Affordable Credit for People on Low Incomes

Debate between Faisal Rashid and David Crausby

Wednesday 5th December 2018 Westminster Hall

[Faisal Rashid (Warrington South) (Lab)]

Thank you, Sir David. I also thank my right hon. Friend the Member for Birkenhead (Frank Field) for securing this debate to highlight some of the appalling and exploitative lending practices that target many of the most vulnerable people in our society.

Despite the welcome demise of big payday lenders such as Wonga, people without enough to get by remain over-exposed to manipulative lending practices. A leading debt charity found that an estimated 1.4 million people used high-cost credit for everyday household costs in 2017; the figure was up from 1.1 million in 2016. High-cost credit keeps many trapped in a vicious cycle of indebtedness just to make ends meet. It is a scandal that those who are least able to afford it are left with no choice other than to accept the highest lending rates.

With in-work poverty on the rise, the Government must do more to reform the broken credit model and tackle the persistent debt spiral into which many working families have fallen. As I have witnessed in my constituency of Warrington South, credit unions constitute a commendable community initiative that seeks to prevent other people from falling into the trap of high-cost borrowing; but without substantial Government support, such alternatives struggle to address the problem fully. Often, low-income households are unaware of or unable to access affordable credit provision in their local area or nationally.

The Government must commit to a comprehensive long-term programme to expand the provision of community lending to ensure that those struggling to make ends meet can access alternatives to high-cost credit. At present, the Government appear simply to be making matters worse. I have been contacted by several constituents who have had to take out loans as a consequence of the Government’s disastrous implementation of universal credit—a flagship Government social security policy. Provision of access to affordable credit is a potential lifeline to many.

I hope that the Government will begin to take a proactive approach to solving this critical issue. It involves not just payday lenders like Wonga, but banks and building societies. There is a huge difference between interest rates for someone borrowing £1,000 and someone borrowing £20,000. The interest rates are so different: they range from 20% to 6%. We need to do something about that and ensure that provision is appropriate and affordable for people in need.

[Sir David Crausby (in the Chair)]

I think that the Minister wants about 10 minutes to respond to the debate. Is that right?