Household Debt

Baroness Coussins Excerpts

Monday 13th November 2017 Lords Chamber

[Baroness Coussins (CB)]

My Lords, I, too, am grateful to the right reverend Prelate for introducing this important debate, and I remind the House of my interest as president of the Money Advice Trust, the charity that runs National Debtline and Business Debtline. Last year, these free advice services helped 200,000 people by phone, with 1.3 million visits to their advice websites—figures which point to the scale of the UK’s household debt problem.

Levels of household debt are indeed increasing significantly, as noble Lords have already heard, with consumer credit growth at around the 10% mark, and more than £204 billion in outstanding credit card, personal loan and other balances. Of course, this paints only a small fraction of the picture, because we are talking not only about mortgages but increasingly about arrears on household bills. The proportion of calls to National Debtline about council tax arrears, for example, has risen from 14% a decade ago to 25% last year, so it is essential that any debate around household debt reflects all these problems and not just consumer credit.

Our debate this evening is on the Government’s assessment of the risks posed by household debt levels, and they are substantial. This is true in an economic sense, as the Bank of England’s Financial Policy Committee has warned, but it is true also in a personal sense for those struggling to cope with their finances. Debt problems can have severe consequences for relationships, employment, mental health, physical health and a person’s general well-being.

The high level of parliamentary interest in this issue is given welcome focus in the other place by the Treasury Select Committee’s new inquiry into household finances, and in this Chamber through the passage of the Financial Guidance and Claims Bill. The new single financial guidance body, working in partnership with advice charities such as Citizens Advice, the Money Advice Trust and StepChange, will be key in reducing the risk that household debt poses to people’s well-being.

The “breathing space” proposals, which have already been mentioned, are also a positive development and were discussed in detail in your Lordships’ House at the Report stage of the Financial Guidance and Claims Bill. As I said during that debate, it is essential that any breathing space scheme include public sector debts, too, such as council tax. We must get this scheme right so that the risks of household debt both to individuals and to the economy as a whole are reduced.

There are many other things that the Government could do to reduce this risk still further. I want briefly to mention just two. The first concerns the recommendations of the group of charities behind the Taking Control campaign, which seeks fundamental reform of the regulation surrounding enforcement agents—the people we used to call bailiffs—whose actions can cause significant distress and detriment to people already in a vulnerable situation. Research by the charities found that reforms passed in 2014 and intended to protect people from unfair practices in this industry have been only partially successful, and in some cases have created new problems. I urge the Government to incorporate bailiff reform of the kind advocated by the Taking Control report published in March into their wider approach to the problem of household debt and in addition to a breathing space scheme. I would be grateful if the Minister could address this specific point in his reply.

Secondly, I welcome the financial inclusion policy forum that the Government are to establish. This follows the recommendation of the Financial Exclusion Committee of this House. I would be grateful if the Minister could indicate the timetable for setting up this forum and say whether the debt advice sector will be represented on it.