Budget Resolutions and Economic Situation

Paul Maynard Excerpts

Tuesday 22nd March 2016 Commons Chamber

[Mr Osborne]

Let me address these points, and then I am happy to take interventions.

First, over 3 million disabled people are now in work, which is 300,000 more than just a couple of years ago. We are also providing more support than ever before for the most disabled people. The budget has risen, will continue to rise and is much greater than the one we inherited. We are going to take our time, listen, consult widely and continue to build a system of disability support that works much better with our health and social services. As my right hon. Friend the Secretary of State said in his excellent statement yesterday, we will continue to support disabled people, and we will work with him to make sure that we do.

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

Does the Chancellor agree with me that we can be a compassionate Conservative Government only if we have a strong, stable economy, with a reduced deficit, to enable us to protect the most vulnerable in society?

[Mr Osborne]

My hon. Friend is absolutely right. I was coming on to make precisely that point.

Budget Resolutions and Economic Situation

Paul Maynard Excerpts

Monday 21st March 2016 Commons Chamber

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

It is a pleasure to be called to speak in this Budget debate.

In these debates, we normally have a chance to pick over the elements of a Budget of which we particularly approve, to consider and discuss them and to draw conclusions, and normally by the Monday the devil in the detail has been uncovered. I think we can safely say that this year that has largely been the case: we have found the devil, and the devil has been chased out of the room.

I would love to speak for the remaining five minutes about the importance of the northern powerhouse, about why it is about more than just transport infrastructure projects—important as they are—and about why devolution has the opportunity to be a visionary policy and how the Chancellor deserves immense credit for persisting with it. Owing to the pressures of time, I will focus on the elements that I think form a golden thread running through the Budget and the Government’s approach.

We can call it compassionate conservatism, one nation, social justice, a preferential option for the poor—the title does not really matter—but running through everything we do as a Government and a party should be a concern for the people the state has failed; those who face challenges we might not face ourselves; those at the bottom of the pile, the low-earners; and those who might not always be at the forefront of our minds as we go about our regular business. If we want to be a party that can look itself in the mirror and believe it is doing its best for everyone in our country, we must meet that challenge.

We have to make sure that our values and principles apply equally across the generations, which is why it was so important that this was a Budget for young people as much as for old people. Focusing on every generation, and on the balance and links between them, and ensuring that the next generation has the chance to exceed the achievements of its parents’ generation have to be the fundamental tests of every Conservative policy in every manifesto we put out. They should be at the centre of what we seek to do.

I heartily welcome the Government’s decision to rethink PIP. I had real difficulty understanding how the limited technocratic changes to the points-scoring system in the PIP assessment could be squared with the large saving the Treasury was seeking to derive from the PIP changes. I am glad we are not going down that path now.

I welcome our remaining a party committed to halving the disability employment gap, but I am realistic enough to recognise that it will require some radical policy reform to ensure that the complex needs of people trying to find work are adequately assessed and met so that we help them back into work. Moreover, we have to recognise that a significant number of people on a benefit such as PIP will never be able to return to work, and we must be ultra-careful in this place not to fall into some inadvertent utilitarian trap that sees those who cannot return to work as somehow being less deserving of our sympathy and financial support. Many who are in work rely on PIP to stay in work—it is a working-age benefit; it is not means-tested. Equally, however, many are not in work and never will be. They will face a life reliant on the state, but that is not necessarily a bad thing or something to be ashamed of.

We need to do more to ensure that money is spent in a way that is aligned with incentives and that the most vulnerable within a vulnerable group are looked after. Those with every chance of returning to work are no more worth while than those who are not. There is no hierarchy of human value in our welfare state. The benefits system should not be seen as a greater opportunity for savings among the economically inactive.

It genuinely staggers me, though, that the Labour party is a bystander in this debate. Labour Members talk the language of welfare reform, but they have no ideas at all, other than to get out the national credit card, time and again, to pay for every U-turn. I have said in the past that to make real progress on disability policy, there needs to be cross-party agreement. I look to the Labour Benches to try to decide who might be brave enough to make that step—to dispense with the ill will and malevolence and to come forward with some real proposals to find that cross-party support. I do not see it yet.

Short Money

Paul Maynard Excerpts

Tuesday 23rd February 2016 Commons Chamber

[John Penrose]

I am afraid that I do not accept the premise of the hon. Lady’s question. We are proposing to cut the number of MPs in this place—which is not an easy thing to do—so we are very serious about cutting the cost of politics. I therefore hope that, in that spirit, people will contribute constructively to the request for views.

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

Does the Minister agree that my constituents at least have the right to as much transparency as possible on how Short money is being spent? For all they know, it could be being used by hon. Members to help them write their books.

[John Penrose]

I am sure that none of the Opposition parties would spend taxpayers’ money in such a disrespectful fashion, but they will, of course, have nothing to hide, so I am sure that nobody will be at all concerned about proposals for increased transparency.

EU Referendum: Timing

Paul Maynard Excerpts

Tuesday 9th February 2016 Commons Chamber

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

Thank you, Mr Speaker. It is a pleasure to speak in the debate, and particularly so early. I was not expecting to be raised so far up the list of speakers, but let us take our chances while we can.

I have been struck by the fact that there seems to be a degree of consensus on this issue in the Chamber, on what should be an issue that greatly divides us. We agree on a number of things. We do not know what the date is, and we can all agree on that—even I do not have telepathic powers at Prime Minister’s Question Time quite yet. Beyond that, we have also managed to agree that all our electors—be they young or old, or male or female, and whatever party they vote for—can perform the amazing feat of considering two important issues at roughly the same time. It is a great step forward that we can broadly agree on all that.

Looking at the DUP motion, however, I do not agree that we are somehow in an unseemly rush. I would dispute the use of the word “rush” in the motion. Before Christmas, I had the misfortune to turn 40. It was a chance to look back at my life. Have I gone down a cul-de-sac or down the wrong path? Am I stuck in a rut? Is now the time to throw it all in, go away and run an artisan cheese factory somewhere? Should I get out of politics now? The Whips will be pleased to know that I might just stick with what I am doing at the moment.

None the less, it was a chance to reflect on the fact that I am 40, so I was not born the last time we had a referendum on this issue. It is not that I did not have a chance to vote—I was not even alive when we had the previous referendum. To say that we are somehow in a rush, therefore, misunderstands the long campaign the DUP itself has run to get us where it wants to go. If it had had its way, this would all have been over and done with many years ago—certainly before I was elected to this House. I do not, therefore, accept that we are in a rush.

I do accept, though, that our electors can cope with these things. That goes back to the real reason why we are having a referendum: we want to trust the people. Certain issues are greater than the party divide in this place. Trusting the people is at the heart of what the referendum will be about.

Electors across the board are capable of making important decisions during campaigns that are, by their very nature, compressed. One need only think of the French electoral system, which has a two-week gap between rounds. What happens in the first round dictates the campaign in the following fortnight, and the truth will then be available at the end of that fortnight. For example, a far-right candidate might have got through to the final two in the contest, and a fundamentally different campaign would then have to ensue in metropolitan France. However, the voters manage to cope with that.

Voters are also quite discerning. We need only remember the Darlington by-election of 1983. A chap called Ossie O’Brien won it for the Labour party shortly before the House dissolved for the 1983 election. But a few weeks later, the good voters of Darlington repented of their decision and elected someone else entirely—the current Defence Secretary. I think we all agree that voters are very sophisticated, and they can cope with compression, as well as with doing two things at once. I would therefore urge people to have confidence in their voters.

There was some discussion of the role the media might play. Once again, however, voters in Blackpool North and Cleveleys are more than capable of seeing through what the media are up to.

[Patrick Grady]

Will the hon. Gentleman give way?

[Paul Maynard]

In the interests of time, I will give way just this once.

[Patrick Grady]

How does the hon. Gentleman respond to the point made by my right hon. Friend the Member for Gordon (Alex Salmond) about the impact on the purdah period, given that the devolved Governments might theoretically be in purdah for 10 out of 13 weeks?

[Paul Maynard]

I thank the hon. Gentleman for that point. It is no different, in a way, from what central Government will have to go through. Every Department will have to work out how it engages on European issues during a long campaign and a short campaign.

I am left in no doubt that this is one of those important issues in the lives of my constituents that passes the “stop me in the street” test. If I am out shopping in my local Sainsbury’s, I am already being asked what I think about this issue. The notion that we can somehow say that the campaign does not start until we the politicians say it does, is rather naive. The campaign has started; the number of emails in my inbox is increasing, and people want to know where I stand. I am trying to deal with those queries, as I am sure every other Member of the House is trying. Setting an arbitrary starting point, when we will allow people to think about this issue, will not be possible. The reality is that we have already begun thinking about it, and the media will keep reporting on it. However, my constituents are perfectly capable of thinking about it for themselves. They are desperate to have this vote. Many of them have waited 40 years for it, and they do not want to wait a single moment longer than is absolutely necessary. Many of them have made their minds up already. They want the vote now, without even knowing what the final decision is or what deal might be reached in Brussels.

In conclusion, I recall the words of my former hon. Friend the Member for Hertsmere during consideration of a private Member’s Bill a few years ago. Surely, the question now is not what to do, but, “If not now, when?” Now is the time, and we need to move as fast as we can.

National Insurance Contributions (Rate Ceilings) Bill

Paul Maynard Excerpts

Tuesday 15th September 2015 Commons Chamber

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

A brief Bill deserves a brief speech. I am pleased to see the shadow Minister back in her place. She checked her phone several times, perhaps concerned that she had been reshuffled by text message for disloyalty. I am glad that she has survived until at least 4 o’clock.

I rise to speak in favour of the entrepreneurs in my constituency. Like my hon. Friend the Member for Bexhill and Battle (Huw Merriman), I have a town that needs regeneration. I have met many of those who have taken advantage of the new enterprise allowance to set up businesses around the kitchen table. The Economic Secretary referred to that in her speech. Whether they are lady funeral directors, stained glass window repairers or supermarket ready meal manufacturers, they all want to grow their businesses from the very smallest roots. To do so, they need three things: confidence, security and certainty. The Bill will give them confidence, security and certainty. My town needs such jobs. We need the Bill. Please get on with it.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

We now come to the Front-Benchers. With the leave of the House, I call the shadow Minister to speak again.

Rent-to-own Sector

Paul Maynard Excerpts

Tuesday 14th July 2015 Westminster Hall

[Paul Maynard (Blackpool North and Cleveleys) (Con)]

I beg to move,

That this House has considered the rent-to-own sector.

It is a pleasure to serve under your chairmanship for the first time in this Parliament, Mr Hollobone, and to see the Minister in his place.

As is not traditional, I shall start with a string of apologies, particularly to the UK public affairs sector: it has experienced great confusion over the past week, having seen the title of the debate and been desperate to tell me all about rent-to-own home ownership. It will be fascinating to see whether the Opposition speakers have been similarly wrong-footed and have furiously to rewrite their contributions.

My second apology is to the hon. Member for Makerfield (Yvonne Fovargue), because I unwittingly gazumped the topic of the report published just before the election by the all-party parliamentary group on debt and personal finance, which she chairs. I discovered that only after I requested this debate a few weeks ago. I know that she will have plenty to say—indeed, earlier we discussed the fact that the two of us could debate this issue for an entire day. The Minister will be relieved that we have only 90 minutes, but I am sure that we can fill them. The hon. Lady will have to forgive me if I occasionally borrow from the APPG’s quality report.

The real inspiration behind this debate is not the public affairs sector—thank goodness—or even the APPG: it is what I see in my constituency on a day-to-day basis. I see families having to cope with the unexpected financial shocks that occur in day-to-day life. We often see the rent-to-own sector as a key component of that unexpected shock—when these things happen, the RTO sector becomes part of an almost transformative experience in how people deal with personal debt. I have spoken to my local food bank, citizens advice bureau and credit union, and they all tell me the same things.

I get frustrated when Members simply read out a list of case studies—I could easily do that for 20 minutes; I want to read out one that encapsulates the problem. The person in question has mental health problems and physical disabilities, and he is highly vulnerable. He does not understand contracts and finds it very difficult to assert himself and say no. He made a purchase from BrightHouse, and when he goes in each week to pay off his debt he comes under pressure from the sales team to buy something else. He finds it very difficult to cope. He has bought a laptop, a TV, a DVD player and a tablet, even though he cannot do emails on a computer and just uses Google.

As soon as he paid off the laptop, he came under immediate pressure to buy something else. The sales team know that he gets mobility allowance, and seem to think that it represents acceptable funds. He struggles to pay the rent and top up the electric meter. He defaulted on the payments for his mobile, which was repossessed. He was pressured into joining Utility Warehouse, so cancelled with BT, but because he cannot understand contracts, he did not realise that that would involve an £800 financial penalty for leaving his contract early. He is now having to pay off that as well. He still goes into BrightHouse every week to pay off his items, and finds it a stressful and fearful experience.

I could fill the rest of the 90 minutes with similar case studies. I am particularly troubled by the suggestion that those who are most vulnerable, who have the mobility allowance, are somehow fairer game than any other set of customers when it comes to extracting the extra few pounds a week that they rely on. Nevertheless, I should make it clear that I am not here just to bash BrightHouse or the wider RTO sector. Theirs is a legitimate business; there is a case for providing short to medium-term credit to people who need it. I recognise that, with a 70% market share, BrightHouse will get more than its fair share of horror stories, but the sector employs many people across the country, fulfils a consumer need and occupies space on the high street that might otherwise go vacant. I recognise all that, but it does not change the fact that vulnerable people are being exploited in troubling ways.

The challenge for the sector is how it can adapt what it does in order to continue to perform its role without taking advantage of people. I want to consider the extent to which the private sector models are truly broken, if they are; whether they are appropriately regulated, and how that regulation can be improved; and whether alternative, socially-funded models are viable, adequate and the right way forward. It is worth pointing out that not all private providers are the same. A firm called Buy As You View already adheres to much of the findings in the APPG’s report. It actually argues for better regulation, but regulation that is also proportionate and fair.

There needs to be some consistency with the principle that credit has a role to play if the object for which someone seeks credit will retain value after the credit has been paid off. In other words, credit is probably not appropriate for things such as food or electricity bills, but it may be for a consumer good. There is also a wider issue about how we ensure that markets function in the best interests of the consumer. That is a key Conservative principle, but I do not want a partisan debate because this is a cross-party issue. We all have vulnerable constituents who are at risk of being sucked into a situation that they cannot get themselves out of. I cannot possibly hope to encompass the entire debate in my short contribution, but I do want to set out a handful of areas that the Government should pay particular attention to and to encourage the Financial Conduct Authority to focus on them as well.

In the centre of Blackpool are the bus stops where people get on the buses. It is a complicated one-way system: people get on at one place but the place to get off is half a mile around the corner. Where people wait to get on the buses is a branch of BrightHouse. There will be dozens of people standing at the bus stops and admiring the scene inside BrightHouse, which has lots of cheerful, bright consumer goods. There are bright-coloured sofas, settees and beds, and enticing goods such as TVs and iPads.

I am sure we can all imagine the range; it is very attractive and fetching. It is bright and modern, and it entices people with what they want in their lives. We live in a world where we are almost defined by what we own. I am tempted to stray off into a spiritual discursion about whether we are measured by what we own and whether that is good for us spiritually, but that is way beyond the Minister’s remit, and even that of the House. We will leave that to God himself.

People aspire to own, not to rent. I am concerned that the idea that the answer is to abolish the sector entirely, with people just renting, misunderstands people’s aspirations to own consumer goods. We should not place an artificial cap on what people want to own in life. Doing so would be a “nanny knows best” approach that fails to respect individual dignity. People on low incomes deserve the opportunity of ownership, but not in an exploitative market. When I think of my constituents and look at the typical customers in the RTO sector, there are broad similarities: 78% are female, 60% have children and 94% are in rented accommodation. Only 1% have hitherto used a payday lender. It is worth reflecting on that a little: although only 1% have used a payday lender before they go to an RTO provider, how many are using a payday lender by the end of their RTO experience?

The bulk of customers have an average of only £19 a week of disposable income to pay for these purchases. That does not represent a great degree of financial resilience. The rent-to-own model is about buying more and more goods over time, and they can quickly mount up. Of course, it is an appealing way to access credit. That misleading low weekly payment does not reflect either the entire cost after three years or what will happen as new items are taken on. I retain a degree of concern about how staff in these stores are being incentivised to sell more and more to each individual. Such incentives lead to perverse outcomes for the individuals concerned—they are not necessarily a good thing.

I will probably keep saying this for the next five years, but I represent the second most deprived Conservative constituency, which contains the fourth most deprived ward in the country. Right behind the Imperial Hotel—many will have been there over their time in the House—is Imperial Street, on which is a mother and baby sheltered housing unit. I have no doubt that some in that sort of sheltered housing may be transient and have experienced family breakdown, or worse, and will often need to furnish their houses rapidly and fully. They will need the full complement of consumer household goods. They cannot just buy one thing and then wait a few months, so they are often driven towards the rent-to-own sector, which is not always the right thing for them. It is a captive market: providers have no incentive to lower prices. Competition is neither transparent nor evident to such individuals, who may not have the necessary financial literacy to understand how to navigate their way through the market. The Blackpool, Fylde & Wyre Credit Union wrote to me and said:

“Some people do not understand the full cost, others do not believe they have a choice because they are frozen out from mainstream credit and have a lack of knowledge of alternatives such as Credit Unions.”

Some in the RTO sector take advantage of the lack of legal understanding of how the system works to encourage payments.

The pricing is unclear. I sent Zach from my Blackpool office on an undercover mission—it was actually rather transparent—to the BrightHouse around the corner to find out what was going on and to look at some of the prices. Zach spotted a Samsung TV on display with a product price of £1,053.13, but the total payable after three years of weekly payments of £18 was £2,808, including what they call “Five Star Service”, which is neither optional nor separately priced and appears to add some £400 to the product price. Just down the road in Tesco, however, the same product was available off the shelf for £1,049 with optional insurance extras. It is worth noting that insurance in the RTO sector also seems to attract interest payments.

The different elements, such as the goods themselves, the warranty cover and the insurance, are all lumped into one tempting weekly payment. After years of pressure, it remains hard to compare properly the products available in the RTO sector with what can be obtained by other means. The product codes remain different due to slight tweaking of the products, such as a different-coloured fascia which might add something to the end of the code meaning that it cannot be directly compared with what one might get in Tesco.

Second-hand or repossessed goods are sold as “pre-loved”, often costing more than a brand new item would somewhere else. The APPG found that about one third of products on sale in the RTO sector were pre-loved. That is not necessarily a bad thing if the credit is made more affordable as a consequence or if it meets the consumer’s need better and more cheaply than a hi-spec alternative, but that depends on the ethics, systems and processes in place in each individual RTO provider.

[Yvonne Fovargue (Makerfield) (Lab)]

Will the hon. Gentleman give way?

[Paul Maynard]

I will indeed: the hon. Lady will give me a chance to catch my breath.

[Yvonne Fovargue]

Getting someone to pay for goods and then repossessing them and selling them to somebody else for twice the price is a wonderful business model. Offence was taken when I mentioned that during the inquiry, but we have not yet been able to find out the providers’ break-even point, which is obviously commercially sensitive. There will be a break-even point, but providers can sell goods to someone else once they have been handed back voluntarily after, say, a year.

[Paul Maynard]

I thank the hon. Lady for that contribution, with which I have a degree of sympathy. Equally, an ethical provider bartering a customer down, because the pre-loved item is a better deal for that individual, can have a role to play. The hon. Lady is quite right, however, about the lack of transparency in the sector and the difficulty of assessing what different providers are actually doing. One cannot regulate in a non-transparent market, which may go to the heart of the matter.

The hon. Lady will perhaps make this point herself, but ownership requires one to make all the payments. One cannot own two thirds of a television. Some providers may seek to make exceptions when almost all payments have been made, but someone could make half the payments and still find themselves losing the product. I am unsure whether the regulations are clear or being applied consistently across the market. There is no mandatory health warning, as I believe payday loans now have—the hon. Member for Walthamstow (Stella Creasy) will tell me if I am wrong—saying that goods are at risk if payments are not made.

Shorter loan periods are certainly not advertised, and three years is the default option. I understand that shorter periods increase the weekly payments and make the deals less attractive to consumers, but why not sell products with more modest specifications or de-bundle the warranties or insurance, as companies such as Buy As You View already do? The three-year contracts matter dreadfully because of the nature of poverty. Child poverty has been discussed a lot recently due to the Government’s changes to the measurement—for the better—but behind that decision was some excellent investigative work about the ingrained nature of poverty and the churn rate. Around half of those in poverty in one year are not in poverty the following year. Around 10% are in persistent poverty, meaning three years out of four. If someone submits to a three-year contract, the probability that disaster could strike in one of those three years vastly increases. If more people could access one-year or two-year deals, the likelihood of having a problematic year might be reduced.

My local credit union said to me:

“The bigger issue we have seen is that people are not just sold one item. We have seen people with multiple debts to a weekly pay store. One customer on benefit income was paying for 8 different items at a total £120 per week (£520 per month) which would stretch the budget of the average full-time working person to breaking point, let alone the low-income people who tend to be the users of these stores. The fact that the goods may then be repossessed for non-payment introduces an element of fear that prioritises these payments in the customer’s mind causing them to pay the weekly pay store and falling into arrears with other essential bills.”

That might particularly be the case when customers have multiple disadvantages, such as mental health problems or a learning disability. It is simply unclear how such companies are protecting the vulnerable people who come through their door seeking to own a consumer good. No obvious assessment of affordability is built in to the selling process in some firms. I recognise that Buy As You View does assess affordability and rejects some 70% of applications, but it is almost unique in the sector in applying that degree of toughness. Such financial vulnerability goes beyond merely an inability to understand the annual percentage rate, and the cost to the taxpayer when vulnerable individuals reach crisis point has not been assessed. How vulnerable customers best access credit for goods is perhaps a separate issue, requiring particular attention, from the wider market of roughly 13 million low-income individuals who need to access low-cost credit for consumer goods.

I welcome the fact that the Government have extended local social welfare funds. It was a matter of controversy in the previous Parliament, but I am glad that they have taken that decision. Such funds are well used and well spent in Blackpool. Many councils may not be doing such a good job, but such funds should be maintained where they are well spent. We must consider the alternatives, however. The Minister is something of an expert on credit unions, some of which have tried to set up RTO providers. The APPG mentioned Smarterbuys in County Durham, which was set up by the Prince Bishops Community Bank.

Those are interesting models, which have something to offer, but I have concerns about their scalability and about the creation of a national network of different providers, all with slightly differing rules and regulations. The scalability is problematic, but I recognise that credit unions have an important role to play, in part because they often have to sweep up the consequences of an engagement with the rent-to-own sector that has not gone well.

What role might Big Society Capital play in inspiring innovation in the sector? Buy As You View is keen on a comparison website and, in the short-term credit market, the Competition Commission encouraged lenderscompared.org.uk, which is a properly regulated, independent price-comparison website in that sector. I can see no reason why we cannot have a similar website mandated by the Financial Conduct Authority or another body in the rent-to-own sector. It would be a great deal of help—in particular because many people use their mobile phones to shop—so that people can make the comparison at the same time and understand the best option.

I hope that the Minister accepts that there must be a fair regulatory playing field for the not-for-profit sector and the for-profit sector. We are not talking about bashing for-profit providers, simply because they happen to be for-profit providers—that would be a dangerous path to go down. There is already broad variety in the sector. We need well understood regulation that puts consumer needs first. I hope that the Minister, or the appropriate Treasury Minister, will meet me, perhaps the APPG members, the charities involved such as StepChange, the companies involved, and the regulator to look at how conduct can be improved across the board.

Will the Minister put on record his view that the FCA needs to focus on fair outcomes for the consumers, rather than only on inputs and what occurs before the individuals take their product away with them? We need to ensure that proper competition and choice for the consumer are the key indicators of effective regulation.

I would be grateful for some thought on how the sector can improve data sharing, not only to identify poor risk and prevent people from getting into problems, but to help the financially vulnerable, so that they can be identified and offered alternative means to access the goods that they need. I hope that the Minister agrees with me that bundling expensive warranties as a condition of the loan seems to contravene the principle that lenders ought to treat consumers fairly, which has to be at the heart of all regulation. Things should be transparent and clear for day-to-day consumer engagement in the shops, but in my view that is not occurring.

I want the Government to press the FCA to work more closely with the industry, to accelerate what it is doing and to ensure that we are as diligent on RTO as we were in the previous Parliament on issues such as payday lending. They are all part of the same financial resilience package.

Will the Minister also outline what steps the Government might take to improve people’s ability to manage their debts? Does he share my concerns about the examples that we have heard today of vulnerable people facing life-changing amounts of debt because of what is to all intents and purposes the mis-selling of consumer goods, credit and insurance?

[Yvonne Fovargue]

Will the Minister also review the advice available to people in debt? Managing one’s own money involves getting out of debt in the first place, then being able to manage the money. That is really important. A recent report on fee-charging debt management showed that 60% of the fees put people in a worse position, so we need to look at the availability of the free advice sector.

[Paul Maynard]

I am sure that the Minister heard that question. I am now trying to reach my conclusion rapidly, because I have been going on far too long.

Lord Freud has met with the debt-management charity, StepChange, but will the Minister agree to convene a cross-departmental working group consisting of the Departments for Business, Innovation and Skills, for Work and Pensions and for Education, and sector representatives? The issues stretch across Government and are not confined to the Treasury alone.

To finish, I want to make a point of principle with which I hope the Minister will agree. About four or five months ago I remortgaged my property, but it has never taken me so long to do so. I was locked in my bank for about six hours, or that is what it felt like, going through every last iteration. I understand why that is: we have to improve safeguards for borrowing, we have to reduce risky borrowing and we have to ensure that the banks are sustainable. Yes, my mortgage payments are a substantial element of my outgoings and part of my financial arrangements, but why are we not as careful about RTO-types of credit as we are about mortgages? If someone’s available disposable income is only £19 a week, even £12 a month is a sizeable payment. There ought to be a point of principle: it matters as much to those people how their consumer credit is regulated as it does to me how my mortgage is regulated.

We as a Government need to look much more closely at how we encourage financial resilience. We need multiple bulwarks for families against the unexpected—too often the unexpected leads us down a path to perdition financially. Proper and proportionate regulation, which does not seek to condemn the private sector simply for being the private sector, is the best way to allow people to fulfil their legitimate aspirations to own consumer goods.

I have asked a lot of questions and I have talked a lot today—I apologise to those present. I look forward to the Minister’s reply.

[Mr Philip Hollobone (in the Chair)]

We will also hear from Mr Maynard at the end of the debate, because he has three minutes to sum up the other contributions that he has heard.

[Yvonne Fovargue (Makerfield) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I welcome the Minister to his place—it is all the better that he was a member of the all-party group on debt and personal finance in the previous Parliament. I also congratulate the hon. Member for Blackpool North and Cleveleys (Paul Maynard) on obtaining this important debate.

The rent-to-own sector is not well understood. People think it is relatively new on the high street, but when I was a citizens advice bureau manager I had run-ins with Crazy Georges, the precursor to BrightHouse. In many ways the sector operates under the radar and I hope that the debate will raise the profile of the issue.

As the hon. Gentleman said, the all-party group undertook an inquiry into the sector towards the end of the last Parliament, producing a report in February. We did so because we were concerned about a number of the issues, not least the fact that rent-to-own customers seemed to be paying about three times more for their televisions, fridges and sofas than they cost on the high street or elsewhere.

I hesitate to say this, but the pricing structure is complex and possibly deliberately so: not only is the base price of the goods high, but customers pay a hefty interest rate on the loan taken out. BrightHouse, Buy As You View and PerfectHome charge annual interest rates ranging from about 50% from Buy As You View to a 94.7% annual percentage rate, or APR, from BrightHouse. As the hon. Gentleman said, the interest is usually charged over a period of three years—not only on the price of the item, however, but on the expensive warranty-style service agreements, insurance and the delivery charge. Everything is bundled together.

The latter items are the most troubling of the whole package, because deals are almost impossible to obtain from the leading firms without those expensive extras. The firms vary on whether such additions are compulsory or optional—in fact, BrightHouse has agreed to make them optional—but in all cases linked insurance and service cover are being sold at the point of sale: it does not matter that the customer is already covered by a statutory guarantee or might have home contents insurance. Moreover, there is little chance of a new TV or washing machine breaking down these days, but the selling is such that the emphasis is on people wanting peace of mind—“Complete peace of mind for you.” Everything is bundled together.

Furthermore, the insurance policies only cover a single item against fire, theft and damage—nothing else. By contrast, a single home insurance policy might cover any number of items up to a value of £50,000. For example, in BrightHouse a £490 double bed costs £55 a year to insure against fire, theft and damage; I have not actually set fire to my bed recently, and it has not been stolen, either, but there we go. Cover for a £725 fridge-freezer would cost £80. By comparison, both those items, up to a total of £50,000, could be insured by Direct Line with a similar level of cover for £118 a year. The more items there are, the more problems there are. There are very few circumstances in which customers get better value for money from insurance than through a single home contents insurance policy. When multiple items are purchased, the value for money will obviously get worse.

As I said, the total cost is higher. In September 2014 a Samsung freezer with a five-year service plan was £644 at John Lewis—Which? found that when it shopped around—whereas at BrightHouse the total repayable over three years was £1,716, three times the price. I accept that people cannot always afford to pay up front, but we need to look at making something available that allows those customers to shop around for goods.

As the hon. Member for Blackpool North and Cleveleys said, weekly instalments are appealing because they give customers the ability to spread cost. The stress put on weekly payments is what is most attractive to customers, which is probably why BrightHouse still advertises itself on its website as “Your Weekly Payment Store”—it does not advertise its prices but the ability to pay weekly. The payments seem affordable—£5 or £10—but amount to a sizeable expense over a few years, as the hon. Gentleman said. For people on low incomes, that will often mean going without elsewhere. It also means that many rent-to-own contracts are left unfulfilled, as customers do not make their payments and goods are returned. As the hon. Gentleman said, two thirds of a TV is no TV at all. The payments are lost, and there is nothing to show for them except, perhaps, a shadow on the wall.

The irony is that the people who can least afford it end up paying the most. That is probably not surprising, as they have little choice but to go somewhere such as BrightHouse and pay those prices. The rent-to-own firms have them over a barrel. That lack of choice for consumers is why I believe that this market in particular needs to be regulated. They are often from low-income households, and many are significantly reliant on benefit income. The typical customer is young, female and has children, and almost all live in rented accommodation. When I spoke to the chief executive of BrightHouse, he said that the firm bundles everything together because it knows its customers are female, and “females like things simple.” Simple, but a little expensive, I would say.

Failure to pay rent-to-own debt means that customers face losing goods. That puts pressure on money available for food and household bills. The average rent-to-own customer is substantially worse off than the average payday loan customer, yet they probably feel they have made a better choice, because of the publicity surrounding payday loans—rent-to-own, as I said, has operated under the wire.

The all-party group was concerned that the financial promotions downplay or ignore relevant costs and risks. Full ownership has to be the target with rent-to-own, surely—owning is in the name—yet the advertising focuses on the weekly payments and does not draw attention to the risks, namely the total cost of the credit and the fact that the goods can be taken back.

At the APPG inquiry, the Financial Conduct Authority said that it shared concerns about how firms advertise the deals and the prominence of the weekly repayment. The emphasis on the low weekly cost could be why so many customers get into debt: according to the FCA, 50% of customers get into difficulty with their rent-to-own commitments. That is a really high proportion of people who cannot afford to pay. I agree with the hon. Member for Blackpool North and Cleveleys that it raises the question of what affordability checks are being done.

The all-party group owes a debt of gratitude to Damon Gibbons of the Centre for Responsible Credit, and the Stockton-based community group Thrive. Their efforts led to the three large firms promising to improve their operations and an agreement was reached for a customer charter, although that was then reneged on—another reason why the APPG undertook our inquiry. That proves that perhaps voluntary agreements do not always work in this sector. The Centre for Responsible Credit and Thrive also gave evidence to our inquiry. Unfortunately, they said that little had changed.

We also took evidence from the three big firms in the sector: BrightHouse, PerfectHome and Buy As You View. They defended their business model on the basis that their customers had peace of mind because of the extensive service contracts. That may give some peace of mind, but what peace of mind can there really be when people cannot afford the goods, as the deals are so expensive, or when, as we heard from Thrive, two big lads turn up late at night to take away the fridge-freezer—“voluntarily”?

We also took evidence from Linda Woodall of the FCA, who said that the practices were ringing “alarm bells”—that was her actual phrase—at the regulator, which is concerned about the high level of repossessions and incomplete transactions as well as the warranties and insurance. The FCA has engaged with the issue: since the publication of the report I have had a meeting with Linda and can see that the FCA is taking the issue seriously. I thank it for that.

The FCA’s intervention has helped to elicit changes in the market, not least on price transparency. Firms are now breaking down the prices they charge for the goods, the loan and the warranty, and we welcome that. BrightHouse has also stopped requiring customers to take out its insurance product compulsorily, if they can prove they have their own household insurance. However, the extended warranty remains compulsory with both BrightHouse and PerfectHome.

[Paul Maynard]

Does the hon. Lady agree that that requires staff in BrightHouse to be aware of and apply the rules, and that, no matter what the centre of the firm might think, that does not necessarily always happen?

[Yvonne Fovargue]

I agree absolutely with the hon. Gentleman; we have seen rogue managers. For example, a manager at PerfectHome actually took a customer’s house keys before handing over the goods, so that they could go into the house. PerfectHome said that was a rogue manager, but it shows that the stores are perhaps not being operated as they should be.

The FCA should go further. I would like to see it ban expensive warranties and insurance as compulsory parts of a rent-to-own agreement. I would love to see some mystery shopping, as well, to look at the staff and staff incentives. The FCA may need to be given a wider statutory remit to do that, so perhaps giving it that remit would be a way forward. However, even within the current FCA rules, surely the current bundling offends against the idea of a credit agreement’s fairness? The FCA took action against compulsory single payment protection insurance premiums, so why does it not have the powers to prohibit credit agreements sold with compulsory service charges? I would like to see those people who were sold such products after April but who already had home insurance come forward, as I think they could reclaim.

The FCA has also said it is concerned about the high level of goods repossessed or surrendered before the agreement is completed. Twenty-two per cent. of customers have their goods repossessed or surrender them—more than one in 10 of all agreements. BrightHouse said that it never repossessed goods, but having looked at its practices and received some information, I have found that it has its own companies that collect debts, Caversham Finance and Sigma. One term in the contract with those firms is for repossessing goods. Caversham is a branch of BrightHouse, and Caversham Insurance is registered in Malta.

I wonder about the idea that customers would give up their goods voluntarily. That beggars belief. Let us say that someone with three children, who will need a washing machine daily, pays hundreds of pounds for one—the idea that they would then happily give it back, leaving themselves without after paying for it for two years, stretches credibility. The firms defend the high levels of surrenders by saying that customers often think of themselves as renting the goods, and happily give them up to move on to something else. Well, possibly, if it is something like an iPad, but not if it is a washing machine, a bed or the sofa. The customer expects to see something at the end. The whole point, as the hon. Member for Blackpool North and Cleveleys said, is that it is “rent to own”—they expect to own the goods at the end.

Thrive gave evidence of people who were extremely distressed when their goods were taken back—or “voluntarily” surrendered; their arms were twisted somewhat. Surely if people wanted to rent, they would go to a specialist rental outlet and pay the lower charge. I have done some comparisons with that sector. The high level of repossession shows a failure of the initial affordability checking, the forbearance procedures or both.

We should also look at whether the companies give people who get into difficulties breathing space. As has been said, over three years people at that income level are likely to get into difficulties. That is not acceptable; the FCA should look at producing sector-specific safeguards to protect people in financial difficulties against the loss of essential items. There are rules that set out that some bailiffs cannot repossess essential items, such as children’s beds, so surely there should be rules for this sector as well. We also think there should be health warnings on rent-to-own stores and websites to ensure that customers are aware of the cost of the agreement and the risks of repossession.

The FCA prefers to promote a supervision-led approach, which elicits a voluntary agreement from the firms to behave more reasonably. However, as I have said, we have tried the voluntary agreement route. The Centre for Responsible Credit and Thrive had a voluntary agreement arrangement, but it did not work. The FCA thinks rent-to-buy is a small sector compared with other, bigger sectors, but it is growing. BrightHouse’s model is to open a new store every fortnight, often in areas of the highest deprivation. Its stores are in prime locations in our towns and cities—particularly in areas of deprivation—and they prey on the poverty and desperation of many of our constituents, who are charged exorbitant prices for goods that they may never own.

We have to promote the alternatives to the rent-to-own model to allow people to obtain a more reasonable deal. We also have to ensure that people who are forced into the sector have some control over the worst aspects of the market. Those customers, as has been said, are particularly vulnerable. The FCA has a particular responsibility to give them a higher level of protection than other customers. We look to the Government and the FCA to protect customers who are not able to go elsewhere and therefore need our protection.

--- Later in debate ---

[Paul Maynard]

Members will be glad to hear that I have only three minutes, so I cannot go on and on. I thank all hon. Members who have participated today, particularly the Front-Bench spokespeople and the hon. Member for Makerfield (Yvonne Fovargue), who was quite right to point out that the sector may be relatively small—indeed, it is—but it has a massive impact on the lives of some of the most vulnerable people if things go wrong.

I should like to focus for a few seconds on the word “vulnerable”, which we have heard so much today. It is a word that is being devalued in modern politics. Everybody, suddenly, is vulnerable in some way or another, which almost strips the word of its meaning. I would rather think of people who have poor financial resilience, but who can function effectively in the market. They are not vulnerable, by my definition. The ones who are vulnerable are those who, for whatever reason, cannot function effectively in the market. We need to recognise that quite precise distinction.

I commend the hon. Member for Walthamstow (Stella Creasy) on her undoubted vigour on these issues. I think, however, that the Minister in his concluding remarks made an important point: the answers to the problems that we have talked about today involve the judicious application of a range of measures. The hon. Lady needs to be alive to the nuances of the debate as she seeks to shoehorn it into her wider national narrative of us all going to hell in a handcart. Occasionally, we need to focus on some of the precise issues in the rent-to-own sector. There are alternatives to the BrightHouses of this world, and consumers need to be made aware of them. That is why I put such importance on the need for a comparative website.

I welcome the Minister’s offer of further engagement, and I look forward to that engagement. I join him in praising the FCA. It is at the start of a journey, and I see a role for Members from all parts of the House to urge the FCA along the journey as best we can, paying attention to the nuance of the rent-to-own sector as well as the wider debate about consumer debt. I thank all hon. Members for attending today.

Question put and agreed to.

Resolved,

That this House has considered the rent-to-own sector.