Covid-19: Household Debt

John McDonnell Excerpts

Thursday 8th July 2021 Westminster Hall

[John McDonnell (Hayes and Harlington) (Lab) [V]]

Let me try to zip through this so that we can accommodate everyone. I thank my hon. Friend the Member for Makerfield (Yvonne Fovargue) and the hon. Member for Blackpool North and Cleveleys (Paul Maynard) not just for securing this debate, but for the serious work they have put in throughout on this issue. They work effectively on a cross-party basis:

I apologise for straying slightly from that cross-party approach, but I listened to the Chancellor on the “Today” programme this morning and, to be frank, he exuded complacency about the scale of problems and hardships my constituents and many others face. The Chancellor quoted selectively from today’s IFS report and the recent Resolution Foundation report. What he did not say is that the IFS reports that 700,000 more children have fallen into poverty over the last eight years. In my constituency, 42% of children are now living in poverty. What he did not quote from the Resolution Foundation report is the potential for 4% inflation by the end of the year, which will have an impact on those families.

We have to put this in the political context. A series of regressive Government policies will drive this debt and poverty crisis deeper. The scrapping of universal credit has already been mentioned, but we will have the freezing of the income tax thresholds from next April and the 5% council tax rise this year. For people on the minimum wage or working in the public sector, their pay rise this year will be below inflation, leaving them worse off in real terms. It is no wonder that the lives of many of my constituents are plagued by insecurity and stress. This leads many of them to have mental health crises, so I fear that, alongside the covid pandemic, we will experience the equivalent of a mental health pandemic, but it will be quiet and it will often be secret, because the stigma attached to debt is so heavy in our society. That is why I believe that lifting the worry of debt off people’s shoulders has to be a priority, exactly as hon. Members have said.

I welcome the combined briefing we have received from StepChange, Generation Rent and other bodies, which sets out a financial package to support and help tenants to clear covid-related rent arrears. It is a sensible and practical approach, and I hope the Minister gives it serious consideration and also takes urgent action.

The time has come to look beyond the covid-related debt crisis and to address the systemic debt burden that always weighs down so many families in our society. Tackling personal debt, as others have said, has social, economic and health benefits. One solution is to cap interest rates, and other proposals include capping the total amount that can be paid in overdraft fees on interest payments.

I also want to refer to what my hon. Friend the Member for Walthamstow (Stella Creasy) has said. The UK lending market and secondary debt market requires much stronger regulation from the Financial Conduct Authority if we are to protect consumers and businesses. As my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey) said, one wider solution to debt—as proposed by Johnna Montgomerie—could be the creation of a company like UK Asset Resolution, which purchased problem debt from the banks during the banking crisis, to do the same for consumers to clean up their financial situation once and for all.

This has been an important debate and I hope that the Government’s response will be positive. We will need to return to the wider question of systemic debt fairly promptly.