Finance (No. 3) Bill

Andrew Percy Excerpts

Monday 4th July 2011 Commons Chamber

[Stella Creasy]

I have come here today to speak in favour of the new clause, and to vote for it, too, which I believe will be a powerful expression of the need to act to tackle the problems caused across our country by high-cost credit companies, or so-called legal loan sharking.

I promised when the House debated the issue previously that I would congratulate those who took action to protect vulnerable consumers, and I want to do so. I welcomed the announcement of the consumer credit review and the coalition agreement promise to tackle the cost of borrowing on store cards and credits, but it worries many of us that it is already overdue. To meet the timetable, that work will have to be done within the next two weeks.

Even more worrying for the Opposition is the fact that we have had to drag the Government kicking and screaming to the table to discuss high-cost credit, because the coalition agreement made no commitment to tackle it. There is still uncertainty about whether it will be tackled in the consumer credit review.

[Andrew Percy (Brigg and Goole) (Con)]

I am a huge supporter of what the hon. Lady is trying to do. I agree that there is concern about how quickly we are moving, but we had 13 years of her party’s Government. Can we try to keep this a cross-party matter? Members of all parties are concerned about it, so let her not bash the Government, and when I speak I will not bash the Labour Government for their inaction. Let us all try to keep it positive.

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[Tracey Crouch]

The hon. Lady obviously did not listen to the Minister’s response to a point made earlier. As he said, a review is currently taking place. The new clause proposes

“a review of all taxation measures contained in this Act”.

I think that, on this occasion, the hon. Lady is wrong.

[Andrew Percy]

Surely any tax review is likely to come up with a suggestion for raising taxes. It is unlikely to propose that taxes should be cut. If that is on offer, however, I certainly do not intend to vote for a measure that would cut the taxes of the people whom we are discussing.

[Tracey Crouch]

My hon. Friend makes a good point. Whether or not the tax goes up following a review—and the hon. Member for Walthamstow will probably say that it will go up—the result will be passed on to the consumer.

Organisations such as Citizens Advice recognise that the problem of debt is not confined to the high-cost credit industry. It is also caused by other practices, such as irresponsible lending, the imposition of high contingent charges, and the mis-selling of debt management services. I am not a supporter of the high-cost credit industry, but a tax on one part of the sector would not only be anti-competitive, but would not address problems in other parts of the consumer credit market.

The simple truth is that the industry needs better, if not more, regulation. Although the House may not often hear Conservatives say that we need more regulation, a number of Government Members believe that in this context, and particularly in the context of debt management, it is the appropriate solution. We have met the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), and have told him that.

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[Andrew Percy]

I was not sure when I came into the debate whether I was going to speak—[Interruption.] Well, I can never resist the temptation to hear the sound of my own voice. I have found this an interesting and fascinating debate with some very good speeches from Members on both sides. Some speeches have been a little political at times and it is best that we brush over that, because the issue should not be political. The hon. Member for Walthamstow (Stella Creasy) is, I know, passionate about this matter and I agreed entirely with a great deal of her speech. She has been in a Twitter conversation with a constituent of mine in Snaith. Very sound people live in Snaith—very sound people, because they re-elected their Conservative councillor with a massively increased majority in May, but we will gloss over that.

The issue has sparked an interest across the whole country. The letters and tweets we are getting from our constituents reflect the fact that a lot of people are interested in this matter. This has been a good debate and the hon. Member for Darlington (Mrs Chapman) made a particularly good speech, I thought, which was very consensual. I look forward to hearing the hon. Member for Makerfield (Yvonne Fovargue). I always listen to her on such matters because of her vast experience. I know that my hon. Friend the Member for North Swindon (Justin Tomlinson) has a huge interest in the subject, as does my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch), who used to work with me at McDonald’s in Hull when I first started to get into debt. Although I have never personally had to borrow from a high-cost credit company, I certainly understand having debts to the tune of tens of thousands of pounds.

In my case, it was credit card debt, and I am not alone in that. It started at university and I went down the line of paying off one credit card by transferring it to another on 0% for a year or a number of months before conveniently forgetting that and maxing out the one that I had just cleared. I now pay about £600 a month to clear all my credit cards, which I have had to roll into a loan since my election. I understand what debt is like and I know how once someone is on the conveyer belt, it is difficult to get off, and that is just with credit card debt. That conveyer belt moves faster for those on the high-cost credit side of things—I guess that is the only difference.

A lot of my constituents come to me with debt issues, which is why, following the lead of my hon. Friend the Member for North Swindon, I am getting the staff in my constituency office trained in the debt management side of things—not so that we can issue particular advice, but so that we can point people towards the most appropriate advice.

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[Mrs Chapman]

I have found myself wondering who the hon. Gentleman disagrees with in this debate.

[Andrew Percy]

I am feeling the love in the Chamber today, which is a good thing—there must have been something in the water in Goole this morning. However, the serious point is that that hopefully proves that although there are concerns, and although lots of Members who will vote differently from each other this evening have made incredibly passionate speeches, they clearly all want to see the same thing. We might disagree on how to get to there, but the fact that I am agreeing with so many people is perhaps a sign that there is consensus on this issue, which is a good thing.

[Stella Creasy]

At the risk of increasing the love in the Chamber, does the hon. Gentleman agree that the new clause would put beyond doubt—along with other measures that could be taken to tackle the problems that we all agree exist—tackling the question of regulation and acting on it by the Government? At the moment, we have no guarantee that that will happen in the consumer credit review; rather, we have only vague assertions that they are thinking about it. The review proposed by new clause 11 would guarantee that that would happen, which is why we want action now.

[Andrew Percy]

Of course that is what we all want to see, but we await the response of the Minister. At one point, some Opposition Members seemed to be saying that the Government were going to announce something at the Liberal Democrat conference, suggesting that it would no doubt be a well attended—I will not be going —and joyous occasion. Indeed, the hon. Member for Walthamstow seemed to suggest that the Government already had a solution that they were about to announce in October, so we all look forward to hearing what they have to say.

To end where I began, this is a hugely important issue for a lot of my constituents, as it is for constituents up and down the country, and it is time that we did something about it. It is appalling that people end up on a conveyor belt and seem unable to get off it. I therefore look forward to the Minister’s response, and I genuinely hope that we have some action soon, in the interests of all our constituents.

[Yvonne Fovargue]

At any one time there are 5 million to 7 million people in this country who are unbanked or who do not have a credit history. In the main, they are the people who turn to high-cost lenders, because they do not have a credit history and they have nowhere else to go. Personal debt is rising, with 46% struggling until pay day, up 8% this year. Again, they are the people turning to the payday lenders.

I take issue with the claim that the rate has grown in the last decade. When I started in the advice field 20 years ago, there was one high-cost lender, Provident, which targeted a specific market. Provident went round the estates, using neighbours and talking to people. The company would go in—here I also take issue with the claim that people use the money on luxuries—and find people who needed to replace their broken cooker. The neighbour would come in, look at the cooker and say, “Oh yes, I can lend you that money.” When the loan was nearly repaid, Provident would come back and say, “Tell you what, your sofa’s looking a bit shabby. It won’t cost you much more to get a sofa,” and people would get trapped in a cycle of debt. However, in one respect, Provident was reasonably easy to deal with, because there was one company with a specific target group. It was possible to go round and talk to individuals, target schools and visit the residents groups that the people concerned attended. It is much more difficult now. The explosion of advertising and the normalisation of the process have made it so much more difficult to control the market and tell people what the dangers are.

I had a constituent come to me in February, as soon as he realised my interest in the subject. He could not quite manage to the end of the month—I think his car tax was due—and he had taken out a payday loan. The company immediately took the payment and the interest out of his bank account the next month. He realised that he could not get to the end of that month either, so he took out another payday loan. That carried on and in the end he had 10 payday loans and all his salary was being taken from his bank account. That was a man who was working. Such companies are supposed to check that people can afford to pay the money back and that they do not have other credit, but that did not happen in this case. For such companies, self-regulation absolutely is not working. That company was not an illegal loan shark: it was a legal company and it did not threaten to break the man’s legs, but it left him in a cycle of stress and depression that he found very hard to get out of.

I am also concerned about the double whammy that these companies are operating, as many of the companies that put people into debt are opening debt-management arms to get people out of debt as well. When the financial inclusion fund was finishing last year, those companies were circling like sharks. I cannot tell hon. Members how many companies contacted me basically gloating and saying, “There will be no, or very limited, free debt advice, so people will have to turn to us and you will have to deal with us now.”

I welcome the Money Advice Service because any advice on budgeting is welcome, but that service does not replace face-to-face debt advice. There is a need for that kind of service to be available—and more freely available than it is now. People have what I call behind-the-clock syndrome. They get into debt and cannot face opening the letter about their debt so they put it behind the clock. When they get the next letter, that also goes behind the clock. I cannot tell hon. Members the number of people who used to come into the bureau with a carrier bag whom I would look at and think, “They are in debt”. They would have a carrier bag full of letters that they could not face opening. People are not going to deal with a telephone or online service if they cannot even open a letter. There is a need for free, impartial, face-to-face debt advice and for regulation of debt management companies. Self-regulation is not working. It did not work in America, and when America regulated, those companies started coming over here because they like what they see.

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[Sheila Gilmore]

Unfortunately, it seems that debates on this subject are beginning to follow a pattern: we all agree that high-cost lending is terrible and a scourge of many of our communities and that we would like something to be done about it, but the problem arises in agreeing to act. In February’s Back-Bench debate, the teeth were drawn from the motion proposed by my hon. Friend the Member for Walthamstow (Stella Creasy). The amendment agreed by the majority of Members of the two Government parties removed any impetus for immediate action or any agreement that the regulator should consider doing something. I see exactly the same pattern beginning to emerge. We are told that we all agree that high-cost lending is bad, but when Opposition Members want something to be done about it we are accused of breaching the consensus. In the words of the hon. Member for Brigg and Goole (Andrew Percy), we are the ones who are being political.

[Andrew Percy]

That is not quite what I said. I said that if we were to be political, we could bandy about the suggestion that all Governments had done nothing. I argued that we should await the Government’s response to the consumer credit review. We can condemn them if they do not do what we want, but until then we should at least try to pretend to be on the same side.

[Sheila Gilmore]

I am afraid I do not share the hon. Gentleman’s confidence that the review will indeed cover the issues, although something might be pending. The hon. Member for Solihull (Lorely Burt) is no longer in the Chamber, but I was interested to hear her say that “we” would all be happy to see the regulations “we” would be bringing forward. I do not know who “we” were, but it suggests that the Government’s plans are quite well advanced and that the hon. Lady is privy to their thinking, as we are not. At the end of the debate, I hope we shall hear what the regulations are and what will happen.

Warm words are not enough. Some of the organisations involved have tremendous resources behind them, yet there is so little control of their operations. Their services can seem attractive because they “solve” people’s immediate problems. Regrettably, at this stage credit unions cannot compete. Castle credit union in my constituency had to give up its shop-front premises in the main street because it did not have the resources to continue to pay the rent. It has moved into an office in a community building and is still functioning, but it has much less presence than it would have if it were still on the high street, where people would be able see it from the bus and pop in when they were doing their shopping. Now that it is tucked away in the community office, people might not know where it is. The situation is not helped by the fact that the local community newspaper, which used to advertise such facilities, has had to shut up shop owing to cuts in its funding. That will make it even harder for people to find the credit union.

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[Chris Leslie]

I must correct the hon. Lady. I know that there is a review of sorts going on, but it relates to credit card lending and high bank charges on lending. The letter that my hon. Friend the Member for Walthamstow (Stella Creasy) received in May from the Under-Secretary said that the high-cost credit market

“was not specifically included in the call for evidence”

for the current review. That was what the letter of 25 May said—from the same Minister, incidentally, who refused to meet my hon. Friend.

The Financial Secretary is far too relaxed about this issue, and the Government are not exercised enough about it.

[Andrew Percy]

rose—

[Chris Leslie]

Members of all parties, including the hon. Gentleman, to whom I may give way in a moment, have made the point that there is great concern among our constituents in our surgeries about the real suffering and punitive charges that they sometimes face. The organisations in question admittedly engage in legal lending, but their activity feels immoral to many of us.

My hon. Friend the Member for Makerfield (Yvonne Fovargue) said that help from the financial inclusion fund ought to be there for our constituents. The Minister tried to explain that that fund will remain for another nine months, but as my hon. Friend said, it will end, and for those who struggle even to open the envelopes containing the bills as they stack up, there is no substitute for such face-to-face advice. The Government need to do better to ensure that face-to-face advice services remain and do not fall away when the cuts to them are compounded by local authority cuts.