Independent Debt Advice

John Hayes Excerpts

Tuesday 8th February 2011 Westminster Hall

[The Minister for Further Education, Skills and Lifelong Learning (Mr John Hayes)]

I congratulate the hon. Member for Makerfield (Yvonne Fovargue) on bringing the subject to the attention of the House, and it is a pleasure to serve under your chairmanship, Mrs Riordan.

Many important questions have been asked in this debate. At the outset, let me commit the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), who is responsible for this area, to writing to Members who raised questions that I am unable to deal with giving specific answers. That is the least that Ministers can and should do in response to Westminster Hall debates.

[Helen Goodman]

rose—

[Mr Hayes]

I will not give way straight away because I need to make progress. I have 10 minutes to deal with the debate. I will give way if I get the opportunity to do so.

[Ian Austin]

You have the opportunity.

[Mr Hayes]

I am not usually terribly critical about Back Benchers making comments. The contribution of hon. Member for Bishop Auckland (Helen Goodman) was pretty intemperate, so she will understand my response being in the same vein.

I made a commitment that the Minister responsible will write to Members who have raised sensible questions, as the Opposition spokesman, the hon. Member for Llanelli (Nia Griffith), did, and will deal with them in a particular and specific way. I shall restrict my comments to some points of principle and detail, and make one or two further commitments.

Before I make the points of principle, let me add this: three points have emerged from the debate. First, debt is closely related to more general well-being, and that needs to underpin the Government’s approach. Secondly, our approach should be co-ordinated and, thirdly, coherent. That has come across strongly from Members on both sides of the Chamber. We heard a speech from the hon. Member for Bishop Auckland, which I critiqued earlier, and speeches from my hon. Friends the Members for Solihull (Lorely Burt), for Warwick and Leamington (Chris White) and for Brigg and Goole (Andrew Percy) and from the hon. Members for Newcastle upon Tyne North (Catherine McKinnell) and for Scunthorpe (Nic Dakin). The hon. Member for Scunthorpe made one point particularly clearly when he rightly said that debt was related to well-being and mental health in a very broad sense. Other Members pointed out that we need a consistent and coherent approach.

I shall make six points of principle and then move on to some points of detail that inform the Government’s position.

[Mr Slaughter]

rose—

[Mr Hayes]

But I shall give way to the hon. Gentleman briefly before I come to my six exciting points.

[Mr Slaughter]

I appreciate the Minister’s approach, but will he answer the central question? Face-to-face advisers cover up to £2 billion of debt every year and about 100,000 people are advised. Who will do that now that all those people will lose their jobs? Who will pick up the burden?

[Mr Hayes]

I said that in the second part of my speech I would try to come to the specific measures the Government will take. I hope I will have time to do so.

The first of the six points of principle is that we want to ensure that the debt management regime means that those who can repay debt do so and those who cannot pay get appropriate debt relief. Debtors and creditors should benefit from a system that is clearer about expectations and provides good advice in advance; I will come to how that advice might be provided later. The picture painted by a range of hon. Members of an entirely haphazard system is not the Government’s intention and it would not help either responsible lenders or debtors. I understand that and it will inform what we do.

Secondly, we want to see empowered debtors accessing good quality preventive advice, as well as advice to deal with debt, to ensure that the most appropriate solutions are found for the debtor’s particular difficulty. Thirdly, some stakeholders have called for a review of the whole lending and borrowing landscape—a point that has been echoed today. I think such a wholesale review is necessary, and the Government will go about that.

Fourthly, we are told that some debtors and, potentially, their advisers, are confused by the array of choice. We heard today about independent debt advisers. We are aware of the issue, and I take the point about the OFT’s condemnation. Fifthly, it is important that we clarify the responsible options available to people rather than allowing a free-for-all in which the advice they receive is of varying quality.

[Nia Griffith]

What action is the OFT taking against the 129 companies?

[Mr Hayes]

I will deal with that specifically in the second part of my speech.

The OFT survey, as the hon. Lady said, points out that many players in the field are less than scrupulous, and that must be dealt with. Finally, we are looking for evidence on how the regime should work. We have called for evidence, and much has been received. I invite the hon. Member for Makerfield, who has expertise on this issue because she managed the CAB in St Helens, and others to play their part in the review.

On the specific measures, the House will know that the Department for Business, Innovation and Skills has been responsible for face-to-face debt advice on behalf of the Treasury for about five years. I am sure the House also knows that the financial inclusion fund, which provided funding for that project, was always due to close in March 2011. I understand the worry about the decline of face-to-face advice, which all contributions today seemed to reflect. Face-to-face advice must support online and telephone advice, and we will look at how to reinforce that.

Funding of £1 million has been confirmed for next year for the National Debtline, as has been acknowledged. We need further work on how to support some form of continued additional face-to-face guidance. I will ask the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton, to clarify as soon as possible, in a statement to the House, precisely how, when, why and whether that might happen.

Secondly, the Government are working with the Consumer Financial Education Body to provide better advice on debt. As hon. Members know, it will shortly be renamed the money advice service. It was set up to take over responsibility from the Financial Services Authority to promote understanding of the financial system and raise levels of financial capability across the UK. It is funded by a levy. We will launch the new service in spring. That preventive approach is critical to stop people getting into difficulties, with the results we heard about today.

The Government will also review the framework for financial services regulation. Two new regulators will replace the FSA: one focused on prudential issues with the Bank of England and the other on markets and consumer protection—the Consumer Protection and Markets Authority. We see this as an opportunity to improve how consumer credit is regulated and to create a simpler, more responsive regime.

As Members know, we have also launched our review of consumer credit and personal insolvency. It is taking an end-to-end view of consumer credit and personal insolvency, from the decision to borrow money through to how we support people in difficulty and help them to resolve their debts.

The feature that characterised most contributions to the debate was the CAB. As a constituency Member of Parliament, I am very aware of its work. I visited the CAB in Spalding to discuss these issues. Indeed, one of the many virtues of our system of parliamentary representation is that Ministers are also constituency MPs. I heard what was said today about the CAB and its importance in providing not only debt advice, but a holistic approach to advice that reflects the connection between debt, well-being and the wider range of challenges that many people face.

[Duncan Hames]

I welcome the announcements the Minister has made, but does he see that it is somewhat incongruous for a Government who are, rightly, concerned about getting their own debt under control to cease funding for voluntary sector support to people to get on top of their own debt?

[Mr Hayes]

Indeed. I think of John 8:7,

“he stood up and said to them, ‘Let him who is without sin among you be the first to throw a stone’”.

As the hon. Gentleman said, it is right that we should be consistent.

I shall make one further commitment on the CAB: as a result of representations received, and this debate, we commit to looking at what to do about the CAB on a cross-governmental basis. Ministers and Governments should be responsive to these debates and to arguments, which were sometimes well put, although at other times slightly partisan. They were no doubt put with a passion that reflects constituents’ concerns. On that basis, there will be a cross-departmental examination of what to do about the CAB.