Financial Guidance and Claims Bill [ Lords ] (Second sitting)

Jack Dromey Excerpts

Thursday 1st February 2018 Public Bill Committees

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I had anticipated that we would deal with amendments 27, 29 and 39 together. I thought that they would have been grouped, but I will address amendment 27 to start, and take your guidance from there, Mr Rosindell.

The hon. Member for Birmingham, Erdington proposes in amendment 27 to amend the Bill by a single word. The strategic function of the Bill as drafted and its three elements have been carefully designed, and I believe that the amendment should not be made. Through its strategic function, the guidance body will bring together interested partners in the sector, various services, the public and voluntary sectors and the devolved administrations with the aim of improving the ability of members of the public to manage their finances effectively. To that end, the body will develop and co-ordinate a national strategy.

The Money Advice Service has been undertaking that vital role to date, and key stakeholders agree that that important work should continue and be expanded. The national strategy will succeed only if the new body works effectively with its many partner organisations in the financial services and other sectors in a collective effort with shared ownership and accountability. Indeed, the premise of the national strategy is that one organisation working independently has little chance of making a great impact, but many working together have more. The role of the new body will be to drive the process forward and oversee its implementation, but not to be solely responsible for the delivery of the strategy in its entirety. For those good reasons, I urge the hon. Member for Birmingham, Erdington to withdraw the amendment.

[Jack Dromey (Birmingham, Erdington) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Rosindell. Briefly, in the words of the Minister, a national strategy will be pursued at the next stages, including a range of stakeholders and, I suspect, other enforcement bodies. Flowing from what the Minister said, the question is who will drive that at the next stages. The single financial guidance body will clearly and undoubtedly have a pivotal and central function.

[Guy Opperman]

indicated assent.

[Jack Dromey]

I see the Minister nodding his head in agreement. In those circumstances, we look for a dynamic body to do precisely that: drive the national strategy. On that basis, I am content not to press the amendment.

[The Chair]

Amendment 29 is part of the same group. Does the Minister wish to speak?

[Guy Opperman]

Amendment 29 seeks to add another strand to the three existing areas of the strategy set out in the Bill. The Government agree with the hon. Gentleman on the overall principle that the strategy of the new body needs to be future-proof and flexible, to meet the challenges that an evolving modern economy might bring. Clearly the Taylor review is relevant to all those factors, but we do not believe that the amendment is necessary. It lacks a specific focus and would risk diverting focus and resources from the areas that we believe the body should prioritise through its strategic function. As I understand it, the amendment is not sought by existing providers. In the circumstances, I ask the hon. Gentleman not to press the amendment.

[Jack Dromey]

It is not for one moment our intention to divert focus from the body’s core and strategic function. All I would say is that the changes taking place in the modern labour market are immense, complex and often profoundly disturbing. To give one example from my personal history, in 2003-04, alongside Gillian Shephard, I chaired the coalition of support that resulted in the Gangmasters (Licensing) Act 2004. From plough to plate— from the National Farmers Union to the supermarkets—it sought to tackle some of the worst abuses of workers and the undercutting of reputable providers by rogues. My experience—like that of all Committee members, I suspect—is that there is much in the modern workplace and the world of work that is profoundly disturbing and needs to be tackled. Having said that, the Minister said himself that the body would take account of the demands in the modern labour market.

As far as the Taylor process is concerned, I know Matthew very well and his report contains some valuable proposals, although I do not agree with them all. It is helpful that on the Government’s part there has been a focus on the modern labour market, including the gig economy. In those circumstances, particularly in the light of what the Minister said about the context of the Taylor review and the demands of the modern labour market, I shall not press the amendment.

[The Chair]

To clarify, amendments 27, 29 and 39 are part of a single group, so any Member who wishes to speak to any of the three amendments must do so now.

[Jack Dromey]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Jack Dromey]

I beg to move amendment 28, in clause 3, page 3, line 31, at end insert—

“(9A) In seeking to improve the provision of financial education to children and young people, the single financial guidance body may advise the Secretary of State that—

(a) Ofsted should take into account the financial education provided by schools when carrying out inspections, and

(b) financial education should be added to the primary school education curriculum.”

This amendment allows the single financial guidance body to, as part of its function to improve the provision of financial education to children and young people, advise the Secretary of State that Ofsted should take account of financial education when carrying out inspections, and that financial education should be added to the primary school curriculum.

Some hon. Members may be surprised by the amendment, but I will explain why it is important. We believe that the provision of financial education to young adults in further and higher education—let alone to primary school children—needs to be improved. Young adults are an important age group not particularly well served under current arrangements. We believe that, where appropriate, education providers should incorporate financial education modules into programmes of study.

Thousands of young people throughout the country leave school without the necessary financial knowledge to approach critical situations such as applying for credit and mortgages. Research shows that 37% of 18 to 24-year-olds hold one or more credit cards, an overdraft or another form of borrowing, with average combined debts of £2,989, not including student loans or mortgages. The House of Lords Select Committee on Financial Exclusion heard that 51% of 18 to 24-year-olds regularly worry about money. Generally, half of all UK adults modestly rate themselves as having some understanding of financial products and services, while 15% say that they have a very good understanding and a minority of just 5% admit to having no understanding. Just 54% of the C2, D and E social classes say that they have some understanding or a very good understanding of financial products and services.

In September 2014, in a welcome move by the then coalition Government, financial education was added to the statutory national curriculum for secondary schools in England. Since then, schools have been required to include financial education as part of mathematics and citizenship teaching at key stages 3 and 4. However, there is still no requirement for English primary schools to include financial education as part of their teaching. In addition, as only 35% of state-funded secondary schools are now maintained schools, the obligation to teach financial education does not apply to nearly two thirds of all state secondary schools.

As the hon. Member for North Swindon (Justin Tomlinson) said on Second Reading:

“We live in a very complex society, with direct debits, standing orders and complicated marketing messages coming forward. Making sure that we equip all people of all ages to make informed decisions is an absolute priority.”––[Official Report, Financial Guidance and Claims Public Bill Committee, 22 January 2018; c. 62.]

The hon. Member for Solihull (Julian Knight) said:

“The development of key skills and knowledge about money matters helps pupils and, indeed, their parents to make wise choices in later life, when innovations in financial technology and online consumer tools—not to mention the march towards a cashless society—will make previous experience and the advice of their elders an unreliable guide.” ––[Official Report, Financial Guidance and Claims Public Bill Committee, 22 January 2018; c. 95.]

In a world in which credit and financial services are more readily available than ever, it is vital that Britain’s young people are given the financial education they need to approach those challenges when they leave education. In the view of the Opposition, it is only through mandatory financial education in both primary and secondary schools that we can be confident that young people will be equipped both to achieve the best possible start in life, and to avoid being exploited by the ruthless.

Returning to my first point, some may ask whether financial education should be taught in primary schools. My experience is that it is crucial that children at young age—primary school age—are involved in crucial discussions that help them to understand the future and the challenges they will face. I will give two examples.

First, Jaguar Land Rover—an excellent company; the Jaguar plant is in my constituency—has a highly developed programme of operating in primary schools. That is because it is the kind of company that looks ahead two to five years, five to 10 years and 10 to 20 years. It always has a particular problem in the recruitment of skilled labour, and it wants, through its work in primary schools, to open up the horizons of primary school children more generally. That is very important in a constituency such as mine, which is rich in talent but is one of the poorest in the country and has high unemployment. In particular, JLR wants to encourage young girls to see themselves as having a future in engineering and car manufacturing. Its strong view is that, without starting that work at that age, by the time people get to secondary school and beyond, preconceptions are formed about what is appropriate for a young girl, and ultimately a woman, to do.

My second example is controversial, although it has cross-party support. I have worked very closely with the admirable Dot Com Children’s Foundation, which collaborates with the police and local authorities. I have seen it at first hand its programme in primary schools that uses a comic book format to teach children to spot risk and harm, to reject any obscene approaches and to know with whom they should talk if they feel themselves threatened. When we embarked down this path in Birmingham, where more than 100 primary schools have now used the programme, I remember some parents saying, “What? At primary school age?” Actually, in a non-threatening way, we absolutely want to make a start in helping children to understand the difference between family and friends on the one hand and those who would seek to exploit them on the other.

I am giving examples of important areas in which primary school children are equipped to deal with the modern world. And coming back to the issue of financial guidance, I suspect that not many primary school children have credit cards. Having said that, however, as they grow up they will need to know how to manage their finances, how to avoid exploitation by those who would seek to exploit their vulnerability and how to get the best possible start in life.

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[Guy Opperman]

I should have said before that it is a pleasure to serve under your chairmanship for the first time, Mr Rosindell, and I welcome you to the Committee.

The hon. Member for Makerfield is right that a significant number of organisations provide, in a primary school setting, particular aspects of financial education in various shapes and forms, whether it is the Association for Citizenship Teaching, MyBnk, the Personal Finance Education Group or a variety of other organisations, and I would happily talk for some considerable period of time and overindulge the Committee on LifeSavers. As she knows, I set up a community bank in my constituency with Archbishop John Sentamu on 5 November 2015, and that community bank has bid for the LifeSavers project in Northumberland, and provides six schools with that financial education. We run six different banks in six different schools in my community. That work is extraordinarily successful. The original pioneer is in Lewisham, which I know the Opposition Whip, the hon. Member for Lewisham, Deptford, will be interested to hear, and the success rate has been wonderful.

The proposal is that the single financial guidance body should have a look at, and then come up with a strategic assessment of, what the provision of financial education of children and young people should be. I take issue with the Opposition on whether Ofsted should judge schools on the basis of financial education. I say, with respect, that it most definitely should not. Ofsted itself does not seek that, so I definitely disagree with paragraph (a) of the amendment. Ofsted, which has been consulted in broad terms, thinks that it would be inappropriate to inspect financial education specifically, since it usually inspects not individual subjects but the curriculum as a whole.

On the broader points raised by the hon. Member for Birmingham, Erdington, the curriculum is ultimately a matter for the Department for Education. He is right that financial education was brought into the secondary context under the coalition Government. Successive Governments have drilled down on the importance of maths, which is an absolute prerequisite and is fundamental to the education of our young people. The maths curriculum has been strengthened to give pupils from five to 16 the necessary maths skills, and I am sure he has seen in his own constituency the success of mental maths and advanced maths in primary schools. We responded to the House of Lords Committee’s report on financial exclusion in a similar way—I make the same case here.

It will be for the single financial guidance body to target specific areas of need, and to match individual funders and providers of education projects and initiatives aimed at children. The amendment is very broad brush. I would prefer the guidance body to be able to zero in on particular areas. That is the purpose of making overall assessment one of its strategic functions. That means that it will be better able to deliver what we all want: enhanced financial education for our children.

We agree about objectives, but I am not sure that we agree about the way forward for delivery. With respect, I invite the hon. Gentleman to withdraw his amendment.

[Jack Dromey]

My hon. Friend the Member for Makerfield made a powerful point about the importance of primary schools as places of contact—sometimes the only place of contact—with people who are struggling in their lives. My experience from a number of projects is that what is done in primary school reads across to a child’s parents, so her point is very valuable indeed.

We can question how this should be done, but it is now public policy that children should be involved in financial education. A valuable start has been made with secondary schools, and we will seek at subsequent stages of the Bill to engage with the Government about how that might be extended further. There are questions about the context for that, including the overall maths context, but that can be teased out at the next stage.

Finally, if there is a coalition of support in the Committee for lobbying the Treasury on LifeSavers, I say: “Yes please, but don’t stop at LifeSavers.” On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Jack Dromey]

I beg to move amendment 30, in clause 3, page 3, line 32, at end insert—

“(d) the understanding members of the public have on how the duties placed on financial service providers under the Equality Act 2010, including the requirements on service providers to make reasonable adjustments, can enhance their ability to manage their financial affairs.”

This amendment would ensure members of the public are informed about what financial services companies need to do to comply with the Equality Act, in particular the duty to put in place reasonable adjustments for disabled customers.

The purpose of the amendment is to ensure that members of the public are informed about what financial services companies need to do to comply with the Equality Act 2010—in particular, but not exclusively, the duty to put in place reasonable adjustments for disabled customers. We are rightly proud of that landmark Act in this country, and I am particularly proud that it was introduced by a Labour Government. There have been subsequent problems with its implementation and, dare I say, without wishing to divert into areas where we would disagree, the implementation of clause 1 of the Equality Act is yet to take place. Having said that, on disability matters, there would certainly be consensus around ensuring that people who have problems with their health and who have disabilities of different kinds get the support that they need and are not taken advantage of.

Under the Act, a person is disabled if they have a “physical or mental impairment” that has

“a substantial and long-term adverse effect”

on their ability

“to carry out normal day-to-day activities”.

In that case, a duty to provide goods, facilities or services falls on providers, employers and a range of other parties. People automatically meet the disability definition under the Act from the day that they are diagnosed with a condition such as cancer, multiple sclerosis or HIV infection.

If an organisation that provides goods, facilities or services to the public finds that there are barriers to disabled people in the way it operates, it has an obligation to act, including to consider making reasonable adjustments. If those adjustments are reasonable for that organisation to make, it must make them. That duty is sometimes described as anticipatory, which means that an organisation cannot wait until a disabled person wants to use its goods, facilities or services, but must think in advance and on an ongoing basis about what disabled people with a range of impairments might reasonably need.

An organisation is not required to do more than is reasonable for it to do—I stress that again—but that depends, among other factors, on its size and nature, and on the nature of the goods, facilities and services it provides. Making disabled customers and their advocates aware of that duty means that they will be able to ask their financial service provider to potentially adjust the GFS it offers and to remove any barriers.

Although I would be the first to accept that there is good practice in the sector when it comes to making adjustments for visual and hearing impairments, that is rarely done in the context of the legal framework. In certain circumstances, where that is not done and where conditions such as a cancer diagnosis or neuro-diverse disabilities such as autism, brain injuries and dementia are not considered, that means that people are let down and there is a failure to comply with the terms of the law. For example, the Alzheimer’s Society reports that 66% of people with dementia need some assistance when using a bank and 80% of carers said that banks need a greater understanding of lasting powers of attorney. On the one hand, there is the legal obligation, and on the other, there is an undoubted need for it to be complied with.

There is no reference to the duty to make reasonable adjustments in the Financial Conduct Authority’s handbook. Frankly, I am surprised at that. The handbook contains provisions set out in legislation that are relevant to the FCA and other provisions made by way of instruments by the FCA. It contains a mixture of rules, which are binding obligations that can result in enforcement action if not adhered to, as well as guidance. The amendment will ensure that disabled people or their advocates are informed about the duty to make reasonable adjustments and that they can use that information to ask financial service providers to make adjustments to the goods, facilities and services they provide, which could include removing physical barriers or making services dementia-friendly.

[Guy Opperman]

It is a pleasure to respond to the hon. Gentleman’s speech. I will make three key points: I will discuss whether the Equality Act applies to this body in future; I want to give some assurances to the House on an ongoing basis, because that really matters; and I will briefly deal with the point about the duty of care.

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Last Monday and today’s debates have shown that all financial services, and all public organisations, have a specific and important duty to all their customers and the consumers that we all serve. I hope that that message has got across to them. There are valuable examples of where they have done it right, and without any shadow of a doubt we should be lauding them. However, in terms of the statutory process in which we are engaged regarding amendment 30 and the application of the Equality Act, I invite the hon. Member for Birmingham, Erdington to withdraw his amendment.

[Jack Dromey]

I actually met Jacci and did a conference with her, and I thought what the hon. Member for Mid Derbyshire said on Second Reading was very powerful and moving, telling the story of a wonderful person and using it as proof positive of why we need to ensure—

[Mrs Pauline Latham (Mid Derbyshire) (Con)]

Is it not true that other financial institutions could do what Santander did and voluntarily sign up to her “Dying to Work” campaign, which would help everybody that they deal with?

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[Jack Dromey]

I strongly agree with the hon. Lady, and that is something we might pursue, including on a joint basis, at the next stages. The “Dying to Work” campaign’s objectives are right. To make the obvious point, she will have seen at first hand what a battle it is for people like Jacci, and I am sure that all of us have come across some very powerful cases in our constituencies. The banks and the financial institutions should absolutely, without hesitation, follow Santander’s lead. Santander is to be congratulated for what it did. Do we have a marketplace where everyone conducts themselves in the same way? No, we do not, so the hon. Lady raises a very valuable point.

In terms of the Minister’s response, it is welcome that, following Second Reading, the situation with regard to the Bill is unambiguous. I want to make two additional points. First, we will return to duty of care later. Secondly, the issue of enforcement is very important. The Equality and Human Rights Commission will have a watchdog role to play, but it is important that, from the start, the single financial guidance body is obliged in law to build into the culture of its operation, as we have argued, oversight of how financial institutions conduct themselves in terms of services, goods and facilities for the disabled.

[Guy Opperman]

I assure the hon. Gentleman that the whole reason we introduced the vulnerable circumstances provision in the Bill was to address that exact point. I cannot stress enough, and I have made the point repeatedly today, that the objective specifically enshrined in the Bill is that the particular needs of people in vulnerable circumstances need to be borne in mind.

[Jack Dromey]

That is welcome. All I will say is that, in our experience, there can be a law or a set of legal obligations, but are they necessarily carried out in practice? In fact, to take the Santander example once again, it took a view that it should do the right thing and that it was obliged by law to do so, but not every provider necessarily takes the same view. The issue of enforcement is key. I stress again that the Equality and Human Rights Commission has a role to play, but at the heart of the SFGB’s operation should be action to ensure that the disabled are not disadvantaged. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 3 ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.

Clause 5

Specific requirements as to the pensions guidance function

[Jack Dromey]

I beg to move amendment 33, in clause 5, page 4, line 13, leave out subsection (2) and insert—

“(2) In section 137FB of the Financial Services and Markets Act 2000 (FCA general rules: disclosure of information about the availability of pensions guidance) after subsection (3) insert—

‘(3A) In determining what provision to include in the rules, the FCA must include a requirement for members of a scheme, or survivors of members of a scheme, to indicate before gaining access to or arranging individual transfer of their pension assets either—

(a) that they have received information and guidance made available under section 5 of the Financial Guidance and Claims Act 2017 (specific requirements as to the pensions guidance function), or

(b) that they understand the nature and purpose of that information and guidance and have chosen not to receive it.

(3B) The rules—

(a) must impose an obligation on the trustees or managers of a relevant pension scheme to satisfy themselves that the requirement under subsection (3A) has been complied with,

(b) may make provision about what is to be, or not to be, treated as a sufficient indication under subsection (3A) (which may, in particular, require indication on more than one occasion in specified cases or circumstances),

(c) must specify that accessing a website or receiving published information does not alone amount to receiving information and guidance for the purposes of the requirement under subsection (3A), and

(d) may include exceptions for specified cases (which may include cases of assets below a specified value, cases where information, guidance or advice has already been received, cases of transfers by way of consolidation and any other cases specified in the rules).’”

This amendment would strengthen the provision in the Bill for requiring members of pension schemes to be given access to guidance in specified circumstances, so as to ensure that guidance was actually received or expressly refused.

[The Chair]

With this it will be convenient to discuss the following:

Government amendment 2.

Amendment 40, in clause 5, page 4, line 24, leave out “may” and insert “must”.

This amendment paves the way for Amendment 41.

Amendment 41, in clause 5, page 4, line 25, leave out from “manager” to end of line 26 and insert “to ensure that, either—

(a) the members of the scheme or survivors of members of the scheme receive information and guidance made available under section 5 of the Financial Guidance and Claims Act 2017 (specific requirements as to the pensions guidance function), or

(b) they understand the nature and purpose of that information and have chosen not to receive it,

before proceeding.”

This amendment would require guidance to be provided to members of a relevant pension scheme or their survivors unless they chose to opt out.

Clause stand part.

Government amendment 19.

Government new clause 1—Personal pension schemes: requirements to recommend guidance etc.

Government new clause 2—Occupational pension schemes: requirements to recommend guidance etc.

[Jack Dromey]

Amendment 33 would strengthen the Bill’s provision for requiring members of pension schemes to be given access to guidance in specified circumstances, so as to ensure that the guidance was actually received or expressly refused. As I will come to argue later, that is an absolutely key point. I underline once again that the term “expressly” is crucial and should lie at the heart of the Bill and what happens during the next stages.

Our proposed default guidance would strengthen the Bill and ensure that more people were protected when transferring their pension assets. Currently, the system of checks and balances for those looking to move their pension assets from a defined benefit scheme are very strong. Members are offered guidance at the time and those moving more than £30,000 must undertake mandatory guidance. However, at a time when more and more defined-benefit schemes are closing than ever before, there is no such safety net for those on defined-contribution schemes. In our very strong view, default guidance would provide such checks and balances for those transferring assets with more value than they may have ever seen before in their lives.

Although the guidance offered by Pension Wise to those seeking to transfer their pension is of great value to many people, the take-up is relatively low and many enter into transactions without proper prior knowledge of their options and the consequences. Once again I refer to the story I told earlier today about the Port Talbot steelworker weeping because of the consequences of his actions and the 20 people he was responsible for who followed his lead.

The lack of a provision for default guidance has resulted in many members of schemes suffering detriment through scams or through making the wrong choice. The current system of signposting advice by pension providers to members of schemes who want to transfer or withdraw their pension pot is not working as it should. The providers, particularly the rogues, have no business interest in making sure that their members receive the appropriate advice and, as such, it is not made as clear as it should be. The right kind of default guidance—strong default guidance—would promote shopping around, better informed decision making and protection against scams.

The amendment would mean that members of a scheme, or survivors of members of a scheme, must either indicate that they have received the appropriate guidance before accessing the pension assets, or explicitly state that they do not wish to receive it. They must state explicitly and beyond any doubt that that is their choice

The service given by Pension Wise is highly respected and is appreciated when it is given. Between February 2016 and January 2017, 94% of people who completed an appointment were satisfied and 93% felt informed about their pension options, compared with 56% of a control group who had not used the service. However, as Pension Wise would be the first to acknowledge, the take-up of the service is extremely low. The number of appointments made with Pension Wise is rising—there were 66,000 in 2016-17—but that is still extremely low compared with the number of pension scheme members exercising pension freedoms.

Latest figures from HM Revenue and Customs show that some 772,000 people withdrew more than £6.5 billion from their pension pots in 2017. An FCA survey found that only one in eight 55 to 64-year-olds who plan to retire in the next two years and who have a defined-contribution pension had used the Pension Wise service in a 12-month period. Although traffic to Pension Wise’s website is quite high, it is not a sufficient substitute for access to tailored and personalised advice. As Baroness Altmann said in the Work and Pensions Committee,

“When you introduce pension freedom into a marketplace that has never really been encouraged to engage with pensions and mostly does not understand much about them, obviously you need an expert to help you.”

The National Employment Savings Trust has said that it was concerned

“that people appear to be making decisions based solely on a read of the Pension Wise website”,

and from what we have been told about the experience of others, that is absolutely right. The main means of promoting Pension Wise advice is through signposting by pension providers and through advertising.

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That is a very broad interpretation of where we are. I am not sure how we can put it into the Bill on Report, but it relates to an issue that I will continue to raise throughout my time in Parliament: people need advice. Allowing advice on the basis of no liability for the advisers would at least mean advice being given where none is given at the moment.

[Jack Dromey]

This has been a good debate, with some powerful contributions. I absolutely agree with the hon. Member for South Thanet on the scale of some of the problems. Those include some welcome problems with auto-enrolment, but also situations in which people with their backs against the wall are being taken advantage of. The sheer scale is immense, so it is hugely important to get this right. As the hon. Gentleman said so compellingly, it is crucial that we should be confident that the mechanism for default guidance is robust and will work.

My hon. Friend the Member for Makerfield made a typically powerful and well informed contribution. A provider recently spoke to me about “pension ignorance”—I am not sure that I would quite use those words, because they sound a wee bit insulting, but I know what he meant. There is a lack of knowledge about pension entitlements, because pensions are very often seen as being in the distance. My hon. Friend was absolutely right to raise that point. As I argued earlier, neither the take-up of currently available advice nor the trials to improve take-up inspire us to believe that the Government have got it right yet.

The Minister described our amendment as the Labour amendment, which of course it is—we tabled it. However, I dare to say that it was the product of the Work and Pensions Committee, working on a cross-party basis—a collective wisdom with which we agree. The Minister’s point about the importance of looking at pensions in the round is correct, because we are looking at the totality of pension arrangements for the future. He said, with good intent, that there would be a speedy process to consider regulations at a future stage. The problem is that we have to get it right when we specify in the Bill what the expectations of Parliament are.

Let us compare the Government’s proposals with the status quo. Interesting work has been done to compare the FCA’s conduct of business sourcebook—COBS—with Government new clause 1. It would seem that the Government have not moved as far as they should have, so it is important that we get this crucial issue right in the Bill. Of course the Minister is right when he says that circumstances vary enormously, but we strongly believe that there is an absolute principle that must be enshrined in law. Crucially, it is not about erecting barriers. On the contrary, we want to help people to make their decision and ensure that they have access to the advice and guidance necessary when they come to make that decision.

The wording proposed is not yet good enough. Ultimately, we seek an outcome in the Bill that puts it beyond any doubt that the individual can be shown to have made a conscious decision and to have decided not to access that guidance. The Minister has referred to a nudge, which has its place but, frankly, a nudge alone, in the traditional sense of the word, is not enough at this stage. We need a strong statutory obligation and entitlement. I stress again that the consequences of what happens if things go badly wrong are heartbreaking. We have all seen it. That is why there is a determination across the House to ensure that some of the abuses of the past are not carried forward. For that to be the case, we need strong and unambiguous law.

The Minister has said that the Bill is a skeleton that we can put flesh on the bones of. The hon. Member for South Thanet made the point, which I understand, that this will be a significant issue on Report. To be frank, there is no flesh on these bones to show what needs to be done at the next stage. I hope that the Minister will listen not only to us and to the Work and Pensions Committee, but to the widespread expressions of people who are reputable in a vast industry—of course, there are people to the contrary, but they are not particularly fazed by what we propose—who recognise the importance of what we are arguing. I hope that the Minister will hear their voices as well as ours.

Question put, That the amendment be made.

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[Guy Opperman]

In the circumstances, I am delighted to say that I do not believe this clause is controversial.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7

Debt respite scheme: advice to the Secretary of State

[Jack Dromey]

I beg to move amendment 34, in clause 7, page 5, line 24, leave out subsection (1) and insert—

“(1) The Secretary of State must, within the period of six months beginning with the day on which this Act comes into force, introduce a debt respite scheme.”

This amendment will require the Secretary of State to set up a debt respite scheme within 6 months of this Act coming into force.

[The Chair]

With this it will be convenient to consider the following:

Amendment 35, in clause 7, page 5, line 35, leave out subsections (3) to (5).

This amendment is consequential to Amendment 34.

Clauses 7 and 8 stand part.

[Jack Dromey]

The amendment would require the Secretary of State to set up a debt respite scheme within six months of the Bill coming into force.

A “breathing space” is a scheme that stops debts from increasing by freezing interest and charges, and halting enforcement action, allowing families the time and space they need to get back on their feet. This morning I told the story of a victim of domestic violence who fled and then got herself into a downward spiral of debt. She said: “I borrowed to pay my debts. I then had to borrow to pay my debts. I then had to borrow to pay my debts.” What she would have greatly enjoyed, if it had been in operation at the time, is a breathing space to halt the downward spiral and allow her to sort out her finances, and indeed her life and the lives of her children.

While we welcome the fact that the Government have committed to a debt respite scheme with the introduction of the new body, those vulnerable people who are stuck in a cycle of problem debt cannot afford to wait. A debt respite scheme gives people who are suffering from debt problems the breathing space to stabilise their financial situation and get on a more stable footing.

One survey showed that 60% of people said that their financial situation had stabilised once all of their creditors agreed to freeze further interest charges and enforcement action. In a world where credit is easier to access than ever before, it is all the more likely that some will fall into problems with debt. Therefore, it is incumbent on the Government to ensure that these people are not left to suffer alone, and that they receive the support and guidance they need to climb back out of the downward spiral of debt.

StepChange, a debt charity, has estimated the wider social costs of current debt problems to be £8.3 billion. Currently, 2.9 million households are at crisis point with severe, unmanageable debt problems. Some 21 million people are struggling with their bills; 18 million people are worried about making their income last until payday; and research by the Money Advice Service found that, for nearly 9 million people, financial difficulty had progressed to more serious and persistent arrears, with bills and debts described as an ever more heavy burden.

Debt has wider social effects. StepChange polled its clients. Seventy-four per cent. said that debt had affected their sleep patterns; 43% said that debt worries left them unable to concentrate at work; 6% said it caused changes to work attendance, such as arriving late or taking more time off; and 2% said that it led to them losing their job. If that evidence was scaled up, it would point to 2.9 million people with severe debt problems, which potentially means nearly 60,000 people out of work as a result of problem debt.

In addition, 57% of indebted parents said debt put their current or most recent relationship under strain. Some 7% said their relationship actually broke up because of debt, and children in households experiencing debt problems were more than twice as likely to say they had been bullied at school.

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[Michelle Donelan (Chippenham) (Con)]

Does the hon. Gentleman agree that rushing a scheme could impact the effectiveness of debt respite? Although I completely agree with everything he said about the problems that can be incurred via debt, it is important to get this crucial element of the Bill correct and to liaise with organisations such as StepChange and the others he mentioned.

[Jack Dromey]

The hon. Lady is absolutely right. It is important that we get this right at the next stages of the Bill. I do not disagree for one moment. Having said that, let me distinguish between two things. Making substantial changes to the machinery of government to deliver a new function willed by Parliament can take a long time, so the SFGB probably will not be operational until May 2019. I understand that. However, it is not beyond the wit of man or woman to send an unambiguous message now, on the face of the Bill, to those who are responsible for unreasonable pressure being put on people in debt that they are not allowed to do so. Introducing that within six months of the Bill becoming law is eminently achievable.

I stress again that I am the first to recognise that great change sometimes takes time to implement, but to be frank, given the times we are living through, I do not want people who could get respite to spend another six months not getting it. There is no good reason not to give them respite. As I said when we started this morning, we want to strengthen a good Bill, and inject into it a greater sense of urgency as appropriate.

[Yvonne Fovargue]

I thank the Minister for his letter about breathing space and the other issues, but it gave me another question for him. He mentioned a six-week breathing space period. I have said this many times: please, please talk to debt advisers. Six weeks is really not enough time.

--- Later in debate ---

I have explained why we cannot accept the amendment. I cannot emphasise enough that requiring the scheme to be set up before the end of the year would risk the scheme not working for consumers or not being utilised by the sector in the optimal way. The scheme was a key manifesto commitment that we are working on apace, but it is too important a policy to be rushed through, as the amendment proposes. I am extremely focused on the policy. Given my experience, I have set out that it is one of the most important things that I will do in my time in office. I am committed to seeing it through. I hope that Members are reassured by that and that the hon. Member for Birmingham, Erdington will withdraw the amendment.

[Jack Dromey]

The Minister speaks with obvious sincerity, which is welcome. As has repeatedly come up in our proceedings today, whether our experience is from our constituency or otherwise, we have all seen the price that people pay as they sink ever more deeply into debt. I do not mind admitting that there was one particular case—it is not appropriate to go into the details—where, when my constituent walked out the room, I was in tears because of what had happened to her. Her life was in a downward spiral. There is common ground and obvious sincerity, so the Government should act.

We will not push the amendment to a vote, but I suggest that the Government reflect further and come back on Report with the best possible timescale for implementation. I agree with my hon. Friend the Member for Makerfield: we should not necessarily have to await the formation of the new body. The scheme is a related matter to the function of the body—of that there is no doubt—but we have seen experiences such as the arrangements in Scotland. We also have the collective wisdom of the discussions in the sector and in the House of Lords. Everyone is determined to get it right. We just do not think that the scheme should be introduced a year beyond the Bill coming into effect in three or four months’ time. We would be talking about it being a year and a half before we ultimately see this welcome mechanism introduced.

In not pushing the amendment to a vote at this stage, I ask the Government to reflect further and come back on Report on two things. First, we want clarity on what the Government think is necessary. The Minister has gone a long way towards that. We want clarity about how one goes about arriving at the default scheme. That relates to the mechanisms and who should be engaged. The Minister has referred to that already. Secondly, we want the quickest possible timescale to get the scheme introduced. If the Minister will respond accordingly on Report, I am prepared to withdraw the amendment.

[John Glen]

I am grateful for the hon. Gentleman indicating that he will withdraw the amendment. I observed closely what he said on clarity on the default scheme and having the quickest mechanism possible to bring it forward. I will reflect with my colleague the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham and provide an update on Report.

[Jack Dromey]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 7 ordered to stand part of the Bill.

Clause 8 ordered to stand part of the Bill.

Clause 9

Guidance and directions from the Secretary of State

Question proposed, That the clause stand part of the Bill.

[Guy Opperman]

The clause gives the power to give guidance to the single financial guidance body and directions specifically on the way it exercises its functions. I do not believe that it is contentions.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Clause 10

Setting standards

Question proposed, That the clause stand part of the Bill.

[Guy Opperman]

I will briefly address the matter of the standards, which the clause will require the single financial guidance body to set out, and their enforcement and monitoring. The clause will require the FCA to review those standards and how the body is monitoring and enforcing those standards. We believe that is appropriate in the circumstances, and that we are creating this body with a degree of scrutiny in the right and proper way.

[Jack Dromey]

We rehearsed this morning the importance of the independence of the body, in terms of its operational role, on the one hand. On the other hand, there is common ground that there should be proper accountability and oversight. We are content with the proposed arrangements.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11 ordered to stand part of the Bill.

Clause 12

Financial assistance from the Secretary of State

[Jack Dromey]

I beg to move amendment 36, in clause 12, page 8, line 10, leave out from “State” to “financial” and insert “must provide”.

This amendment proposes to adjust Clause 12(2) to strengthen the provisions on financial assistance from the Secretary of State related to the operation of the SFGB

[The Chair]

With this it will be convenient to discuss clause stand part.

[Jack Dromey]

The amendment proposes to adjust clause 12 to strengthen the provisions on financial assistance from the Secretary of State related to the operation of the single financial guidance body. The intention of the new body is to increase the number of people who receive financial guidance and advice—indeed, the ambition is to greatly increase it. This function is key to increasing financial awareness, education and inclusion across the country.

While the current services provided by the three bodies to be merged are greatly valued and appreciated by those who use them, I think there is common ground that they are not used enough. A primary function of the new body needs to be to increase take-up of the services it offers. For example, take-up of the services offered by Pension Wise is extremely low. The latest figures from HM Revenue and Customs show that some 772,000 people withdrew more than £6.5 billion from their pension pots in 2017. However, only 66,000 appointments were made with Pension Wise in 2016-17—approximately 8.5% of people.

An FCA survey found that one in eight 55 to 64-year-olds who planned to retire in the next two years and who have a defined contribution pension had used the Pension Wise service in a 12-month period. The FCA also found that 25% of pension transfers are withdrawing all, or virtually all, of the pension, with 19% withdrawing virtually all and 6% withdrawing all. What plan do the Government have for those who have withdrawn all their pension and may end up with nothing later in life? They may end up falling into the arms of the taxpayer, and the Government need to prepare for that.

While traffic to Pension Wise’s website is quite high, it is not a sufficient substitute for access to tailored and personal advice. Also, many of those looking for advice may not be completely digitally aware. As Baroness Altmann said in the other place,

“When you introduce pension freedom into a marketplace that has never really been encouraged to engage with pensions and mostly does not understand much about them, obviously you need an expert to help you.”

NEST has said that it is concerned

“that people appear to be making decisions based solely on a read of the Pension Wise website”.

If those looking to transfer their pension are only accessing the Pension Wise website, it means that they will not get the tailored specialist advice that they need at such a time. We must therefore ensure that as many as possible of the 772,000 people who take advantage of their pension freedoms every year receive the guidance that they need to make informed and reasoned decisions about what are usually large sums of money.

For this reason, having set out why this body matters and the scale of likely demand at the next stages, we are surprised that the Government, from some of the things that they have said, appear to expect to make a financial saving from the formation of the new body. The Government’s impact assessment states:

“One structure replacing three will reduce cost of guidance provision, releasing funds through these efficiencies…savings could be used to reduce the levies that industry pay to finance the government’s guidance provision.”

With the greatest respect, that is the last thing that should happen. We do not believe that the Government should use the formation of the new body to make savings and pass them on as reductions in the amount paid by the industry to finance the body. The industry has a responsibility to finance the body adequately through the levy system. The industry and the Government should use the efficiencies created by the new structure, as well as additional money in grants and levies, as appropriate, to drastically increase the services provided. In our view, that is essential to the success of the SFGB if it is to deliver the complete guidance service that people need.

I had a fascinating discussion earlier this week with the chief executive of the Pensions Advisory Service, and she referred to the extraordinary statistics on TPAS’s work and the take-up of it. She made the point, absolutely rightly, that more could be done with existing resources and economies of scale from bringing together the three organisations, but she went on to make the compelling point that so great is the likely demand at the next stages that much more will need to be done to finance the new body. Inescapably, unless it is properly resourced, the new body will not be able to discharge the functions that will fall upon it.

The chief executive gave some examples. She made the point again about not duplicating work done by other areas of Government such as research, and said that, in TPAS’s experience, some things that are key to the services that it provides include, of course, the dashboard and the website, but also face-to-face guidance, which is crucial time and again. She talked about the specialisms necessary to help and inform decisions about options, saying that we should not dumb things down by having people give guidance by just reading off a list. She said that an advertising programme ought to be part of what the Government do, and that it could be done in a number of different ways. She also spoke about what I call the Carillion capacity—the capacity to respond at a time of crisis—as well the promotion of financial public awareness, which we debated earlier.

In conclusion, we hope for a statement from the Government that makes the point that the purpose of the new body is not to save money but to provide the kind of service that all people in all circumstances ought to be able to count on. The industry must play its part, but Government must be unambiguous that the body will be properly and fully resourced.

[Guy Opperman]

Can I answer the point raised directly? It is absolutely the case that merging three bodies and having one building rather than three will create some degree of potential cost efficiencies, but we are absolutely of the view that those efficiencies should then be directed into frontline services. I can unequivocally give that assurance to the Committee.

The hon. Gentleman referred to the original response to the consultation. It is true that there is an expectation that rationalising the provision will create some operational efficiencies. One would expect that. However, that same response made it very clear that the intention was for any savings to be channelled to frontline delivery of debt advice, and money and pensions guidance. I could not be any clearer on that in any way whatsoever.

I manifestly want to make that point, but I also disagree that there will be an insufficiency of funding, and the reason for that, it seems to me, is threefold. First, this is effectively not taxpayer-funded; it is done by a levy. The levy is a moveable feast, depending upon the need identified by the individual organisation, and it is something that can be assessed and increased on an ongoing basis, to provide the service that, it seems to me, we all wish to ensure is there. Secondly, there is capacity to top up the levy, should the Secretary of State wish to do so, and the financial guidance body on an ongoing basis, and that additional funding can be provided.

The proposed amendment has the bizarre, counter- intuitive effect of removing the discretionary nature of the financial assistance that the Secretary of State can provide. I simply make the point that while we are keen to ensure that this body is run more efficiently, in terms of amalgamating most probably into the High Holborn offices of the Money Advice Service, we certainly believe that this is something the levy will be able to fund, and if it is the case that this expands the provision—the House of Lords seems to have done so and this House may do so as well—then the levy may go up to accommodate the need as has been described. With those assurances, I respectfully ask the hon. Gentleman to withdraw his amendment.

[Jack Dromey]

The assurance that this is not a cost-saving measure is very welcome, but I stress again: is there an economy of scale? Are there possibilities, for example, of freeing up, by locating in one location, which is very likely to be the case? All of that is absolutely true, but right at the start, as we go down this path, to see a welcome mechanism created, we need to be confident, and to send a message to the people out there that they can be confident, that the new organisation will be effective, dynamic and properly resourced. Therefore, on the basis of the assurances given, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 ordered to stand part of the Bill.

Clauses 13 to 20 ordered to stand part of the Bill.

Schedule 3

Minor and consequential amendments relating to Part 1

Amendment made: 19, in schedule 3, page 34, line 22, leave out paragraph 13—(Guy Opperman.)

This amendment removes the amendment to s.137FB of the Financial Services and Markets Act 2000 in the Schedule 3 which was needed in consequence of the Bill, because this is now dealt with in the new clause inserted by NC1.

Schedule 3, as amended, agreed to.

Clauses 21 to 23 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Amanda Milling.)