken on more than £1 billion of new debt.

Over recent decades, many people have come to presume that it is normal to live with debt, in some cases with considerable levels of debt. Anecdotal reports from Citizens Advice centres and other organisations working in debt advice describe the terrible problems caused for some individuals and their families. This is a profound societal change, which has developed over a number of years under different Governments and could lead us into very serious problems in the future if the trends cannot be reversed.

The problems of indebtedness are clearly too deeply rooted to be swept away by the very welcome improvements in the UK’s economy over recent months. However, it is important to keep a close eye on these trends and the extent of the rise in personal debt, not just because of those individuals I have already mentioned but because it could possibly threaten financial stability in our economy. I wonder whether the Minister could tell us what assessment Her Majesty’s Government have made of the rising levels of personal debt and, in particular, whether they have any views about the level at which such personal debt could threaten the economy? At what point does that become something of significance for everyone?

If we are to achieve sustained attitudinal change towards personal debt we need to work in the coalitions that my noble colleagues have already spoken about, made up of government, the third sector and civil society institutions. A key part of this partnership must be to improve the availability, quality and consistency of debt advice in this country. For this reason, the Church of England is keen to support the work of the Money Advice Service and other debt organisations. We are concerned that the Money Advice Service should target its work and its resources be deployed as effectively as possible. With the demand for debt advice expected to double over the next five years, the challenges facing the sector are huge.

Locally, many churches are actively involved in helping people affected by debt. There are 270 debt centres affiliated to Christians Against Poverty; I have recently been closely in touch with one of them in Christ Church in Ware, in Hertfordshire. About 140 church-based centres are supported by Community Money Advice. Another church in my diocese, in Bedford, runs Money Advice at St Andrew’s, a free, confidential service financed by church members and used by a large number of people. Many other churches provide informal help to those who are struggling with their finances.

Nationally, the Archbishop’s task group is promoting the use of responsible credit and saving to ensure that there are real alternatives to payday loans and other forms of high-cost credit that push many people into problem debt. We are also very pleased to be working with the Money Advice Trust, to which my noble friend Lady Coussins has just referred, the charity that runs National Debtline, to develop a debt awareness and signposting resource. This will better enable congregation members and volunteers to raise awareness of free debt advice and help those in financial difficulty get the advice and support that they need.

As well as helping those struggling under the burden of debt, we need to work to move our society away from the current situation in which indebtedness is increasingly seen as the norm. We need to find ways of changing attitudes to credit and saving for the long term. I therefore want to focus my remaining remarks on financial education, which is equally important but still an underfunded element of the Money Advice Service’s financial capability strategy. I welcome the strategy’s emphasis on improving the financial capability of children and young people, and agree with its recommendation that the Government should consider the case for adding financial education to the primary school curriculum in England.

Young people today grow up in an increasingly complex world, requiring them to make difficult choices that will often have a significant impact on their future. They live in a culture that is heavily influenced by consumerism, and even very young children are being targeted by commercial companies because of their “pester power” and very real spending power. Online shopping, mobile phone contracts, tuition fees and the accessibility of credit cards mean that many young people are making financial decisions and are exposed to debt at a very young age. Millions of children are directly affected by overindebtedness as their parents struggle to keep up with their bills and credit commitments. Teaching our young people financial responsibility is vital.

At the same time, evidence from national and international surveys shows that the younger generation has lower levels of financial capability than their parents. If we are to enable future generations of young people to manage their finances well, children must be given high-quality financial education in school so that they can make informed choices and take responsibility for their actions. Sadly, that imperative is not yet adequately reflected in our education system. Although 94% of teachers and 79% of parents think that it is important for young children to learn about money and financial matters at school, only about one-third of primary schools teach financial education, and only 5% of parents think that young people are leaving school with the financial skills and knowledge that they need to manage their finances.

That is why the Church of England is working with the Personal Finance Education Group, now part of Young Enterprise, to establish an effective national financial education programme for primary schools centred on school-based savings clubs. Building on the evidence set out in the financial capability strategy and elsewhere, we want to give children the opportunity to learn about money at a much younger age, focusing on developing good attitudes and habits towards money, including practical experience of managing their own money. We want to involve parents and the wider community in children’s financial education, so that positive messages about money are being reinforced from a range of different sources. We are very grateful to this Government for funding the pilot of the LifeSavers programme, starting in Bradford, Nottinghamshire and south-east London, and we hope that it will be the beginning of a stronger and long-term commitment to financial education in this country.

Finally, one practical thing that we can do is to encourage take-up of credit unions. I am glad that the St Albans credit union, of which I am a member, not only helps many adults who need advice and help but pays regular visits to one of our local schools to encourage saving. I hope that we can find ways to build on such partnerships to increase financial literacy and responsibility. To that end, the review by the Money Advice Service is vital to ensure that we are doing all that we can to improve the situation for both this generation and those to come.

Credit Unions

Lord Bishop of St Albans Excerpts

Tuesday 3rd February 2015 Lords Chamber

[Lord Newby]

As my noble friend says, this is a very important issue for people on low incomes. A number of the largest credit unions already offer current accounts that have a direct debit facility. However, they are still a small minority. This is an area where the Credit Union Expansion Project is very important, as it will allow more of them to offer such services.

More generally, the Government’s announcement in December about basic bank accounts means that people who open such accounts will have access to a range of normal personal current account facilities, including direct debits.

[The Lord Bishop of St Albans]

My Lords, I imagine many of us are concerned about the culture of debt that seems to be normative in many parts of our society. In the light of this, can the Minister tell us whether the Government have any plans, first, to encourage all schools to consider working closely with credit unions, as in the case of the credit union in St Albans, where I come from and, secondly, to further roll out and encourage payroll savings schemes as part of a wider initiative to encourage saving and financial responsibility across society?

Financial Services: Cold Calling

Lord Bishop of St Albans Excerpts

Monday 17th November 2014 Lords Chamber

[Lord Newby]

I will definitely relay the noble Baroness’s request to my noble friends. As she will know from Committee on the Bill, a number of examples were given which made it less straightforward than she suggests, not least in terms of family members having access to calls being made from organisations such as helplines.

[The Lord Bishop of St Albans]

My Lords, I wonder if I could press the Minister again, particularly on payday loans. The recent report published by the Children’s Society, Playday not Payday, has highlighted the regulatory gap whereby payday loan companies can make unsolicited marketing calls, whereas, as we have heard, mortgage providers are not allowed to. That report showed that over 40% of people who have taken out payday loans are receiving on average more than one unsolicited phone call a day. Does the Minister not agree that the provisions that prevent the mortgage providers from making that sort of marketing approach really must now be brought in for the payday loan companies in order to protect those who are most vulnerable?

[Lord Newby]

The very specific arguments that apply in respect of mortgages do not apply to payday loans. The key thing about payday loans at the moment is that the payday loan companies are being regulated for the first time, which is leading to a collapse in the number of payday loan companies, so that it is expected that we may end up with as few as four payday loan companies in operation at the end of this process. However, the FCA is undertaking an in-depth thematic review of the debt management sector to assess the quality of advice and the area mentioned by the right reverend Prelate. If it finds substantial evidence of consumer detriment of the kind he suggests, it will be able to consider the scope of further regulations.