High-cost Credit

Debate between Chris Evans and Justin Tomlinson

Thursday 5th September 2013 Commons Chamber

[Chris Evans]

As I have said, we need an innovative approach because the payday lenders have become huge and they are a first-stop shop for anyone who needs money. We need to examine how credit unions are funded and to let people borrow through the Post Office.

In addition, yesterday I spoke to the UK Cards Association and asked whether there was a way to get credit cards to impose a small limit and micro-manage them in some way. It was very receptive to the idea. My argument was that then the big banks could be involved and they could use their own account management techniques. It would be a win-win for everybody in many respects. A decent interest rate could be charged on a credit card and the banks could then manage people who need short-term loans into mainstream banking. That is the way forward. I have every sympathy for people who need this money, but the way forward is to find a way with the big banks to manage people into mainstream banking.

[Justin Tomlinson (North Swindon) (Con)]

I welcome much of what is being said, but I have a word of caution. An unauthorised overdraft in a mainstream bank is equivalent to 80,000% APR. We may not want to signpost people towards that.

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Before the hon. Member for Islwyn (Chris Evans) concludes his remarks, I gently remind him that the recommended period for opening a debate is 10 to 15 minutes and he has now had 19 minutes. I appreciate that he has taken interventions.

Opportunities for the Next Generation

Debate between Chris Evans and Justin Tomlinson

Tuesday 13th September 2011 Commons Chamber

[Chris Evans]

Has Christmas come early? Is this the pantomime season?

I come to this debate remembering the experience of the 1980s. We cannot talk about opportunities for the future without thinking about that period. I grew up in the south Wales valleys, and I remember the headmaster saying to us on our first day at school, “Some of you will bring joy to the school. A tiny minority of you will make us proud and you will go to university. An even smaller minority will get into trouble with the police and bring shame on the school. The vast majority of you are only good for factory fodder, and until that time comes, we are going to make this the happiest period of your lives.” [Laughter.] We can laugh at that, and we can look back and mock it, but he was putting across the poverty of ambition that we felt. We felt ignored by the Tory Government; we did not fit in with Thatcher’s economic miracle. We simply wanted one thing. Well, we wanted a few things, actually. We wanted to feel safe in our own homes, we wanted to feel secure in our jobs, and we wanted hope for the future.

But, as we have heard today from the Opposition Benches, there is no hope for the future. Education maintenance allowance has gone and tuition fees have trebled, but what do we hear from the Minister? “We can’t do anything different. It’s the deficit. It’s the only way.” I congratulate the Whips, because that is all I have heard since I came into the House: “It’s the only way; it’s the only way.” Well, if the Minister wants to find a different way, I suggest that he phone the Welsh Assembly and make an appointment with the Education Minister there, Leighton Andrews. He should then jump on the tube, go to Paddington, take the train to Cardiff and go and speak to him. He will hear how our students in Wales are paying only £3,000 in tuition fees, and how we have managed to keep the education maintenance allowance. Then let him come back here and say, “It’s the only way.” In Wales we have a Labour Government. In Wales we are delivering for young people. That is the truth.

I have been hearing about the wonderful idea of apprenticeships, but there is also a huge problem with them. I pay tribute to the companies in my constituency, including Axiom, Abingdon Carpets and Pensord, that are offering wonderful apprenticeships; those schemes will build for the future. They face a problem, however, and I think that it comes from the 1980s. Many of the candidates do not have the necessary skills, such as timekeeping or communication skills, and that puts them at a disadvantage before they start. We need to look at the education system.

[Justin Tomlinson (North Swindon) (Con)]

I congratulate the hon. Gentleman on his eloquent speech, but will he confirm that those very same potential apprentices were educated under a Labour Government?

[Chris Evans]

The apprenticeship scheme was during the Labour Government, and we have a Labour Government in Wales. It is devolved. [Interruption.] Will the hon. Gentleman repeat his question?

[Justin Tomlinson]

Is it not the case that those potential apprentices who do not have the necessary skills were educated under a Labour Government?

[Chris Evans]

I apologise for not having caught part of the hon. Gentleman’s question. The point I am getting at is that this problem has come down through the years. Sometimes the problems have not been addressed by any Government. As my hon. Friend the Member for West Bromwich West (Mr Bailey), who is no longer in his place, said, because of the decline of the manufacturing base, a number of families had no jobs and were on benefits, as there was a benefit culture there. That permeated through the education system. We need to take action now to ensure that when apprenticeships are available, those people can go for them.

Co-operatives and Mutuality

Debate between Chris Evans and Justin Tomlinson

Thursday 30th June 2011 Westminster Hall

[Chris Evans]

At the end of the day, I have to get political. As I always say, I am from a mine-working area, and the previous Conservative Government were no friend of the miners. I cannot get away from that; that is what I was born into, that is what I grew up believing and that is what I still believe.

I am extremely proud of those communities, and I am proud to be here as a Labour and Co-operative Member representing them, but there was a dark side. I am perhaps being romantic again, but I remember being out on the street kicking a football against the wall every Monday evening after school. The women would shout at us children and move us on.

At about half-past six, however, we would all rush through our doors and slam them shut. We would see the white XR3i coming down the hill, if anyone remembers those flashy cars. A woman would pull up and get out. I can see her now with her bleached blonde hair. My mother would say, “Caked with make-up, she is. She stinks of Estée Lauder perfume,” not that I knew what Estée Lauder perfume smelled like, but that is exactly what my mother said.

The woman was there with her little book, her little bag and her pen, and everybody would run inside. She would hammer on the doors. She was the woman from Provident, and everybody in our street had Provident. If people did not pay her, she would bang on the door and say, “I know you’re in there, love. You owe me £400.” If people had made the mistake of leaving the door ajar, she would push it open and go, “Where’s my money?”

When I was first elected, I found a chitty from when my mother took out a Provident loan in 1987, and the annual percentage rate was 150%. Years later, I went to work for Lloyds TSB, and I thought there was no way that Provident could still exist, but it does.

When the basic bank account was introduced, I felt the banks often did not want to know about people with a basic account. These people did not have a credit score for loans or credit cards, so when they needed money, they had no access to it. When they were asked how they were getting by, they would say they had Provident or Shopacheck and that someone would come round to their house to pick the payments up.

[Justin Tomlinson (North Swindon) (Con)]

It is a pleasure to intervene in the hon. Gentleman’s flowing speech. As I have said in many debates, the other problem with firms such as Provident is that they build relationships. They turn up at people’s doors and suggest ways in which their customers can spend money. They might say, “Christmas is round the corner. Have you sorted your Christmas presents?” They take advantage of the most vulnerable people.

[Chris Evans]

The hon. Gentleman is absolutely right. I was coming to that. This culture is very much engrained in the valleys. My mother, my grandmother and all my aunties and uncles had Provident. However, this is not just about Provident; it is also about paying off the money for the television through the slot in the back. People put a pound in, and they had 10 hours of television. In that way, they could pay off their television. It was always a nightmare, because the pound was guaranteed to run out just at the conclusion of “EastEnders”, and we would never know what the cliffhanger was. The hon. Gentleman is absolutely right that once the television had been paid off, the firms would come round and say, “The carpet’s looking a bit bald. Do you fancy a new one? What about a new washing machine.” They would then sign people up.

This problem of high-cost lending still exists. I cannot believe that I am going to admit this in a Westminster Hall debate, but I actually watch Jeremy Kyle; I am ashamed to admit it, but I have watched his show. As I was waiting for the all-important DNA tests and the lie detector, the adverts came up. One was for a company called Wonga.com. It was wonderful; Wonga was revolutionising same-day lending. I thought, “This is marvellous.” The advert said, “You’re in control.” I thought, “This is brilliant.” Then, however, I looked at the APR, which was 4,125%—pure, utter profiteering.

I did not think any more about the company. Then, however, I got on the tube on Monday morning, and there was an advert for Wonga.com, saying, “You’re in control.” The APR was more than 4,000%. I cannot get away from this company. I was watching “Match of the Day” and the press conference after the match. There were adverts for Barclaycard, but the Blackpool players also had the word “Wonga” right across their chests. Such things give the company the legitimacy that it does not deserve.

There is a way of out this. Yes, we can have legislation, and I pay tribute to my hon. Friend the Member for Walthamstow (Stella Creasy), who has done a lot of work on the issue, and I am sure she will speak about it later. However, there is a more intrinsic way forward, so let me move on to credit unions.

The other day, I went to Islwyn Community Credit Union with my hon. Friend the Member for Harrow West (Mr Thomas)—I will not talk about our earlier visit. We talked about how the credit union had lent a total of £1 million to the most vulnerable people. To pick up the point made by the hon. Member for East Hampshire, the people at the credit union said it was all very well lending money at competitive rates and allowing people to save, but that people did not know about credit unions. Provident, Safeloans and Shopacheck will knock at the door, and people can go to Wonga, Ocean Finance or someone else, but they do not know about credit unions. People are hearing about them by word of mouth and they are hearing about getting more protection points.

The other day, I was proud to visit Trinant school—I must give it a plug. If anybody wants to see a credit union, they should go there to see the children’s enthusiasm. The pupils have formed their own saving scheme, which is run along the lines of the Islwyn Community Credit Union. Those children have saved £600. The scheme has 56 members. One of the wonderful things about the scheme is not only that the children are saving, but that they are so enthusiastic that they are going home to their parents to tell them about credit unions. They are promoting credit unions in that way. This is an excellent project.

When the Minister sums up and talks about credit unions, I hope he will talk about Wales. Everybody in Wales has access to a credit union, and I really think the coalition Government should have that as an aspiration more widely. We should also take legislative obstacles down. I would ask the Minister to lower the minimum age necessary to join a credit union, which is presently 16—the same as the minimum age people need to be to serve as a company director. If we take such steps, we can promote credit unions, good lending and good saving.

I turn now to the mutualisation of the banks. I have been accused of banging on about the banks, but, like many Members, I am disappointed that Northern Rock will be sold privately. I hope the Government can look at introducing a mutual element, because we need that in society. In the middle of the banking crisis, there was one bank that did not need bailing out and which had run its business ethically: the Co-operative bank. When we look at the banking sector again, I hope the Co-operative bank is one of the examples we look to and learn from.

--- Later in debate ---

[Justin Tomlinson (North Swindon) (Con)]

I intend to consolidate some potential interventions in a short and efficient speech, partly in recognition of you, Mr Amess, because your role as chairman of the all-party group on small shops reminded me of a few extra elements that have not been touched on. The first is the impact on the high street. The Government have commissioned Mary Portas to review the high street, and having avidly watched her TV programmes for some years, I know that her main mantra is about customer service. All too often in this great nation of shopkeepers, customer service is appalling at best. Through the principle of co-operatives, employees are directly involved and have a direct incentive to offer far better customer service, and to help to rescue our high streets. That is an element that we should consider.

Some hon. Members have talked about credit unions, and I intervened several times. It is essential to the interests of the most vulnerable consumers that they have access to loans on which their interests are put at the heart of decisions, in stark contrast with the doorstep lenders who prey on people, and encourage them to get into a long-term cycle of expensive debt, and end up buying dodgy-smelling perfume. There is so much consolidation of banking services on the high street that there is less competition, and that is another opportunity for the credit unions to step in. Access to services is key, because vulnerable people often do not know how to access more affordable credit, and the help and advice that come with it.

I want to issue a slight warning to the hon. Member for Islwyn (Chris Evans) for picking on Wonga. It does not lend to vulnerable consumers, who must go through rigorous checks. If the headline interest rate is 4,400% APR, and if someone is two days from their pay day and wants to borrow £100 to tide themselves over, they will be charged a product fee of £5.50 plus 4,400% APR of £1 a day, so they will pay £7.50 for the privilege. If they just go overdrawn at their bank, Lloyds TSB, for example, would charge a flat fee of £10 a day plus £2.50 for the debit card charge, which makes a total of £22.50 so they will be £15 worse off. We must be careful not to fall into the traps of some headlines.

The way to get round the problem is to support my financial education campaign so that more people understand the deals that are put before them. However, I was testing some people on Wonga’s APR yesterday, and not one person was able to calculate the interest rate, including a Treasury manager.

[Chris Evans]

I agree with some of the hon. Gentleman’s sentiments about APR. I have always said that people should be quoted a flat rate of interest, which is simpler and easier to understand than APR. As the hon. Member for Chatham and Aylesford (Tracey Crouch) said, I used to work for Lloyds TSB, and I have regretted it every day since, but I have always said that a flat rate is simple.

[Justin Tomlinson]

I thank the hon. Gentleman for his intervention. In an ideal world, we would have cash-for-cash comparisons if people wanted to borrow money. I echo the comments about doorstep lending. The Minister feels strongly about it, and it really needs to be dealt with. The sales techniques are nothing short of disgraceful.