High-cost Credit

Debate between Chris Evans and David Wright

Thursday 5th September 2013 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

I beg to move,

That the House has considered high-cost credit.

I thank the Backbench Business Committee for granting us time for this afternoon’s debate, which takes me back to my maiden speech in this House, just over three years ago, in which I raised this very issue. My reason was simple: I grew up in the south Wales valleys, where doorstep lenders were as much a feature of the towns and villages as the coal slagheaps from the mining industry. Although the valleys have changed and are now green and beautiful again, one thing has not changed—the loan shark, whether legal or illegal, is still a regular visitor to the terraced streets of my youth.

Despite heavy campaigning by Members on both sides of the House, I still have constituents trapped in the appalling cycle of debt. Indeed, in March 2012 I tabled a ten-minute rule Bill calling for the introduction of legislation to tackle the problem of financial exclusion. Based on the US Community Reinvestment Act, it called on banks to work with community lenders in areas where the banks have only a limited presence. It was my hope that such a development in fair finance would ensure that financial exclusion did not continue to push families into high-cost credit.

My Bill was formulated against a backdrop of the increasing market for short-term loans. Just recently, Wonga announced that profits after tax had risen by 36% to £62.5 million in 2012. Whether we like it or not, people will always need money for an emergency—such as a car repair or a new washing machine—and with many of the mainstream lenders not even in the market it is the short-term loan companies to which people will turn. To put it simply, we are not going to abolish the sector. If we do that, we will do nothing but push money lending underground. Families in communities such as mine might be tempted to borrow from people who might offer unattainable terms and conditions and many of those lenders might even resort to criminal behaviour if money is not repaid to their satisfaction. That is not what anyone would want to see.

That does not mean there is no room for improvement in the present market. At present, payday loan companies are expanding into new markets and target customers who previously would have borrowed money from friends and relatives. Last month, a study by the housing charity Shelter Cymru and the citizens advice bureaux in Wales warned that nearly half of adults in my native Wales—some 48%—struggle to afford rent or mortgage payments.

One in six mortgage or rent payers in Wales does not have any financial safety net such as insurance or savings and 12% “struggle constantly” to make ends meet. Citizens Advice in Wales says that it has seen a 555% increase in the number of people asking for advice about payday loans. Sadly, whether we like it or not, unlike the future of households across Wales, which have experienced the second biggest drop in earnings in the UK since 2010, the future of loan sharks and payday lenders is more secure than ever.

Despite the Archbishop of Canterbury’s announcement of plans to use the weight of the Church to boost credit unions so that they provide a real alternative, the Church is up against a considerable commercial opponent. In the past 12 months, the amount that the biggest five payday lenders spent on advertising rose by 26% to an incredible £36.3 million. My hon. Friend the Member for Sheffield Central (Paul Blomfield) pointed out while introducing his private Member’s Bill in July that the payday loan sector was worth just £100 million in 2004 and is now, less than 10 years later, estimated to be worth more than £2.2 billion.

Since 2011, the average amount owed on payday loans has increased by £400 to £1,657. People now owe more than a whole month’s income on payday loans. Over the past few years, there has been a very aggressive marketing strategy by these companies. The more payday loans are advertised, the more people will see them as a mainstream solution and will not look to other more cost-effective ways to borrow or make ends meet.

[David Wright (Telford) (Lab)]

My hon. Friend makes the strong point that advertising and new technology are promoting those companies. One way we can tackle this is by making credit unions more visible on the high street and we have been trying to do that in Telford. We need to develop strategies to give credit unions a higher profile and make them more mainstream on the high streets so that more people will use them.

[Chris Evans]

I agree entirely with my hon. Friend. As I said before, we are faced with an absolute juggernaut of advertising. A credit union might promote itself to 70 people whereas a payday loan company can promote itself to 7 million if it puts its advert on television at the right time. As I develop my argument, I shall suggest strategies to take on the goliath that is the payday lenders.

Finance Bill

Debate between Chris Evans and David Wright

Monday 1st July 2013 Commons Chamber

[Chris Evans]

I feel as though this is part two of my speech. I listen to Government Members, and I hear the sound of the creation of two Britains. We have the Britain of the elite who are protected by the Government, who bring about tax cuts for the most affluent in our society. Then we have the other Britain—people who are playing by the rules but have seen their benefits squeezed, their tax credits cut and their council tax benefits cut. When they go shopping, their bills have increased because of the VAT increase. Nor is this society encouraging work, because work does not pay. Those people in work can be reliant on the benefits system, but the policies of the coalition Government are skewed against them—the vast majority of people in this country who are playing by the rules and want something better from their lives.

I feel sorry for the hon. Member for Eastleigh (Mike Thornton), who has not been a Member for very long. He is in his place alone as we challenge the Liberal Democrats on their approach to the mansion tax. As on tuition fees, VAT, tax avoidance and the tax cut for the most affluent, what they said in opposition, when they sat on this side of the House with no hope of being in government, was a different kettle of fish from what they say in government.

I can never clear my mind of the image of the Deputy Prime Minister, in a party political broadcast, implying—I do not wish to use unparliamentary language—that anyone who was not a Liberal Democrat was a teller of mistruths. Students remember that party political broadcast saying that tuition fees would not go up under any Liberal Democrat Government. It was a different matter when they found themselves in government.

In February, the Deputy Prime Minister said:

“I continue to believe we should ask for what would be a modest contribution from the very wealthy, either in the form of a Mansion tax—a 1% levy on properties worth more than £2m—applied just to the value over and above £2m; my preferred option. Or, alternatively, we could introduce new council tax bands at the top end, again, affecting properties worth over £2m…Nothing could do more to demonstrate a commitment to greater fairness in our tax system. I will continue to make this argument, in this Coalition and beyond. My approach is simple: taxes on mansions; tax cuts for millions.”

What did the Deputy Prime Minister do in the coalition? Did he sit there and fight for a mansion tax? No, the evidence—and we have to go on the evidence—is against it. In every major decision that the coalition has made, many of them unpopular, the Deputy Prime Minister has been found wanting. Let me explain something to the hon. Member for Eastleigh, who, in fairness, is the only Liberal Democrat Member who has sat through this entire debate. If that is who his leader is—if that is what his leader is about—he should ask whether the Deputy Prime Minister is equipped to lead the Liberal Democrats into the next election.

[David Wright]

It gets even worse for the Liberal Democrats. Not only did the Deputy Prime Minister say in that discussion point that he was a supporter of the mansion tax, but the Business Secretary went on to say to the BBC in March this year:

“Nick Clegg and I are very strong supporters of the mansion tax”.

I am really pleased to hear that, and I am sure my hon. Friend will be, too. I await to see how they will vote in the Lobby this evening.

[Chris Evans]

I, too, hope to see them in the Lobby, but I am sure that they will not be there. That is the wonderful thing about the Liberal Democrats: it is the only party that can support something—have the bare-faced cheek to stand up in favour of something—and then vote for the exact opposite in the Division Lobby. That is what the Liberal Democrats should remember: in the marginal seats that they need to hold on to, they will be judged on their priorities—[Interruption.] Does the hon. Member for Eastleigh want me to give way to him, or is he happy to listen? [Interruption.] Indeed, we do not usually hear from a Liberal Democrat.

The Liberal Democrats will be judged on their priorities, and their priorities have not been what they said they would be. They are not for the students; they are not for the elderly; they are not for the poorest paid in society: they are simply there to prop up this coalition Government. They are becoming nothing but voting fodder for this Tory Administration. I notice that the Tory Members were nodding when I said that. If any further proof were required about who is in the senior part of—

--- Later in debate ---

[Chris Evans]

Yes, I do. I think this is a win-win situation for everyone. Yes, I have said that we got the 10p tax wrong, but I think a lot of employers would welcome a 10p tax rate. As I have said here before, Opposition Members agree that work is the only way out of poverty, and a mansion tax could provide a way forward on that.

The new clause deals with a mansion tax. Labour has often been accused of having no policies and of not setting out our policies or of not being forthcoming enough, but we have said that we need to introduce a mansion tax to bring about a 10p tax cut and bring some fairness into society. Fair taxation should not be a Labour issue, a Tory issue or a Lib Dem issue; it should be across party. Fair taxation should interest us all, but without a fairer and less complex system, we cannot hope to achieve what we want, which is to see more people in work, paying their taxes and bringing down the deficit that way. With that, and after a number of interventions from you, Mr Deputy Speaker, I shall sit down.

[David Wright]

I was in the Chamber at the opening of the debate, and I would like to make a brief contribution on this subject. I am keen to see us move the debate forward a little on the issue of progressive taxation. My hon. Friend the Member for Islwyn (Chris Evans) was right to say that the Labour party was wrong to abandon the 10p tax rate before the last election, as it caused a good deal of concern in constituencies right across the country. It is important that we reassess that policy position now.

It is useful that we are matching the commitment to reintroduce the 10p band with a proposal for a mansion tax, linking the two objectives, and I am particularly supportive of the mansion tax. As we heard in an earlier segment of the debate, one of the key issues is tax avoidance, and Government Members made great play of the fact that the higher rate of income tax introduced at the end of the last Labour Government was not going to deliver much revenue because people would attempt to avoid it. I can understand that argument, but I think they are wrong, because we did not have a long enough period to see it work though, and not enough time was given to allow the new top rate we brought in to bed down.

One thing that can be said of the mansion tax is that one can with certainty ensure that income is being delivered for the Exchequer. Clearly, by their very nature, properties do not move. Some Members have referred to the possibility of revaluation of the council tax base. I do not think that there should be a broad revaluation in England at this stage, but I do think that it would be logical to apply a mansion tax to the largest properties in the country, given the need to generate a tax system that is fair and progressive.