Budget Resolutions

Debate between Alex Cunningham and Yvonne Fovargue

Tuesday 30th October 2018 Commons Chamber

[Yvonne Fovargue (Makerfield) (Lab)]

I welcome the rise in mental health funding, but people with mental health problems also need support from other Departments, not just Health, particularly when they have problem debts. A person is four to six times more likely to have a debt crisis if they have mental health issues, and half of all those seeking debt help have a mental health issue. The two are interrelated. Debt can trigger clinical depression, anxiety attacks and more, while mental illness can build debts. Universal credit is not helping. I am thinking not only about the complex and stress-inducing work capability assessment but about the wait for the first payment. Also, if people are able to get an advance payment, they struggle to pay it back. None of that will do anything to relieve their mental health issues.

If the Government really are intent on prioritising the nation’s mental health, they need to guarantee that no one will be left without sufficient income as a result of moving to universal credit. Under the rules, any advance payment could be deducted at a rate of up to 40% of the standard payment. It was also possible to have other debts, such as council tax arrears or money owed to utility companies, taken at the same rate. The Chancellor has announced a reduction of this rate to 30%, but that could still mean a combined deduction of up to 70%, which is much higher than for pre-existing legacy benefits, so actually the change will be of little help. For some people, having deductions taken from their benefits to pay their creditors can be a positive method of repaying debt and managing their bill payments, but a rate of 70% is ridiculous. What steps is the Department for Work and Pensions taking to determine whether a deduction is appropriate or even affordable for the individual? I recognise that this method can be positive, but for many people it is inappropriate and unaffordable.

Universal credit can push people further into debt. The Government’s data confirm that people on universal credit are falling into rent arrears, with more than two in five saying that that is due to problems with universal credit. More than half the recipients of universal credit that Citizens Advice helps have had to borrow money while waiting for their first payment. We know that 97% of tenants in Wigan who live in social housing go into arrears because of universal credit, and that 60% of those tenants have arrears of more than £600. It is therefore perhaps ironic that the Chancellor has finally announced a breathing space in the form of a statutory mechanism to give those in problem debt a period of respite while they get their financial lives in order.

[Alex Cunningham (Stockton North) (Lab)]

I met representatives of Macmillan Cancer Support this morning, and they were talking about the challenges facing cancer patients in the self-same circumstances that my hon. Friend has just described. Does she think that action needs to be taken for them, as well as for people with mental health issues?

[Yvonne Fovargue]

I absolutely agree with my hon. Friend. I also think that the rules on terminal illness should be changed.

Going back to the question of the breathing space, the devil will be in the detail. For a breathing space scheme to work well, it has to have minimum standards. It has to provide enough time for the person in debt to get advice on the best way to resolve their problem debts, to recover from temporary financial difficulties and enter a statutory debt solution, and to pay their debts at a manageable rate. There must also be funding so people can access free, independent and impartial services speedily, because when people decide they are at the end of their tether, they want to see someone quickly.

The Government suggest a breathing space of 60 days, but debt advisers need the flexibility to recommend an extension. I worry that if the arrangement is too rigid, creditors may well delay until someone gets out of the breathing space period so they can start chasing them again. Call me cynical, but that is what 23 years at Citizens Advice does.

There is clear consensus that a breathing space solution must cover all debts, including debts to the Government—household bills such as council tax and moneys owed to central Government. It must also offer protection against further interest and charges, and against enforcement action. Creditors must stop collection activities such as calls, letters and visits—that means no more bailiffs. Returning briefly to universal credit, there must be no deductions from benefits or other income to recover outstanding debts during the breathing space period, future deductions must be affordable, and—please—there must be no public register of people who enter a breathing space. Evidence from Scotland shows that that deters people from doing so. If there is going to be such a register, let us make it private between creditors and people in debt.

I welcome the announcement that the Government will look at no-interest loans, although the long timescale will allow many people to fall into debt. It is unfortunate that, despite the work of the Law Commission, Government time was not given to debate ending the exploitation of a Victorian law that was used as a vehicle for logbook loans.

I turn to education—in particular sixth-form funding, which is at crisis level.

Financial Guidance and Claims Bill [Lords]

Debate between Alex Cunningham and Yvonne Fovargue

3rd reading: House of Commons & Report: 3rd sitting: House of Commons
Tuesday 24th April 2018 Commons Chamber

[Alex Cunningham]

I want to speak briefly to new clause 2. While I am sure, Madam Deputy Speaker, that you have many years to go before you reach your own mid-life point, I am sure you will understand that we could all use a bit of advice at times—even though those of us with six decades or so behind us think it our duty to pass on pearls of wisdom to the younger generation.

There is plenty of talk about young people and their finances—about how they can manage their cash and get on the property ladder, which is of course impossible for many these days. This Bill does something to help young people, and I am pleased about that, but what it fails to do is help those in the mid-life stage—people who may have saved a bit, joined a pension scheme, or bought an ISA or two. More importantly, it does nothing to help those who have done none of those things and simply do not know who or where to turn to when planning their later life.

Although some excellent initiatives have passed through this House, such as Labour’s policy of auto-enrolment into workplace pensions, there have been a number of failures, not least around the issue of ’50s-born women and their state pension age, which was extended by the Tory-Lib Dem coalition by several years, condemning many such people to poverty when they should have been enjoying retirement. We could have hoped that the experience of thousands of women left facing difficulty and uncertainty would act as a salutary lesson to everyone else that they cannot really depend on Governments to deliver the security they need in retirement, but need to find ways to make provision for themselves.

People are now looking at their expected pension provision, if they have any, and then panicking about how they are going to afford to live when they retire, or are faced with the reality that they will have to work beyond retirement age in order to make ends meet. We also have people who have lived their lives just getting by—who have never been able to buy their own home and now do not know how they will afford their rent once they retire. Uncertainty is very much the name of the game in the 21st century, so we have a responsibility in Parliament to make provision to ensure that everyone, whether they can afford it or not, is able to work out how they will live when they are no longer receiving a wage. This new clause to provide targeted information to people from the age of 50 delivers that.

We all know that people can now expect to have several jobs throughout their career, and redundancy, zero-hours contracts and insecure work are clouds hanging over millions of people every day. Some people in their 50s find that they need to retrain for another role, but many do not know where to begin or where to get to the facts. This body, backed by the right promotional campaigns, including multimedia, could be a lifeline for those who ignore their money problems. I am, however, concerned about the capacity of the new body. We need to guarantee that it can expand if we are to reach many more people with guidance. I am yet to be convinced that that capacity will be there. I hope that the Minister will say something about how it can expand. I also hope that he can extend its services to provide the mid-life advice that people need.

[Yvonne Fovargue (Makerfield) (Lab)]

I, too, want to support my hon. Friends the Members for Walthamstow (Stella Creasy) and for Harrow West (Gareth Thomas). I hope that the FCA will look speedily at the total cap on the rent-to-own sector, with its inflated prices for goods and roll-up charges.

I am pleased that the Bill aims to ensure that members of the public can access good-quality, free-to-client impartial financial guidance, pensions advice and debt advice. Clauses 10 and 11, which relate to my amendment 42, require the single financial guidance body to set and enforce standards across the debt advice partners it commissions. I think that everyone agrees that the body will have to have regard to standards of practice for the organisations it commissions, but the respective roles of the single financial guidance body and the FCA should not create uncertainty. There may have to be additional requirements for organisations that it commissions.

However, an independent report to the Debt Advice Steering Group run by the Money Advice Service says that the quality assurance process for the larger debt advice charities should be authorised by the FCA. The concern is that any such new and additional requirements from the single financial guidance body should not replicate the requirements faced by the debt advice organisations from their regulator, the FCA. Having had a contract from the Legal Aid Board where we had three auditors in at one time, I was tempted just to throw the files into the middle of the room and say “Fight over them.” The auditing ought to be in the same capacity, and it should be done under one audit that covers all if there are the same requirements.

The body’s standard-setting powers also need to be matched with principles of good regulation, and conditions ought to be proportionate to the benefits they will bring. Amendment 42 would make that plain. Ensuring that the new body’s standard-setting powers have regard to proportionality would smooth its functioning, guarantee assurance and stop the uncertainty as to whether the FCA or the single financial guidance body has primacy.

Pension Schemes Bill [ Lords ] (First sitting)

Debate between Alex Cunningham and Yvonne Fovargue

Tuesday 7th February 2017 Public Bill Committees

[Alex Cunningham]

Yes, it is the responsibility of the regulator to ensure that whatever trusts are set up are stable and ready to go. My point is that, as we have seen, whether we are talking about defined-benefit schemes just looking at the failure of the banks in recent years, there is always an opportunity for catastrophic failure in our master trusts, with perhaps 1 million or 2 million members. I am not convinced that there is provision to protect their interests. Lord Freud referred to this clause as a sledgehammer to crack a nut, considering all the mitigations against the risk that are already in the Bill, but what if those mitigations are not enough?

Again, will the Minister provide the Committee, and people all over this country, with a 100% assurance that the Bill without this clause is enough to protect members? Will he guarantee that no master trust will be in a situation whereby it has failed and has insufficient resources to meet costs? I believe—he has already said it, and I have said it as well—that he cannot guarantee that 100%, which is why the clause needs to stand part of the Bill. By seeking to remove it, the Government continue to go back to the argument that there are enough conditions in the Bill without the clause, such as the Pensions Regulator needing to be satisfied that the master trust has sufficient financial resources to comply with its continuity strategy. There are too many unknown factors out there in master trust world for us to know that for certain.

How can we encourage ordinary, hard-working people to save for retirement and put their trust in a scheme that their company bosses have picked for them when the Government are consciously acting against the clause that could be the safety net? We have seen all manner of pension schemes get into trouble and pensioners have been the losers, so we need systems to be much more robust. Workers need to be confident and assured that the money they have faithfully put aside is given the greatest possible protection.

Another mitigation in the Bill that the Government use to support their argument that the clause is not needed is the regulation of our record management, which will be regularly monitored.

[Yvonne Fovargue (Makerfield) (Lab)]

If the clause is not needed, why not put it in to give people that extra confidence? People have an historically low opinion of financial institutions, trusts and banks, so surely any extra insurance that will encourage people to have confidence is worth putting in.

[Alex Cunningham]

My hon. Friend is correct. People want to know that everything is 100% safe. I know that the Minister said that we can never guarantee 100% safety, but we are talking about some of our society’s most financially vulnerable people who are investing relatively small amounts of money in their master trust. They are not going to get a tremendous pension—nothing like what a Member of Parliament receives—but they want to know that their small pot will actually mean something for them. That is why we must have those protections.

We were talking about regularly monitored business. How regular—every three months, every two years, every five years?—and what type of monitoring? Can the Government say for certain that, by the time the regulator has identified a problem with record management, it will still be within the timeframe to resolve the issue without a funder of last resort?

The Government argue that the Bill already achieves what clause 9 is trying to achieve, but I must question the real reason why they do not want it in the Bill. If they support the idea of master trusts having regulations in place to avoid a disastrous situation if one failed, why will they not just support the clause? If they are so sure that it would never reach the stage of needing a funder of last resort, what is their opposition to including the clause just to ensure that, in a worst-case scenario when things do not go to plan, there is extra protection in place? Unless, of course, they are ideologically opposed to the concept of a funder of last resort. It would be a safety net; a guarantee from the Government that they will need to do everything in their power to protect workers’ retirement funds. If that is the case, I am disappointed that the Government do not believe that it is their duty to step in when business fails and that they would leave innocent people paying the price.

One argument that the Government Lords kept repeating was that, in the event of regulatory failure and a trust not having the means to finance a wind-up, it will not be members that will have to pay the price, but the Government have yet to tell us who it will be. When a number of master trusts and pension experts are calling for there to be a funder of last resort, why are the Government not listening? We have heard a lot of words in the other place and here today, but we have seen not action. Verbal assurance is not good enough when we are talking about people’s livelihoods in older age. We need action and robust legislation to ensure that we take every precaution. In the absence of greater clarity about the Government’s insistence that the Bill already addresses areas raised in this debate, it is vital that clause 9 is not removed. We should be covering every base in order to say confidently that we have taken every possible measure to protect members’ money 100%.