Financial Services Bill

Baroness Grey-Thompson Excerpts

Wednesday 28th November 2012 Lords Chamber

[The Lord Bishop of Ripon and Leeds]

My Lords, I share the gratitude of the House to the noble Lord, Lord Mitchell, to my right reverend friend the Bishop of Durham and to others for bringing forward the amendment, and to the Minister for his response. I could talk about examples in Leeds very similar to those which people have raised. However, I will raise two particular points. The one point at which I was concerned at the Minister’s response was when he talked about the danger—which I acknowledge—of driving people into the murky world of illegal loan sharks. That is true and it can happen, but it is very important that we do not allow it to dominate the way in which we establish these provisions.

Where illegal lending is taking place, it needs to be dealt with by prosecution. We need to encourage the police to take action. That should not prevent us from being very firm in the way in which we—the law—control the debt industry. The Minister cited Japan as a good example of a society where that control appears to have worked. It would be interesting to see what contrasts there are between Japan, France and Germany, to ensure that we provide proper control and do not give in to illegal loan sharks because of their power.

I am grateful to the noble Baroness, Lady Kramer, for raising the point that there needs to be credit available. One thing that I have not heard very much about in these debates, although we talked about it often in the past, is the role of credit unions. Those unions seek to tackle debt but their growth has been sadly limited in this country and they appear to be unable to provide the necessary cover to give security to those struggling in our society, although the work that they do is excellent. I hope that as we go forward in discussing the issue of debt, we shall encourage credit unions to play a much greater part in providing a way forward and one answer to the major issues that we face.

[Baroness Grey-Thompson]

My Lords, I very much welcome the words of the Minister as I, too, put my name to the amendment. It is essential that we get this right because it is about people who are already in very difficult financial situations. The UK has one of the largest consumer lending markets in Europe, alongside those of France and Germany, but they have their rates capped. I will say a few words on the scale of the issue, which is important. There are 1.75 million people without transactional bank accounts and 7.7 million accounts without credit facilities, so it is very easy to see why people resort to payday loans.

One of the starkest things I read was that between April and May 2011 there was a 58% rise in people applying for payday loans via moneysupermarket.com, which means that an estimated 4 million people are using these loans, with the amount advanced exceeding £2 billion per year. In 2004, that amount was £100 million. Nobody wants to see more people in poverty. The noble Baroness, Lady Kramer, is absolutely right that the devil is in the detail. I look forward to the response of the noble Lord, Lord Mitchell.

[Lord Glasman]

My Lords, I will declare an interest. I was involved in the anti-usury campaign with London Citizens after the crash of 2008. I very much want to acknowledge the work of Stella Creasy in intensifying and continuing the campaign, which was based on the common good—on an alliance between the secular and those of faith to talk about a basic issue. Before we get too carried away, I will say that not since 1854 have there been any statutory constraints on interest rates. Everything else was voluntary but, in 1854, Bentham’s influence led to that. It followed the changes in abolishing usury laws in the Long Parliament in the 1630s, so we have to say that we are at an absolutely exceptional moment. There is a consensus on a cap on interest rates, which has not existed in our country for 400 years.

What it brings to our attention, and what I wish to share in honouring my noble friend Lord Mitchell for raising this historic amendment and the Government for responding to it, is the terrible condition of the poor. To quote someone who has not always been popular in this House, the Pope, usury is a way in which the rich prey upon the misfortune and troubles of the poor. I want to share with your Lordships that this is urgent; it is happening again and Christmas is coming. Overwhelmingly, it is not the unemployed but the working poor who are taking these loans.

I will raise two issues for future discussion, as we have reached such a fantastic moment of consensus. The first is in relation to credit unions, which the right reverend Prelate the Bishop of Durham mentioned, and regional banking. The proposal that London Citizens put forward, which I do not think sounds outlandish now, is that 5% of the bailout should be used to endow local, non-usurious lending institutions. The way in which the burdens of the crash have fallen on the poor is indecent, and we have to look at credit arrangements. I acknowledge what the Government have done in freeing up credit unions, but they do not have adequate resources or reach, and the establishment of new, non-usurious lending institutions in the regions of our country is the only way forward.

The other important issue—if I might interrupt the Minister’s conversation—is that data show that there is more illegal lending in Britain than in Germany. There is a 20% cap in Germany. I am not going to be bounced into any position, but it is still the case that if you put any constraints on the power of money, it automatically leads to illegal lending.

The other thing that we need to address is a living wage. When people work, they should be paid enough not to have to go into poverty. We have to build on this and intensify the conversation and the common good between secular and faith institutions. I commend the lead taken on this because the fundamental issue of our time is that the biggest growth area in our economy is debt, and overwhelmingly it falls on poor families. We need to address it as a matter of intensity and urgency.