Business Banking: Undesignated Client Accounts

Kelly Tolhurst Excerpts

Wednesday 18th October 2023 Westminster Hall

[Kelly Tolhurst (Rochester and Strood) (Con)]

It is a pleasure to speak under your chairmanship, Mrs Cummins, on an issue that is affecting many businesses across a number of sectors. It is an issue that is extremely important to the businesses that are affected, and one that could have a significant impact on many businesses and their customers in future. I want to raise the situation faced by a number of small businesses with ongoing struggles to get access to the bank accounts that they need to carry out day-to-day functions and protect their clients’ customer funds.

Over the past couple of years, I have heard horror stories from a number of reputable and long-established companies that have been driven to the brink of closure as a result of how anti-money laundering regulations, particularly the Joint Money Laundering Steering Group guidelines, are being understood and implemented by UK banks. Many small businesses that deal with large quantities of client money use pooled client accounts, also known as undesignated client accounts.

I have a background in the marine industry, so I have a good understanding of, knowledge of and relationship with the industry. That is why, when the Association of Brokers and Yacht Agents reached out to me to highlight its concerns, I understood that it was a real issue and that I needed to work with the association, along with the Treasury and other relevant parties such as UK Finance and the Financial Conduct Authority, to try to resolve it. Yacht brokers are a very resilient bunch and are a key part of the UK’s marine industry, so when I hear that they are facing challenges that threaten their businesses, it is something of great concern that we must take seriously.

Although I initially raised this issue on behalf of the yacht broking industry, I have since learned that it is an issue that affects a number of other industries and sectors, including letting agents, estate agents, jewellers, care homes and even solicitors. I suspect it affects many more. I have had recent engagement with Propertymark, the professional body for property agents, which represents over 12,500 member branches in the UK, some of whom are being affected in the same way.

I will briefly explain why the yacht broking industry has come to use those types of accounts, and where we are up to with getting this resolved. In the early 2000s, the yacht broking industry faced a severe crisis when yacht broker and new boat dealer BA Peters went into liquidation. This created shockwaves throughout the industry, as BA Peters did not have a pooled client account in place. As a result, clients’ money was not protected when the company collapsed. Numerous individuals lost their deposits and the proceeds of sales, with some receiving only 23p for every £1 they were owed. It also resulted in a massive bill for the Insolvency Service to conduct a thorough investigation to try to identify client funds and into which of the many accounts they had been paid. This devastating experience exposed the vulnerability of client funds and the need for urgent safeguards.

[Jim Shannon (Strangford) (DUP)]

I congratulate the right hon. Lady on bringing forward this debate. We spoke beforehand. Does she agree that some banks are being accused of using the legislation she referred to as a way of closing accounts that are not profitable? I have several examples from back home in Strangford—I could read out two pages of them—of businesses being given no other reason for closure than this legislation. Does the right hon. Lady agree that the loophole must be closed?

[Kelly Tolhurst]

I thank the hon. Gentleman for his questions. Something is going on, and it is worrying. Banks are there to help us with our personal finances, but they are also a key part of how all businesses operate within the UK. I would be very disappointed if they were taking a cynical approach to potentially reduce costs of applications. However, having heard that some organisations are now being requested to implement a number of individual accounts, maybe there is a business case for them to want to administer 1,000 bank charges rather than just one.

In the aftermath of this, the yacht broking industry came together to ensure that such a calamity could never occur again. It was unanimously agreed that all yacht brokers should establish pooled client accounts as a standard practice. The PCAs were designed to protect client funds and enhance transparency in financial transactions. That became industry standard practice and is a prerequisite for any business joining an association such as ABYA. It is now a requirement by many professional indemnity insurance providers to hold client funds in these accounts. To formalise those efforts, brokers that set up PCAs with banks obtained letters confirming that funds held in those accounts were exclusively client funds and not part of the broker’s trading capital. Thus, they could not be used to offset business loans or overdrafts with that bank. That strengthened the protection of clients’ interests and returned confidence to the marine sector.

In 2009, it was made compulsory for anyone acting as an introducer for marine finance or settling marine finance to be registered with the Office of Fair Trading. That was a significant step towards regulating the industry and ensuring that financial transactions adhered to established standards.

In 2015, the Financial Conduct Authority was formed. The FCA introduced the FCA Handbook, taking over regulatory oversight. In 2016, the FCA confirmed that yacht brokers did not fall within the scope of the FCA handbook for holding PCAs, but did need to be registered for acting as an introducer for finance and insurance.

In 2020, significant changes occurred to the anti-money laundering regulations. That was when I first heard of the struggles that the industry were coming up against. Anti-money laundering legislation was introduced in 2017, as were updated Joint Money Laundering Steering Group guidelines, but notably they did not mention yacht brokers being excluded from FCA registration, or that their PCAs could be assessed using a simplified due diligence approach. That led to confusion and concern within the industry. As a result, major UK banks such as Lloyds, HSBC, Barclays and NatWest started to refuse to open PCAs for yacht brokers and threatened a number of businesses with the closure of their accounts.

Over the following months, I heard numerous stories from businesses within the industry that were fearful that, should they have their accounts closed, they would be unable to trade. Reputable businesses that had been trading for decades were suddenly faced with that terrifying prospect. Many of those yacht brokers are small independent family-run businesses. Contrary to what often comes to mind when yachts are mentioned, they are not large businesses trading in multimillion-pound superyachts and they do not have thousands of pounds in capital behind them; they tend to be long-established reputable small businesses operating in our coastal communities, where the marine industry may be a key part of the local economy, selling smaller boats for UK leisure.

Some of those family-run businesses—registered UK companies—operate across borders to support UK clients to buy, sell or hire their boats. Many of their clients are repeat customers because of the great experience they have encountered and the reassurance and confidence that their funds are safe.

All ABYA-member brokers are required to abide by strict professional standards to minimise fraud and money laundering. Yacht brokers are required to complete “know your customer” checks to verify clients’ official documentation such as driving licences, passports and utility bills, to ensure that the documents are valid and that the person is not on the anti-money laundering or politically exposed persons lists.

Purchasers receive a legally signed sale and purchase agreement, and all transactions are done by bank transfer, so there is a full audit trail of the money. ABYA yacht brokers do not accept any form of cash payment. As I mentioned, brokers undertake their own checks and specific sale and purchase agreements for every transaction, and they rely on UK and EU banks to transmit funds to the PCA from their own bona fide and validated clients.

Despite the checks that brokers carry out and the detailed recording of transactions, the fact that UK banks now consider yacht broking to be a high-risk business might imply that UK banks are failing their customers’ AML and politically exposed person checks before opening their client accounts.

In January 2022, ABYA and I held a crucial meeting with the Chief Secretary to the Treasury, who was then the Economic Secretary to the Treasury, and UK Finance. Following that meeting, he agreed to issue guidance allowing banks to simplify due diligence for opening and maintaining PCAs. That decision was made to try to temporarily ease the conflict between banks and account holders, and to encourage banks to keep accounts open while a comprehensive review of the anti-money laundering regulations was undertaken. This review was expected in December 2022 but, to the disappointment of both me and the industry, it was pushed back a year until December 2023. I am grateful to the Chief Secretary for the action and the interim guidance he provided in his previous role, but unfortunately that did not go far enough to prevent many banks from closing some of those accounts, which had a devastating impact on some of our small businesses.

In May 2020, we witnessed Barclays close the first pooled client account of a yacht broker because it was not registered with the FCA and part of its business involved cross-border transactions. Members will be unsurprised to learn that cross-border transactions are a fairly normal part of yacht sales, given the nature of boats. The stress that caused the company, including its potential collapse, and the impact on clients resulted in the director of that small UK-registered company suffering a mental illness for which, 18 months on, he is still receiving medical treatment and support.

That move set a worrying precedent. In May 2023, Barclays blocked the accounts of another company without appropriate notice, preventing the company from accessing its funds for three weeks. Not only that, but the bank transferred the funds from a European pooled client account into pounds sterling and placed the funds into the company’s account, without the authority of the clients whose funds were in the pooled client account. I understand that ABYA has asked the FCA to investigate that case, as it believes that Barclays had breached the provisions of the FCA handbook. As an aside, I have been made aware of another case in which such action by a UK bank has affected personal bank accounts, so I am concerned about how widespread that type of action is among some UK banks.

The FCA has acknowledged ABYA’s concern but has refused to conduct a full investigation and take appropriate action against Barclays, which I believe sets a dangerous precedent by endorsing Barclays’s actions and destabilising the security of PCAs for all industries. The FCA has advised ABYA that its members should report the incident to the financial ombudsman, which they have done, but they have been advised that it could take up to 18 months for it to report back.

To enable their business to continue trading, the directors of the affected company had to personally fund their clients’ sales and purchases, while Barclays sat on its client funds. That has also had a significant impact on the mental health of the directors of those businesses. Only last week, HSBC approached yacht brokers to ask them to stop using their pooled client accounts. I have recently been made aware that marine insurance companies, which have thousands of clients, are also being asked to cease using pooled client accounts.

The consequences of those developments extend beyond the yacht broking industry. They are a concerning precedent, which indicates that funds held in PCAs for clients may not be as secure as was previously believed. The situation has implications not only for the yacht industry but for lawyers, estate agents and care homes, as I have mentioned. Only last week, Propertymark members reported that Lloyds had threatened one of their members with account closure if they continued to use PCAs. That forced the property agent to open and hold individual client accounts for the rents and deposits of every landlord they worked for, and this particular agent was working with over 100 landlords.

ABYA has been at the forefront of the efforts to address the issue. It has tried to push various individuals who have influence over the matter to work together and with the industry to find short and long-term solutions. The Treasury has met and been in communication with ABYA’s chairman, Peter Norris, and has agreed to meet him again. For that, I am grateful. I am also grateful for the continued engagement I have received from the Treasury and its Ministers over the last 18 months. ABYA has worked to strengthen its code of practice and engage with banks consistently over the past couple of years. ABYA has candidly and consistently said that it will put in place whatever measures and changes to its code of conduct are necessary to ensure that banks have confidence to offer these services to ABYA members.

Since the FCA’s confirmation that yacht brokers do not need to register to hold PCAs, one bank has asked its customers to register as a high-value dealer with His Majesty’s Revenue and Customs for anti-money laundering purposes. ABYA is currently in consultation with HMRC to see whether it is possible to register as a high-value dealer, as such registrations normally apply only to businesses that deal in cash transactions of over £10,000 or €10,000. I understand that HMRC is questioning whether that is a necessary registration.

It has been a particularly tiring and frustrating few years for the industry, and ABYA and other industry representatives can only do so much. They have shown their willingness to find solutions, but we need the same willingness and drive to find a solution. As I have mentioned, these are often long-established small businesses or sole traders. Like any businesses, these companies are lifelines for their owners, employees and local economies, and they rarely have significant capital reserves to keep them afloat while seeking a resolution with the banks. It has been heartbreaking to hear the panic and distress that some of the businesses have been put through. Some business owners have been driven to the point of illness or, in some cases, have wanted to take their own life because of the stress of the potential loss of their business. As someone who ran a business prior to becoming an MP, I can totally empathise and understand how those business owners may be feeling.

Can the Minister confirm that there will be no more delay in bringing forward the consultation on the review of the anti-money laundering regulations? Can the Minister also assure me and those listening that he and the Treasury are engaging with the banking sector to represent the views of these small businesses, which are struggling to survive as a result of the actions that have been taken? Will he commit to urgently finding a short-term solution for this very real issue, which is having a devastating impact on people’s businesses and livelihoods?

Oral Answers to Questions

Kelly Tolhurst Excerpts

Tuesday 17th May 2022 Commons Chamber

[John Glen]

This is a criticism that I hear. I am very happy to meet the hon. Gentleman to discuss it further, examine the experience of his constituents and look at what we can do constructively to move things further in the right direction.

[Kelly Tolhurst (Rochester and Strood) (Con)]

Following clarity from my hon. Friend to UK Finance on how banks should interpret the money laundering regulations, a number of banks continue to close existing pooled client accounts of long-established, reputable boat-broking businesses. That is now stopping those businesses trading. What further assurance can he give to banks regarding these low-risk businesses?

[John Glen]

I thank my hon. Friend for her question. As she will know from the letter that I sent her this morning and from our conversation with industry representatives together a few months ago, this is quite a challenging issue to resolve. I cannot direct the banks to open, and keep open, these accounts, but I will continue to engage with her and with UK Finance to see whether more progress can be made in the coming weeks.

Oral Answers to Questions

Kelly Tolhurst Excerpts

Tuesday 7th December 2021 Commons Chamber

[John Glen]

I welcome the hon. Lady to the Front Bench. I draw her attention to the answer that I just gave concerning the number of interventions that the Government have made, including the warm home discount and additional support through local authorities. Households in the lowest income decile receive on average more than £4 in public spending for every £1 that they pay in tax. The Government are acutely sensitised to the challenges that we face this winter.

[Kelly Tolhurst (Rochester and Strood) (Con)]

12. What assessment he has made of the effect on businesses of the Joint Money Laundering Steering Group guidance on pooled client bank accounts.

[The Economic Secretary to the Treasury (John Glen)]

The Joint Money Laundering Steering Group guidance helps firms to meet their obligations under the money laundering regulations. Banks should take measures to assess risks presented by pooled client accounts to ensure that the accounts are not abused for criminal purposes.

[Kelly Tolhurst]

Yacht brokers have been using pooled client accounts for years to protect large sums of their clients’ money, without issue. Changes to the guidance have meant that banks are now closing some of these accounts, putting some of these professional, long-established businesses at risk. Will my hon. Friend meet me, UK Finance, and the Association of Brokers and Yacht Agents, to find a solution quickly? This is an important sector of the economy for some of our coastal communities, such as my constituency.

[John Glen]

My hon. Friend knows a lot about this matter and the industry, and I take her concerns very seriously. Although the Government will never insist on individual lending decisions and behaviours of banks, we will engage closely. I will meet her, and the Association of Brokers and Yacht Agents, and I will write to UK Finance to ensure that the guidance that is posted is being used effectively in the circumstances that she has raised.

Finance (No. 2) Bill

Kelly Tolhurst Excerpts

2nd reading: House of Commons
Monday 11th December 2017 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

It is a shame that the Chief Secretary to the Treasury is not in her place at the Dispatch Box. Notwithstanding the fact that the Financial Secretary is fantastic at doing his job, we should have the Chief Secretary here today. In my opinion, it is disrespectful to the House that she is not here. I think she is most probably looking for Shergar, frankly.

I wish to use my remarks to convey a message from the British public to this increasingly divided and out-of-touch Tory Government. It is a message that comes from all corners of the UK—from my home town of Bootle, from the city region of Liverpool, from Manchester, Leeds and Newcastle. It is a message from Edinburgh, from Cardiff, and from Kent; from Birmingham, from Oxford, and from Nottingham: from every region. It is a message from people who live in rural communities and urban centres alike. It is a message from public sector workers, private sector workers and those on zero-hours contracts; from the young and the old, as well as all those in between, all of whom have been let down by this Government. [Interruption.] They have been let down by them—private sector workers and public sector workers believe that, and that is why they are turning to Labour. [Interruption.] Conservative Members can laugh until the cows come home, but that is the reality.

It is a crystal clear message to the Tories: enough is enough. People across the country are fed up with this Government’s inaction and economic incompetence—and incompetence is the word. With this shambolic Government, every day—every single day—feels like groundhog day. Day after day, we are told that there are fresh cuts to Departments and that our overstretched public services face even more austerity, while we receive the same empty pledges—we have heard more of them today from the Minister—that at some point in the ever-distant future, the deficit will be eliminated.

[Kelly Tolhurst (Rochester and Strood) (Con)]

The hon. Gentleman speaks about incompetence from the Government. Does he not recognise, when he is speaking about people travelling towards Labour, that perhaps the Opposition’s incompetence is in making promises that they cannot deliver on?

[Peter Dowd]

Let us have a general election and we will deliver on those promises.

On Brexit, there is no abating the deep divisions between warring Cabinet Ministers. Within a few hours of the ink drying on the joint statement between the Prime Minister and the European Commission and the agreement to move on to trade talks, we had the Environment Secretary contradicting the Prime Minister and briefing the press that unhappy leave voters can tear up any Brexit deal that is negotiated, while on the Sunday talk shows the Brexit Secretary undermined the Prime Minister further by downgrading the agreement reached to merely a “statement of intent”. Given that there is much talk of a divorce bill, perhaps I can take the matrimonial analogy a little further. Do people make proposals of marriage or simply statements of intent? Did the Brexit Secretary propose to his wife or make a statement of intent?

Paradise Papers

Kelly Tolhurst Excerpts

Monday 6th November 2017 Commons Chamber

[Mel Stride]

The hon. Member talks about our having to live within our means, and it is, of course, right that we do that. He talks about the amount of money we need to bring in. What has been most unhelpful is that the previous Labour Government were so ineffective at bringing in tax, the tax gap became so high they cost our country over £40 billion. If they had had the same average level of tax gap in their last seven years in office as we have had in our seven years, we would be about £45 billion better off.

[Kelly Tolhurst (Rochester and Strood) (Con)]

Does my right hon. Friend agree that the Opposition are being disingenuous? They had 13 years and did nothing. They voted against measures to close loops, confirming that only this Government will act to tackle avoidance.

[Mel Stride]

My hon. Friend is absolutely right. We hear a lot of talk from the Opposition, but I am afraid that the results of what they did—or, rather, what they did not do—when they had their turn in office speak for themselves.

Breathing Space Scheme

Kelly Tolhurst Excerpts

Wednesday 29th March 2017 Westminster Hall

[Kelly Tolhurst (Rochester and Strood) (Con)]

I beg to move,

That this House has considered the Breathing Space scheme to help families in debt.

It is a pleasure to serve under your chairmanship this afternoon, Mr Turner. I am grateful to have secured my first Westminster Hall debate since my election to the House and I am thankful that so many Members have turned up to support me.

As many Members will know, issues of fairness are close to my heart, and in particular, fairness for children and young people. Personal debt problems can have profound consequences on those groups, yet the system we have means that creditors are again and again hassling and hounding families and young people for debts in an aggressive and harmful way. The breathing space scheme would deliver respite from those threats in two ways: through introducing a breathing space so that people in financial difficulties get the help they need to stop their debts from spiralling, and through achieving a safer way for families to make agreed debt repayments with creditors. The scheme is about ensuring that families doing the right thing about their debts are properly protected.

I am delighted that the Government are actively considering whether a breathing space scheme, such as I have proposed in my private Member’s Bill, should be introduced. I want to ensure that families who are repaying their debts have a legal guarantee against poor practices, ultimately protecting the children in those households. People often have debts with multiple creditors. Unfortunately, at the moment, what we see so often is councils reaching for bailiffs instead of looking to work on affordable payment plans, or a bank adding punitive charges to a family’s account, sending their debts out of control.

[Dame Caroline Spelman (Meriden) (Con)]

I am sure my hon. Friend is aware that the Children’s Society data show that 20% of families in council tax debt are visited by bailiffs, and that more than 30% of those families have to cut back on essentials such as food. Does she agree that a breathing space would give those families an opportunity to work with charities such as Fair for You to have planned expenditure for household items, and that Christians Against Poverty offer training courses in budgeting, which would help prevent debt spiralling?

[Kelly Tolhurst]

I agree with my right hon. Friend. My Bill and this campaign seek to give people exactly those opportunities to work with charities to come up with a structured payment plan and to give them safety in that period—I completely agree.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

I congratulate the hon. Lady on securing this debate and on her private Member’s Bill. In my constituency alone, 3,348 children are living in families with problem debt. Those children are five times more likely to have low wellbeing than those in families who are not in such debt difficulties. Does the hon. Lady hope, like me, that the Minister will take into consideration that family debt problems can have a significant impact on children’s mental health and wellbeing?

--- Later in debate ---

[Kelly Tolhurst]

I agree. As I outlined at the beginning of my speech, one of the reasons I am behind the campaign is that I have an interest in the wellbeing of children and families. Debt can have a major impact on the young people in those families.

People working on a plan with an independent debt adviser should not be forced into an ever-worsening situation when they are doing their best to recover. The Government have a proud record on moving people into work, and the latest employment figures show that we now have the highest levels of employment that have been recorded. In my constituency of Rochester and Strood, hard-working families are sometimes bringing up their children and getting on with life, paying mortgages or rents on low incomes, sometimes with insecure jobs. However, while we have good news on employment, it is worrying that Bank of England figures show that household debt is at its highest since the financial crash in 2008.

Problem debt is when that debt gets out of control. Sometimes, it is small sums of money that push families into that situation. Credit can be a good thing, helping people smooth their finances and make purchases today to be repaid out of future income. When things are good, that can be managed and provide benefits, yet the rise in personal borrowing has led to mounting concern that households who get into debt need safer ways to manage when they get into difficulties.

According to figures from the Children’s Society, an estimated 2.4 million children live in families in problem debt in England and Wales. In my constituency of Rochester and Strood, more than 2,700 children are living in more than 1,500 families who are suffering with problem debt.

Problem debt often strikes when people experience a sudden change in circumstances, or, more usually, an unexpected income change. For example, if a boiler breaks down or hours are cut at work, parents, and particularly those on low incomes, sometimes find themselves forced to rely on credit to make ends meet. That is the reality for many families in the UK, and we often do not hear about the struggles that working families face. Sometimes the debt is not through any fault of their own. That is backed up by the fact that the vast majority of people seeking help from charities such as StepChange or Citizens Advice have fallen into debt as a result of a job loss, a reduction in income, illness or a relationship breakdown that affects their income and ability to cope.

When problem debt grows, keeping up with repayments can demand ever increasing proportions of monthly income. Families in problem debt are spending, on average, 18% of their income on repayments, and more than 600,000 families are spending more on debt repayments every month than they are on food for themselves and their children. I would argue that, in many cases, that is a temporary financial difficulty that could be resolved with the right help and support, given time.

We know too well the devastating impact that debt can have on people’s lives. Debt makes people ill. Half of the clients seeking debt advice from independent debt charities such as StepChange said that debt-related mental health problems or physical health problems were so bad they needed to get treatment from hospital or from a GP. Debt can also cause families to break up. It can stop people from working and make them much less productive at work.

[Paul Blomfield (Sheffield Central) (Lab)]

The hon. Lady is rightly talking about the consequences of debt. In Sheffield this week, there has been a crackdown on the growth in illegal money lending. It has revealed a world in which physical violence and rape is used to intimidate those who are not paying back money. Does she agree that there is a depth and unpleasantness to the options that are available to people who do not have the opportunities that an initiative such as breathing space would provide?

[Kelly Tolhurst]

It was truly terrible to hear of those practices in Sheffield this week. I completely agree: an opportunity to implement a breathing space will allow a regulated, clear way to enable people to go to legal credit agencies and deal with charities, so that they can borrow and deal with debt in a managed way, without having to seek help from organisations such as the hon. Gentleman refers to.

[Greg Mulholland (Leeds North West) (LD)]

I join others in commending the hon. Lady for securing this debate, for her Bill and for her leadership. The Liberal Democrats are delighted to work with and support her. I also commend the volunteers in my constituency and others who have raised this very important campaign. I am sure the Minister will be very sympathetic, but as a society we need to understand that the costs of debt can be far bigger than we realise. The hon. Lady has mentioned the health costs. When it affects children, holding them back at school and meaning they do not get the qualifications they might otherwise do—that is quite common—it can have a lifelong impact on their earning potential, so the economic costs of debt of this nature are really devastating.

[Kelly Tolhurst]

The hon. Gentleman is absolutely right. We can look at these things in silos, but this is actually about the whole of society. Debt is just one factor, and if we look only at debt we sometimes do not recognise or take account of its effects. I completely agree with his point.

As hon. Members said, debt has a profound effect on children. Children in households that are struggling with debt problems are twice as likely to say at school that they are being bullied. Adding up all the social impacts that are endured—the loss of health, the broken families, the loss of production and the hardship—there could be an £8 billion cost to the state and society, which would fall on all of us. Those unthought-of issues have an impact on families. My Bill would enable us to look at those issues further.

I want to dwell for a moment on the damage that problem debt does to families and children living in such households. Unfortunately, the presence of children in households corresponds with a rise in debts. One in five parents said that they have faced problem debts in the past year, compared with one in 10 adults without children. Geographically, families and children are more likely to have debt problems in the north-west, the midlands and Wales, where at least a quarter of households have struggled in the past year. That compares with Scotland, which has a form of breathing space scheme, and where only 10.9% families with children suffer debt problems.

Research from the Children’s Society shows that families trapped in problem debt are also more than twice as likely to argue about money problems, leading to stress on family relationships and causing emotional distress for children. It found that children living in families with problem debt are five times more likely to be at risk of having low wellbeing than those without debt difficulties. More than half of parents in council tax debt polled for research carried out by the charity said that they thought their children suffered anxiety, stress or depression as a result of that debt. The Children’s Society research shows that is not the amount owed by households that directly impacts on children’s wellbeing but the number of creditors to whom they owe money.

StepChange Debt Charity clients typically take between six and 12 months to stabilise their finances. It estimates that, in just six months, a typical StepChange Debt Charity client would have an extra £2,300 added to their debts if creditors applied default interest and charges to all their accounts. John Kirkby, the founder and international director of Christians Against Poverty, said that even three months could be a sufficient period to enable a stabilisation of finances.

The debt trap and the direct impact it has on children in the household brings me to why this scheme is needed. There are two main problems with the current system. First, this House has given people who need to go bankrupt legal protection against spiralling debt problems, but we have simply failed to deliver for people repaying their debts more manageably over time. Our laws have focused on people with the most intractable problems, who need debts written off and the chance of a fresh start. However, there is a cost for families who go down that route—bankruptcy is not free. It is the right solution for many people and undoubtedly meets an important need, but fewer than one in 10 people seeking debt advice enter into an insolvency option. For the majority of families who are likely to recover from a temporary setback and repay their debts in an orderly way, there is no equivalent protection. We all know about the issues associated with bankruptcy. They are often a step too far for those families.

Secondly, the voluntary approach to breathing space fails far too often. We know that creditors agree with the general principle, because it is in industry and Government codes, yet sadly there is a widespread failure to abide by those codes. According to StepChange, between a third and a half of people who contacted creditors for help said they were not given any kind of temporary breathing space. Without such protection, pressure to repay debts at an unaffordable rate and threats of enforcement can leave households cutting back on everyday essentials, or falling even further behind on other bills. The benefits of a breathing space scheme go across the board. Indeed, Martin Lewis of MoneySavingExpert, who spoke at the launch event for my Bill, called it a

“win, win, win—for the creditor, the state, and the individual.”

The evidence is clear: 60% of StepChange clients said that their finances stabilised once further interest, charges and collection actions on their debts were frozen voluntarily. However, not one client who received no such help reported that their finances had got back on a steady footing. That is not all. Many firms that provide that sort of support when their customers have a temporary financial difficulty say that the repayments they receive are higher in the long term.

We need a scheme on a statutory footing that enables families to recover. That is what breathing space sets out. It will help more families to recover and repay their debts. It will reduce the social cost of debt, which affects us all. Ultimately, breathing space will benefit the wider economy. I want to propose the introduction of such a scheme, with two key protections. The first would provide a guaranteed period of time—breathing space—without additional interest, charges, collections and enforcement action. First, that would stop the spiral of worsening debt while people gain control of their financial situation, for example by moving into new employment or recovering from ill health. Secondly, it would give people who need more time to repay their debts through an agreed affordable payment plan the same statutory protection from further interest, charges, collection and enforcement action that the law currently gives to people who need an insolvency option.

I am delighted that a breathing space scheme has had support from across this House, including from the Work and Pensions Committee, the all-party parliamentary group on debt and personal finance and the many Members who have supported my Bill. It is important to stress that we are not starting on this endeavour from scratch. A comparable scheme—one we seek to improve on—is already in place in Scotland. The debt arrangement scheme has been in place in Scotland since 2004, and in 2015-16 £38 million was repaid through it. Over time, the number of people using the debt arrangement scheme has increased. Crucially, its use has increased as a proportion of the available debt options. At the start of available data in 2009-10, over half—57%—of debt options were bankruptcies. That number has now shifted significantly down to 36% bankruptcies and 22% for the debt arrangement scheme. That means that more people are paying back their debts and are being supported to do so, rather than having their debts written off.

The scheme works for all. It works for creditors, which get back the money owed to them rather than seeing it written off through bankruptcy. It works for the state and services who support families. Most importantly, it works for families and children, who can repay their debts free from enforcement action, rising fees and charges and spiralling interest repayments.

I welcome the Prime Minister’s announcement in January that she will review the unfair practice of charging people with mental health problems up to £150 to fill in crucial debt help forms. I pay tribute to the Money and Mental Health Policy Institute and MPs across the House for campaigning to end that unfair practice, which prevents people with mental health problems from getting the help they so desperately need, but we need to tackle the causes, drivers and consequences of mental ill health in all services.

Addressing the impact of debt on children’s mental health is central to the breathing space scheme. This week, we launched the all-party parliamentary group for young people’s health, which seeks to look at ways in which we can improve the health, and particularly the mental health, of young people, and seek to understand all the reasons for the increase in mental health issues that we see in our young people. Working with families and helping families thrive is a way of improving the health of our young people. As I have outlined, debt is a factor. We now have the ideal opportunity to introduce a comprehensive breathing space scheme to give people in debt a guarantee of protection from the escalating pressure that blights families’ lives and affects the wellbeing of children and families who are trying hard to do their best and work their way through life. I hope we do not miss this opportunity, and I hope the Minister will agree that this is a sensible way forward in improving outcomes for families who are just managing.

[Several hon. Members rose—]

--- Later in debate ---

[Kelly Tolhurst]

I thank all Members for their contributions and for supporting my debate today, and thank the Minister for his positive comments.

Oral Answers to Questions

Kelly Tolhurst Excerpts

Tuesday 17th January 2017 Commons Chamber

[Mr Gauke]

I thank that we can agree on all that; there is consensus on this point. We do need to build more homes. Building more homes more cheaply, but of high quality and on a sustainable basis, is something on which I hope the whole House can agree.

[Kelly Tolhurst (Rochester and Strood) (Con)]

In my constituency, we face high levels of proposed new housing. Can the Minister assure me that that will be matched with increased investment in our local infrastructure?

[Mr Gauke]

I draw my hon. Friend’s attention to the housing infrastructure fund, which demonstrates the Government’s determination to ensure that when new housing is built in areas of high demand, we also deliver the infrastructure to support that housing. That will have a beneficial effect by getting more houses built, and also ensuring that the appropriate infrastructure is in place.

Equality: Autumn Statement

Kelly Tolhurst Excerpts

Wednesday 14th December 2016 Commons Chamber

[Sarah Champion]

I have to say that it pains me that it is a woman Member who is asking that. Should I go back to my constituents and ask them to be grateful that it will only take another 60 years before they have parity of pay?

If the Government are set to continue their contemptuous attitude on equality impact assessments, will the Minster explain how else they have managed to show that due regard has been given to the impact of the autumn statement on those with protected characteristics?

The Government know how to conduct a proper audit of their policies on women and those with protected characteristics. The Equality and Human Rights Commission and the Women’s Budget Group, among many others, have outlined suggested methodologies very clearly. We have to ask why, in the light of the availability of those methodologies, the Government continue to be so evasive. Labour Members will not let go of this point. We will continue to commission and publish our own analysis at every future Budget and spring statement for as long as it takes the Government to do their duty. The question is how long the Government will continue to stick their head in the sand regarding the impact of their policies on women, disabled people and people from ethnic minority backgrounds. Will things change when the impact figure rises from 86% to 89%? Perhaps it will be 95%, or perhaps we have to reach 100% before the Government carry out an audit.

The situation has become increasingly embarrassing, as the Government continue to let women down time and time again. The Treasury refuses to send a Minister to appear before the Women and Equalities Committee to answer questions on the gender impact of the autumn statement. The Government have provided insubstantial data, and last year they voted down an Opposition motion on publishing a cumulative gender impact assessment of their policies. In their amendment to today’s motion, the Government point to their distributional analysis, which provides no overall analysis of the impact of the measures announced in the autumn statement on women, black and minority ethnic people or disabled people.

A few days before the autumn statement, the Women and Equalities Committee published a report criticising the Government for their lack of clarity both on how the 2015 spending review affected women, black and minority ethnic people and disabled people, and on how the equalities impact assessment had been undertaken. The Chair of the Committee, the highly regarded Conservative MP, the right hon. Member for Basingstoke (Mrs Miller), said:

“Without the information we have asked for or ministerial evidence it’s not been possible to form a view of the Government’s work under the public sector equality duty. Promotion of transparency is a central aim of the Public Sector Equality Duty requirements.”

The Committee, numerous organisations and, indeed, the Opposition have all made it clear that the distributional analysis produced by the Government is inadequate for judging compliance with the Equality Acts. The evasiveness must stop. Women and those with protected characteristics up down the country deserve and expect better. Various Ministers have refused to accept the analysis produced by the House of Commons Library that is cited in the motion. If the Minister disagrees with independent House of Commons analysis, will he say whether the Government would be willing to produce their own and make it available to colleagues? It is simply not good enough for the Government to criticise the Library analysis without producing their own.

[Kelly Tolhurst (Rochester and Strood) (Con)]

Will the hon. Lady explain whether the House of Commons analysis includes the national living wage? Two thirds of women benefit from the national living wage policy.

[Sarah Champion]

The problem with the national living wage is that it is a misnomer. It is welcome that it has been increased, but we are seeking a real living wage that brings people out of poverty, and we have not seen that.

Oral Answers to Questions

Kelly Tolhurst Excerpts

Tuesday 25th October 2016 Commons Chamber

[Karl MᶜCartney (Lincoln) (Con)]

12. What steps he is taking to support regional infrastructure development.

[Kelly Tolhurst (Rochester and Strood) (Con)]

14. What steps he is taking to support regional infrastructure development.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

World-class infrastructure is central to raising our country’s productivity. About 3,000 infrastructure projects have been delivered across the UK since 2010, with another 600 projects worth over £480 billion in the pipeline. We are investing over £13 billion in transport across the north, with £5 billion in the midlands. Nationwide, we are making the largest investment in roads across the UK in a generation, and rail is experiencing a level of investment not seen since Victorian times.

--- Later in debate ---

[Mr Hammond]

I recognise my hon. Friend’s commitment to his preferred version of this project. Funding has been made available for the provision of the Lincoln eastern bypass, in the county council’s preferred version of single carriageway road. As my hon. Friend will know, the county council is not in favour of restarting the process from scratch and introducing further delays, so I am afraid I cannot give him any confidence that additional funding will be made available to adopt a dualling solution.

[Kelly Tolhurst]

I was pleased that in the last Budget statement, the previous Chancellor, my right hon. Friend the Member for Tatton (Mr Osborne), announced a new Thames Estuary 2050 Growth Commission to focus on delivering essential infrastructure development for this crucial region. Will my right hon. Friend assure me that this commission, which is led by Lord Heseltine, will continue to be supported?

[Mr Hammond]

Yes. I am glad that my hon. Friend has raised this point. The Thames Estuary 2050 Growth Commission has been asked to develop an ambitious plan for north Kent, south Essex and east London. I am grateful to Lord Heseltine and his fellow commissioners for leading this important work, and I look forward to receiving the interim report ahead of next year’s Budget, when I will respond to it.

Oral Answers to Questions

Kelly Tolhurst Excerpts

Tuesday 19th January 2016 Commons Chamber

[Mr Osborne]

We have backed our manufacturers and exporters. We have cut corporation tax and other taxes that affect those businesses, and we have reformed UK Trade & Investment. As a result, the manufacturing sector accounts for a larger share of our economy than when I became Chancellor, but there is still a huge amount more to do. One thing I would say to the hon. Lady and the Scottish Government is that we want to work more closely with the Scottish Government on overseas trade missions, where we can promote Scottish businesses. We do not always get that co-operation, but we hope it will be forthcoming in the future.

[Kelly Tolhurst (Rochester and Strood) (Con)]

T4. Although I welcome the Government’s move towards digitisation of tax, a number of self-employed people and small businesses across my constituency, approximately 74% of which employ fewer than four people, have voiced concern about how quarterly tax reporting might have a negative effect on their human and financial resources, depending on their reliance on an accountant. What support will be provided to our small businesses to help them to adapt to the proposed changes?

[The Financial Secretary to the Treasury (Mr David Gauke)]

First, may I reassure the House that there are no plans for quarterly tax returns, as has been reported? What HMRC is considering is making greater use of digital technology and ensuring that information is provided to HMRC more frequently. My hon. Friend raises an important point about ensuring that businesses are supported as they adapt to new ways of record keeping, and HMRC is determined to do that.