Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

2nd reading (Hansard): House of Lords
Wednesday 5th July 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I add my welcome to the noble Baroness in her first substantive outing as a Minister. Of course, we have had many exchanges across the Dispatch Boxes on other Bills, where she occupied a more junior position, but now she is free to fly her own route on this. I hope that she is successful.

Others have mentioned the first Minister for financial inclusion, who was able to join us. I am afraid that he failed the Jo Johnson test as he has left before the end of the debate. Nevertheless, it was pleasant that he was able to hear much of it and I hope that he will come back for further instalments as we go forward.

This has been a very good debate. We have all been on roughly the same territory—I am afraid that I will not move away from it—in that we like what is in the Bill and we think that it is doing a good thing at a good time. However, it does not quite go far enough. I think that we all have issues tucked up our sleeves which we have raised on other occasions and failed to get across, but which we now see an opportunity to raise again. I have no speeches to quote from and no perorations to share with noble Lords, nor do I anticipate the speech which I believe the noble Lord, Lord Holmes of Richmond, will make tomorrow on a not dissimilar subject—financial inclusion in hyperspace. I think we all get the message that there is a little bit more to do on this. Indeed, we have already met the Minister privately and warned her that other issues could be added to the measure.

Let me declare my interests. I was a chair of StepChange, the debt charity mentioned by several noble Lords, and I am a current member of the Financial Inclusion Commission, along with the noble Lord, Lord Kirkwood of Kirkhope. I find that a very useful sounding board for many of the ideas and issues that have been raised today. It is a non- partisan, independent body of experts and includes parliamentarians from all parties. Indeed, until the last election, we had an SNP Member as well. The sharing of issues and ideas has been very helpful in formulating a policy in this interesting area of financial inclusion.

It is rather an interesting time to discuss what is, in truth, a non-political Bill. It is starting in the Lords, which changes the terms of trade in how it is to progress. We also have the benefit of an excellent Lords committee report on this issue—many of its recommendations have already been mentioned. They are obviously relevant and may need to be considered as we move forward. Given that the elected Government do not have a majority in the other place, many of our conventions do not apply. I do not necessarily mean to make much of that as a political point; I simply think that it is interesting as it opens up a range of options for making progress on this issue, as many noble Lords have said. By working together, we could make a huge difference. I hope that will be the spirit with which we enter the Committee and Report stages of the Bill.

These issues are in the public interest. For a variety of reasons they have not been given the full-scale consideration they need. However, I say to the noble Baroness, Lady Altmann, and to the noble Lords, Lord Sharkey, Lord Hunt of Wirral and Lord Holmes of Richmond, that we are available. If they want to come and talk to us, we would be happy to sign up to their amendments.

Why is financial inclusion so important? If you think hard about how this country is going to progress, whether or not the current state of concern about Brexit will be realised in practice, the availability and uptake of central financial services at affordable cost to every section of society is important in itself. It is very important that everyone in society has sufficient skills and motivation to use these services and to benefit from them. Financial capability—the awareness of the necessary skills—is key and must not be neglected.

As we have heard, the numbers are extraordinary. Nearly 2 million adults in the UK do not have access to a basic bank account. Financially excluded people pay a “poverty premium”, which I think is about £1,300 a year at present. Nearly 9 million people are overindebted and 13 million people do not have enough savings to support them for a month if they were to experience, for instance, a 10% or more cut in their income. The situation is not good. We have heard other figures in the debate illustrating the way in which credit growth is fuelling the expenditure we are seeing. Some serious consideration needs to be given to this. The Bill, which will help make progress in this area, is something we can all support, but I hope that it will be improved.

I will make some detailed points about debt and follow up a number of the points made by the noble Baroness, Lady Coussins, because I think that we come from the same place on many areas of this issue. I also acknowledge the expertise on pensions displayed by my noble friend Lady Drake; I endorse everything that she said. My noble friend Lord McKenzie covered many of the more general points in his introductory remarks.

On the question of whether the Government get this, as I have said already, it is important that there is now a Minister for financial inclusion based in the DWP, which is an interesting choice. However, I wonder whether that is sufficient. As I think has already been said, there may well need to be a Cabinet committee on this. I also think there is a case for trying to see whether it is worth having designated Ministers or champions in other departments such as the Treasury, Health and DCMS as a start, because without that group of interested and committed individuals at Cabinet level we will not get the purchase and buy-in across the various departments.

We have already said that we welcome the creation of the single financial guidance body, but I wonder whether the lessons about the problems with MAS have properly been learned. The Money Advice Service did not work successfully, and it is important that we pick up from that what worked and what did not—and mainly what did not.

It is relevant—although I would not want to make too much of it—that it took three consultations and a number of expert advisers to get us to this point. I was struck by the way in which the Minister felt that she had to rely on a lot of endorsements from outside bodies in making the case for what the Government are proposing. Usually when people have to rely on endorsements, that means that they are not terribly confident about what they are saying; I hope that that is not the case on this occasion. In particular, the focus of many of the contributions today has been about the debt space—I will concentrate on that, although I will touch on other things at the end.

The relationship to the bodies operating there, which are independent and separately authorised by the FCA—they are mainly charities, although not all of them are—in the free-to-client debt advice and debt solutions is not, or does not appear on the surface to be, compatible with what the Bill says in Clause 2(5):

“The debt advice function is to provide, to members of the public … information and advice on debt”.


That implies some sort of direct traction. The Minister said that the Money Advice Service does fund debt advice. That is partly true, but only a very small proportion of the money is spent on that. The MAS funded some of that, but most of it was raised bilaterally by the individual organisations such as independent charities. Therefore, the MAS never really got to the heart of what its relationship was with bodies like the Money Advice Trust, Citizens Advice, StepChange and others, such as Christians Against Poverty. It could never really match the money, the aspirations and the organisational structures that would make that work.

In addition, the noble Lord, Lord Sharkey, made an important point about the way in which debt has changed. I mention this because I will come back to it on the funding side. The existing debt advice and solutions sector is financed largely directly by those who provide credit. Whereas before it was largely the credit cards and the banking sector, that is no longer the case. Increasingly, the debts being incurred in the population come from store cards but also from the utilities, local government and from the Revenue—government—itself.

It is important for the continuation of the model, which the noble Lord, Lord Sharkey, described as being under pressure, that these bodies continue to fund this. There are signs that that will not work through. In any case, the proportion of funding that goes on providing a service to those bodies which offer credit that is going wrong is relatively low compared to the overall costs elsewhere; I will come back to that point. The lesson that needs to be learned is that the combination of three functions into one—pensions, the operation of a proper financial education service, and the debt space—is useful. However, the way it has been done makes it seem that they have just been bolted together like some sort of mechanical tool, and I do not think that thought has been given to what will happen on the ground. We will need to come back to this in Committee.

On the funding, the change that has been proposed in the Bill is not clear; that has not been picked up, except by the noble Baroness, Lady Kramer. The system under which the Money Advice Service was funded involved raising a levy, which was paid to the MAS by the FCA. The new system is that the levy will be used but the companies are being taxed to provide a stream of funding to central government, which will then be passed to the new single body as a grant. That point seems to be a fundamental change to the way in which the operation is done. When we had a meeting with the Ministers before this Session it was explained why that was, and I understand it. However it radically changes the way in which people operate.

For example, if companies which are currently funding independent debt advice—for example, the Money Advice Trust—are already being taxed to fund a central body, are they not going to ask why they are paying twice for this? That has not been thought through properly, and we will need to return to it in some detail when we get to Committee. I am not against it but there are implications of changing to a non-departmental body, with all that that implies, which is grant-funded; we may be through with the financial problems that have been caused but we are surely not in a situation where the money will be found on trees—or are we? If we are, will it be enough to make sure that all the suppressed demand for debt advice can be funded? I estimate that 1 million people a year are probably getting advice, but there are figures which say that the number of people who need advice is probably double, if not three times, that. Where will the money come from for that?

It is obviously right that the new body should have a standard-setting aspect—it should certainly not fund anything substandard, and I am sure that we can all support that. Since all the bodies in the debt space have to be regulated by the FCA, and all are proud of the fact that they have been authorised to do whatever they do, whether it is holding client money or not, it is not obvious how the standards will operate. We cannot have two standard-setting bodies—that will not work.

A point that has been raised in other places is that a number of commercial companies—too many of them—operate in the debt space, and, as some noble Lords have said, their charges are outrageous for people who are under pressure anyway. Will this system look at those, or will it be restricted to only the free sector or the free-to-client sector? We will return to those points in Committee with, I hope, a chance to debate them.

We have not talked much about banking: the need to make sure that people in vulnerable circumstances receive banking services and that those services meet the needs of low-income consumers. Banking is in some senses a utility, and we have never really come to terms with whether that issue should be taken up. There were a number of debates a few years ago about whether models that apply in other countries, such as the Community Reinvestment Act, might be applied to our banking system. Clearly, banks are a part of everyday life—it is impossible to do things without them. You have only to look at the fallout from the terrible disaster in north Kensington, where it was said that those who were affected would receive £500 in cash and the rest through their bank accounts. How many of those people have bank accounts, and was that question even asked? I suspect that a very large number of them do not. Obviously, it can be settled, but the instinctive reaction does not meet with what low-paid people have to live through. We need a better approach, maybe along the lines of the broadband universal service obligation. Perhaps this will be picked up in the debate tomorrow.

On credit and debt, there are still problems with how we deal with people who get into unmanageable debt. The statutory breathing space has been mentioned; this already works successfully in Scotland and it would be easy to introduce it down here. Indeed, last Session a Private Member’s Bill gave us the main mechanics of it. We will want to see whether we can get that into the Bill. The question also has to be asked about other systems which are operating; for instance, the debt relief scheme, which is currently running at a cost to the charities which are involved with it—mainly Citizens Advice and StepChange—of about £2 million per annum. It is an important part of the debt relief solutions but it does not stack up in financial terms, and that needs to be addressed. We also need to think about the way in which the credit rating industry deals with financially vulnerable people, particularly when they are emerging from a debt repayment process but may be barred from accessing credit for many years.

Finally, we support the proposal to transfer responsibility for supervision of claims management companies to the FCA, and I echo calls from many noble Lords around this House and from outside for this to be done speedily and efficiently so that there is no question of a loophole remaining. We will also probe, as others have done, why the Government are not taking steps in the Bill to ban cold calling and cold texting.

I will end on the following point, even though others have mentioned it. The excellent report by Carol Brady on claims management, which many noble Lords have mentioned, had a wide-ranging number of recommendations but only two or three have been implemented in the Bill. What is happening to the rest of them? That report needs to be taken up and taken through to its conclusion. I would be grateful if the Minister could respond on that.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Committee: 1st sitting (Hansard): House of Lords
Wednesday 19th July 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

Well, my Lords, what is in a name? I start by declaring my interests: I am a former chairman of StepChange, the debt charity, and I am currently on the Financial Inclusion Commission, which is a group of all-party interests and experts that tries to lobby for increased financial inclusion and less financial exclusion. I mention StepChange for two reasons: first, because I have to declare it as an interest and, secondly, because it recently went through a change of name, which may bear on some of the points made in this debate. When I took over as chair, it was as chair of an organisation called the Consumer Credit Counselling Service—I could not say it without spitting out most of my teeth and I got very confused about the terminology.

As a matter of interest, at the time that I took over, the organisation was seeing over 500,000 people a year—so a lot of people—but we did not believe that the people whom we saw were “consumers” of our services in that classic sense. We did not deal with credit, because we were talking about people who were in debt. Now, obviously, debts and credits are simply optical illusions, one against the other, but people recognise them differently and, therefore, our name did not really say what we did. We did not do counselling —I am sorry to disappoint the noble Baroness opposite—and we were a service, but it was not just a service of advice. Our intention going into any engagement with anybody who rang us or contacted us through the web—I am sure this is also true of the Money Advice Trust, the Citizens Advice service and others working in this area—was that we wanted them to become debt free. In other words, it was a case not just of simply holding their hands and telling them what the options were but of working with them until they got to the point that they were debt free. I do not know where that fits in the catalogue of names with which the noble Baroness is enticing us, but I do not think that her amendment gets to the reality of the issue facing us.

The noble Baroness, Lady Kramer, is right to remind us above all that where we are trying to go with this organisation is to get to a place which will add value to those who approach it by providing impartial and independent advice which will get them to where they want to get to. There are real difficulties in trying to combine in one body the different bodies, organisations and ideas. The pensions work, the financial guidance work and the debt space are all very different. They are not operated at the same level but are regulated differently, and the information that is provided, the guidance, the counselling—all the other words that we are using—will change considerably.

Where I think the noble Baroness is right is that it would be entirely against the best interests of the people we are talking about if the body were set up in a way that did not create an opportunity to resolve the issues that were brought before it. The examples she gave were all relevant. I add one which we picked up in earlier discussions—I think it was raised on Second Reading—namely, that, at least initially, although I hope that it will change, it will not be possible for the new body, however named, to answer direct questions about individuals’ state pensions. That seems to me a completely useless start for a body that is trying to deal holistically with people’s issues for all the reasons the noble Baroness gave about the increasing importance that pension draw-down will have for any of these solutions.

At present, StepChange is regulated to give debt advice and debt solutions but not to give pensions advice. It could apply to be a pension adviser and give advice on pensions, but it has not done so. It was the present management’s decision to do that. However, the issue stems from the initial problem about whether or not it is reasonable to have all those different types of expertise in one place or whether you need more expertise than would be available in a general advice system.

It is easy to describe this as a mess and a problem, and it is very hard to see how we will make progress. I look forward to the noble Baroness’s response to this debate. The noble Baroness, Lady Kramer, is right that we need to rethink this. However, I have a slightly different approach to it which I would like to try out with the noble Baroness. As she will have picked up, our Amendment 38 in this group replicates what she said to the House on Second Reading. In terms which I think are not unreasonable, it defines “guidance” and it defines “advice” in terms of what the FCA considers it to be. That may be the current state of the art for this discussion and it may need to be looked at again. However, I do not think it is helpful to try to analyse the best word we can select to describe all the things that this body should do. We need to go back to what the noble Baroness, Lady Kramer, suggested and ask what this is about. We need to ask what this body is trying to achieve.

It seems to me that the two fixed points on which we can agree are, first, the functions that are currently carried out by these bodies, or could be considered to be added to the existing functions to achieve the aim that we are going to set for this body, and, secondly, the regulatory structure. I do not think there is much room for manoeuvre on either of those two things. We have a pretty good appreciation of what people want and we have a pretty good regulator that is capable of regulating these things. The names seem to me to fall back a bit in our consideration of that. If we get the infrastructure right, we will also get the processes which support it right. What is this body set up to do? What aims and responsibilities will it require to achieve that? What functions are required to achieve that? What are the regulatory constraints and what will they be called? That seems to me the right way to approach this. I hope that, when the noble Baroness responds, she will pick up at least some of those points.

[Lord Skelmersdale (Con)]

My Lords, before this debate concludes with, I hope, the wise words of my noble friend the Minister, I should say that the noble Lord, Lord Stevenson, seems to have widened the subject of this amendment or group of amendments beyond what my noble friend Lady Altmann intended. I have been looking at Clause 2(5):

“The debt advice function is to provide, to members of the public in England, information and advice on debt”.


The noble Lord, Lord Stevenson, almost got it. What we really want to happen is advice on debt reduction, so why cannot the Bill say so?

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[Lord Stevenson of Balmacara]

I do not wish to prolong the debate, because we could continue this discussion outside if we wished to. However, I was not the only person to say that there were wider issues at stake here, so I accept the charge, but I am not the only one guilty of this. Secondly, I was trying to make the point that information is only part of the story. It is of no value if we cannot get somebody who owes £10,000 to five different creditors to a position where they owe nothing. So it is a process leading to a resolution. I think that we are on the same page.

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[Lord Stevenson of Balmacara (Lab)]

I understand that a note has come at pace with its best advice. It might be sensible to ask for a letter on this point because it is at the heart of not so much the naming game but functions. If advisers of the body will not be able to move seamlessly, however many hot keys they are able to employ, from pensions to general expenditure and back again, it is a different body to the one we are trying to set up. As I understand the situation—this is what I would like to be checked back—it is possible for an individual to be authorised to give advice on both debt and pensions, but the debt advice community has broadly not chosen to go down that route, regarding pensions as needing expertise that would be difficult and expensive to acquire. What the noble Baroness has said is not entirely wrong, but it is not entirely right either.

[Baroness Kramer]

Perhaps I may add to that. Partly this is problematic because individuals receiving the debt advice may not understand that there is no discussion of their pension pot, because the adviser is unable to raise the issue and, therefore, they may not recognise that they are being offered a series of potential solutions within a limited framework that does not make use of the full financial resource that describes essentially who they are and what they have available to them. We use advice only in the regulated sense, but the person listening thinks that it is advice in common terminology, and that is why we end up with the problems that the noble Baroness, Lady Altmann, is trying to address.

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Moved by

[Lord Stevenson of Balmacara]

5: Clause 2, page 2, line 13, at end insert—
“( ) the debt solutions function.”

[Lord Stevenson of Balmacara]

My Lords, in moving Amendment 5 I shall speak also to Amendment 42. Here I shall begin to put some flesh on to the bones of the discussion we have already been having. The amendment tries to unpick some of the questions about exactly what is going on among the various legs which are being added to this body. We are beginning to recognise that it is no longer going to be called the single financial guidance body for debt but the “signposting to other financial guidance support services”. That may well be where we end up, although I think that that would be sad.

Amendment 5 adds to the list of functions set out in Clause 2(1) what I call the “debt solutions function”. There is no advice, no guidance and no information. It will have none of that airy-fairy stuff because it is about solutions—getting people from the point at which they are unable to manage because their debts are beyond them to the point where they can re-engage with the wider world, take out credit and get back into ordinary living. That is the difference which was alluded to in the last debate; namely, that which can only be advice and that which is regulated to be solutions. It is important to make that point strongly here. Simply using the debt advice function can include these other areas, and indeed the earlier debate showed that, but it would be more helpful if the Bill explained and extended what is available to those who will approach the body and did so by clearly signalling that one of the important functions, one that will be important to them, is a debt solutions process.

The purpose of putting this in Amendment 5 and linking it to Amendment 42 is to be able to take a further step in the discussions which this Bill should engage with in terms of what it will allow, permit, encourage and support. That will lead naturally to the amendments in the fifth group containing Amendments 7, 23 and 41, the first two in the names of the noble Baroness, Lady Kramer, and her colleagues. Those amendments seek to add another function to the way we hope that debt advice can lead to debt solutions by creating what is commonly called a breathing space, to which I will return when we come to that arrangement. They can be seen both as an opening up of more functions and providing more certainty about what the body will be able to do and to deliver. They are also an example of what action is required in terms of insolvency which would seriously enhance the ability of those who are working in this area to take clients on a journey that allows them to emerge from their current debts.

We had some difficulty with the clerks in getting this amendment in scope. It is not in the form that I would have preferred to see because—I will say this again on the breathing space amendment—what is required now is what was set out in both the Conservative Party and the Labour Party manifestos, which is that England and Wales are a long way behind Scotland in dealing with debt solutions. One of the great advances made by the Scottish Parliament has been to introduce a statutorily based breathing space and different insolvency regimes which very much have the client at the heart of what they are doing. The regimes are not creditor dominated. I could give noble Lords a brief lecture on the history of credit and creditors in this country but I will not because there are too many experts here who might pick me to pieces. However, we are obsessed by the place of creditors in our society. We ignore the problems that an overly zealous approach leads to: whenever there is a problem, the creditors are always assumed to be in a strong enough position to require 100% repayment of the debts that they have advanced to people. That has led to real difficulties when for reasons which have already been mentioned, people get into problems with their finances, even if it is not always their fault.

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[Baroness Buscombe]

My Lords, I thank the noble Lord, Lord Stevenson, for his positive contributions so far on the Bill. He has raised an important issue regarding the status of current insolvency regimes available to members of the public in England and Wales.

Amendments 5 and 42 tabled by the noble Lord would introduce a new function to the body with regard to debt solutions in addition to requiring it to review the current insolvency regimes available for members of the public in England. This would also apply in Wales, as the insolvency regime is common across both nations.

The Government are committed to helping those worst affected by problem debt. I agree with the noble Lord, Lord Stevenson, that the insolvency regime for members of the public, including businesses, must be of high quality and be kept under review to ensure that it works as it should. It must provide essential debt relief for those who need it while offering those able to repay their debts the opportunity to do so. I commend the noble Lord on the work that he has done with StepChange and have listened with care to the examples that he gave, which are of course deeply concerning, in relation to debt and insolvency.

I assure the noble Lord that the Government are indeed committed to ensuring that we retain the best possible personal insolvency regime. The Insolvency Service, which is an executive agency of the business department, is charged with delivering economic confidence by, among other things, supporting those in financial distress. The service has implemented a number of changes to the personal insolvency regime to make improvements where they are required. For example, in April 2016, the Government removed the need for a person applying for bankruptcy to go to court. The Insolvency Service keeps the personal insolvency regime under review on behalf of the Government and works closely with the Money Advice Service and the wider debt advice sector.

Working with the Insolvency Service, MAS—the Money Advice Service—launched a consultation on improvements to the debt solutions regime across the country in February this year. This consultation followed a period of in-depth research with users of the main insolvency solutions across the UK and a review of each separate insolvency solution. All the major debt advice providers and many other stakeholders responded to the consultation. MAS will publish a response to the consultation later in the year. It is reviewing the responses with its debt advice steering group, which includes representatives of all the major advice providers and the largest creditors.

The single financial guidance body’s strategic function requires that it, too, works with others in the financial services industry, the devolved authorities and the public and voluntary sectors. The Government therefore expect that the SFGB will continue to work closely with the Insolvency Service to ensure that the insolvency regime in England and Wales meets the needs of members of the public.

The Government agree that the insolvency regime must remain fit for purpose and be regularly reviewed. That is why MAS, working closely with the Insolvency Service and the debt advice sector, has undertaken its consultation. However, the duty to review the regime remains the responsibility of the Insolvency Agency. Of course, there is a role for the new body to work with the Insolvency Agency on this matter, as MAS does now. My view is that this is captured by the strategic function set out in Clause 2(7). For these reasons, I ask the noble Lord not to press his amendments.

[Lord Stevenson of Balmacara]

I thank the Minister for her full response and recognise much of what she said about the work currently going on. We are back in the same territory. The body will not work as we are beginning to envisage it if at every turn blockages are put up. It will be an insolvency service behind a different departmental boundary—it is in BEIS and not in DWP—making decisions of primary importance about clients coming to the single financial guidance body and the debt advisers seeking help with a problem. I accept that it is way the world is, but if it became clear after the reviews and further consideration of the points made here—there are many other people who can send in evidence—we might want to change that, having missed the opportunity to do so in the Bill. I appeal to the Minister to think again about this and to see whether it might be sensible to have a power somewhere in the Bill giving the single financial guidance body the opportunity to make proposals at least. In my view, we have the power to change it to help the consumers that it tries to deal with, but I realise that may be a step too far at this stage. I beg leave to withdraw the amendment.

Amendment 5 withdrawn.

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[Baroness Altmann]

My Lords, I echo the wise words of my noble friend Lord Trenchard and certainly support the spirit of these amendments. It is right that we in the Committee should debate the concept of the single financial guidance body being able to help the Government in circumstances where the market is failing customers in a significant manner, such as has just been described. We all know that people are being enticed with teaser rates into debts that they are ultimately unlikely to be able to afford to repay. This is sometimes because salespeople are rewarded for the loans that they manage to get people to take on but do not necessarily stay around to worry about whether that debt is ultimately going to be repaid.

I also support the concept of banning cold calling. We will come to other amendments later on the claims management side. I would echo the concept in those on cold calling for pensions. The unsolicited approaches to people, enticing them to do things that are not in their interest, is a real problem. We would be wise to see whether we can find ways to address that while we are concerned with the financial circumstances of the general public in the context of the Bill.

[Lord Stevenson of Balmacara]

My Lords, we are not having much success with our amendments here on the other side. I had hoped that the climate of a Government not having a clear majority in either House and the general spirit of wanting to work together on improving things would allow them to put at least one change of wording into the Bill as it stands, if nothing else. But I see that the tyranny of the Bill is with us still, and that there is a determination in the serried ranks of those looking with stern faces from the sidelines to ensure that Ministers do not depart in a single way from the track by showing weakness. In fact, we think they would be strengthening the Bill by accepting some of our amendments.

At this moment, we are giving them two options for the breathing space. The very good amendment put down in the names of the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, is echoed by Amendment 41, which is in my name and that of the noble Earl, Lord Listowel, and the right reverend Prelate the Bishop of Newcastle, whom I thank very much for their support. There is a bit of a movement across the House whereby the time has come for a breathing space. I hope that the response to this amendment will be better than before.

As has been said—I said this on an earlier amendment—it would be much better if the Long Title of the Bill were such that it would take a real policy direction, and that the amendments were therefore not curtailed in the way that they are. We are having to seek that the body, as part of a strategic function, has generalised powers. Would we go as far as a Henry VIII power? I think that our arms could be twisted on that. As the Minister is aware, they have been offered on previous occasions; in debating the Digital Economy Bill, we were almost throwing Henry VIII powers at them. But they would not take them, the tyranny of the Bill being so strong.

Here is another option: there is no doubt that a scheme called breathing space has been working well in Scotland. It has done so now for nearly 10 years and been through three or four refinements. Some of the questions raised by the noble Viscount, Lord Trenchard, have therefore already been addressed there, and I do not think he would find it quite so bad. I know that the noble Viscount is shocked by having the curtain of secrecy torn down regarding what happens in the creditors’ dark rooms when they discover that they have unpayable debts. However, I can tell him that if a breathing space is built in, as it has been in Scotland, it is possible to get returns to creditors that are much nearer the full 100% which they seek. We may be talking about 60%, 70% or 80%. Indeed, in the Scottish system the debt arrangement scheme has a pretty good record of getting 90% or 95% back to the creditors.

The noble Viscount should not be too worried about small entrepreneurs and others, when this is not their province. We are talking about household bills, credit card companies, banks and, increasingly, the Inland Revenue—it has money to spare, has it not? We are talking about local authorities, store cards and utility companies. These are the bodies creating the conditions, not necessarily in any destructive sense, under which it is too easy for people to borrow beyond their means to repay. The spiral of debt moves very fast when they suddenly get into it and find themselves in a hopeless situation. In StepChange—I am sure it was true of the other debt advice organisations—our best day in the year for business, but our worst day because of what was happening, was 23 January. That is the day when the credit card bills come in for Christmas and at that point, reality sometimes sinks in and people realise that they are out of their depth. They cannot respond and that is when the panic calls start.

One theme that we have not addressed in the Bill so far, but which I want to nail now, is the real problem there is in getting people to engage with the services that are available. We can label or signpost them—we can do what we like—but getting people to move from the vague realisation that there is a problem to actually seeking help in a constructive way that will get them out of their debt is the hidden problem. As well as making sure that the bodies we set up through the Bill work with the sole purpose of making sure that the consumer or individual citizen is at the heart of what they do, we have to recognise that we are not doing it well at the moment and there is still a long way to go.

Research carried out when I was at StepChange showed, I think, that it took about a year from people’s first indication of problems with their debts to seeking a debt management plan and going ahead with one. It must therefore be right that we all make every effort we can to ensure that there are systems, bodies, organisations, structures, mechanisms and techniques that will get people on to a way that gets them out of the debt, because the damage is so great. The breathing space scheme works in Scotland, and it is not difficult to see how it could be adapted to work in England. At the moment, there is no statutory scheme. We are talking about a breathing space period where interests, charges and collection activities are postponed without a requirement to make payments. That would give people time to seek advice and stabilise their finances enough for their debt adviser to recommend how to get out of it.

There is another thing about debt advice. I meant to make this point on an earlier amendment, and I apologise for getting carried away by what we were trying to do when we were discussing names. The physical product of most debt advice that is being exchanged in return for people’s engagement is a budget, which most people do not have. I am guilty of this, and most people in the Chamber probably are as well, as I do not have absolute certainty about where every penny of the very limited number of pennies I have under my direct control goes every month. Multiply that by the 63 million people in this country and you recognise that there is a bit of a problem here. If you ask them, people have no idea of what they are doing with their money. When I first went to Step Change, I was told that of 100 people who rang it, 30 people were obviously suitable to go straight on to a debt management plan and did, but about 10 of them actually had enough money to sort out their problems but did not know it. It was a question of going through every item of their expenditure line by line and making them believe that it was going to be all right and that, although it might take four or five years, there was certainly a solution. They did have the money, but they just did not realise it.

There is both a very simple solution to a lot of the problems we are seeing and a very complicated one, but both would benefit from having time to work through the options and to make sure that people are signed on and can go forward and get out of debt. We have to crack getting people. I think the Minister used the phrase “hot keying”, and I agree. If you catch them at any point in the cycle, hold on to them. Make them do something about their problem. Get them engaged and excited—and not only will you get them out of their debt problems but they will get an educational experience. It is only when people are in the crisis of not knowing what they are going to do, how they are going spend their money and whether they have enough cash to buy a meal for the kids that evening that they begin to feel, “I must get out of this and get it right in future”. That is what we must do.

When you can get a breathing space in, it is a sensible solution. It would work. The problem is that the Bill as currently constructed does not easily allow us to put this in as an amendment, but at the very least can we make sure that the powers exist for this to be taken as the next step forward, because it is certainly worth supporting?

[The Earl of Listowel]

My Lords, on cold calling, my mother suffered from dementia and, in the early stages, before we realised quite was the problem was, we were very concerned about attempts to defraud her, so I say to the noble Viscount, Lord Trenchard, that it is a problem not just for young people but for the elderly and the increasing number of people with dementia. I welcome that aspect of the debate.

I thank the noble Lord, Lord Stevenson, for tabling Amendment 41, to which I was pleased to add my name. I am grateful for the expertise on this issue that he brings to the Committee with his long involvement with StepChange. It has been good to hear the Government’s concern for those who have been left behind and for families who are struggling. I welcome that their manifesto said:

“We will adopt a ‘Breathing Space’ scheme, with the right safeguards to prevent abuse, so that someone in serious problem debt may apply for legal protection from further interest, charges and enforcement action for a period of up to six weeks”.


That is a very welcome commitment from the Government. I think the noble Lord is just seeking to help the Government to meet that commitment as soon as possible.

As treasurer of the All-Party Parliamentary Group for Children, I am particularly concerned about the way that family debt impacts on children. We know from Children’s Society research that, where a family has multiple creditors, the children fare worst. This welcome breathing space scheme would enable multiple creditors to be held at bay for a period of six weeks. What often happens is that, just because one creditor will not agree, there will not be that breathing space and proper planning cannot be put in place, so this is a very important proposal.

As a particular example, I think about care leavers. Until fairly recently, one-third of them left local authority care at the age of 16, and more recently one-quarter of them left at that age. We are making further progress on that. They are young, they have had trauma and they are out in the world fairly unsupported. Over the past 15 years, as a member of the All-Party Parliamentary Group for Looked After Childrenand Care Leavers, I have heard many young people talking about how they got into debt and about issues about paying for their housing. We know that care leavers are historically overrepresented among rough sleepers, often because they have fallen into debt around housing.

I can give as an example Emma—I shall call her Emma—who sought advice from Toynbee Hall. She was a care leaver. In 2015, she began a zero-hours contract. She had council housing, but she fell into debt, so over the course of about a year and half she was being pursued by the council for not paying her council tax and rent arrears and by a number of non-priority creditors. This caused her a great deal of stress. At the end of 2016, she got herself a regular job and was able to get a plan and begin to pay her debts off. How much better for that young woman if help had been there at the beginning of 2015. She would not have had to go through that and the creditors would have got their payment. At times, she was having to choose whether to eat, pay her rent or pay her debts. I hope the Minister can give a sympathetic response to the amendment.

--- Later in debate ---

I want to reassure noble Lords that the Government are committed to developing a breathing space scheme. Work is ongoing and the Government will set out their plans for taking this proposal forward in due course. Placing a statutory duty on the body to review the case and advocate for a breathing space is therefore, we believe, not necessary. I urge the noble Lords to withdraw these amendments.

[Lord Stevenson of Balmacara]

My Lords, every journey starts with a single step. We are not able to put in as an amendment the existing scheme—which has been through another Parliament close to here, has worked for 10 years and has answered all the questions that were on the lips of the noble Baroness—because the Long Title does not encompass it. We have put down a second-order amendment, but if we have to wait for an entire financial education edifice to be created and think about a cultural revolution in the way people deal with their credit card bills on 23 January, we will never get there. I urge her to think about taking powers now, so that in the future, where she does see this as a strong possibility, it becomes more real and tangible than it is at present.

[Baroness Buscombe]

I hear what the noble Lord says, but I want to assure noble Lords that, as I said, the Government are seriously considering this issue. I take slight exception to the inference from the noble Lord, Lord Kirkwood, that the Government are not doing anything. Why would the Government put this in their manifesto if they were not doing anything? The Government believe in this in principle; they simply want to get it right.

[Noble Lords]

Oh!

[Baroness Buscombe]

Noble Lords may laugh, but I have the advantage of having been at the other Dispatch Box in opposition when noble Lords opposite were in government. We suffered continually from the inability to get that Government to introduce and think about really important measures like this. That is why the situation has become so much worse over the past 19 years that I have been in your Lordships’ House. But we want to get this right.

--- Later in debate ---

[Baroness Buscombe]

The Government take the threat of scams and the whole issue of cold calling very seriously. On the specific issue of pension scams, the Government launched a consultation in December 2016, looking at three potential interventions. These included a ban on cold calling to help stop fraudsters contacting individuals. The Government plan to publish the response to that consultation shortly, which will set out the intended next steps—but, throughout the consultation period and during engagement with stakeholders, it became clear that this is a complex area. For example, where the consultation said that the ban would not extend to existing relationships, respondents highlighted the potential difficulty in defining existing relationships and ensuring that legislation is appropriately worded.

It is clear that this policy requires careful and detailed consultation as we further develop plans. We do not propose to extend this ban to debt management cold calling. We have focused on pension scams because they can have such a detrimental impact on individuals. Pension scams can cost people their life savings and leave them facing retirement with limited income and little or no opportunity to build their pension savings back up. I should add that, at the same time, we have sought to increase standards in the debt management sector by requiring organisations to be authorised by the FCA.

I assure noble Lords again that the Government take the issue of problem debt and cold calling very seriously. Work is ongoing in these areas. I do not think that the amendments would add value to the new body’s functions—and, although I appreciate noble Lords’ intentions, this is not the right time or the right place to amend the Bill, so I ask the noble Lord to withdraw his amendment.

The noble Lord, Lord Stevenson, referred to officials in the Box. They are doing a brilliant job. I took to heart his reference to them as if they are just there to be difficult. They are doing a superb job.

[Lord Stevenson of Balmacara]

I feel humbled if in any sense what I was saying was taken as a criticism of the wonderful work that is being done to make sure that the good things in the Bill get done. I in no sense intended to say that, and I hope that the officials will accept my apology, gracefully given. I was trying to say that there is a mentality growing about the tyranny of the Bill, which is set up in part because those who have responsibility for drafting it—not always Ministers—feel very attached to it, having gone through the process, done the consultations and decided things. It is inevitable and perfectly understandable that they do not want to see it changed. I was making a light quip at Ministers. If I were in their position, I would probably be saying exactly the same thing—but it does not make it right.

[The Earl of Listowel]

Before the noble Lord withdraws his amendment, I thank the Minister for her kind words to me. I gently remind her that the right reverend Prelate had her name attached to Amendment 41 as well. It has been a very difficult and bruising time recently, and we now have the breathing space of summer, so I welcome the Minister’s reaffirmed commitment to reintroducing breathing space eventually. It is reassuring that there is work going on to look at how these measures will be brought about. I hope that, after the breathing space of the summer, we may perhaps have a more fruitful conversation in the autumn. I thank her for her reply.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Committee: 1st sitting (Hansard - continued): House of Lords
Wednesday 19th July 2017 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

8: Clause 2, page 2, line 19, leave out “provide” and insert “ensure provision of”

[Lord Stevenson of Balmacara (Lab)]

My Lords, this is a brief amendment and stands on its own, I think primarily to ensure that the next group gets enough focus. We are back to the definition of words, which is obviously going to bedevil us as we go through the Bill. This one is slightly more generic than the others, in the sense that the description we have been given of the task of this new body is that of creating a mixture of direct provision and commissioning. However, sometimes the wording does not seem to match up to that, so the amendment suggests a better form of wording that would leave out “provide” and insert “ensure provision of”. When we look up the dictionary definition of “provide”, we see that it is basically an active verb whose primary meaning is to make available for use or to supply.

As I read it, it is there as an active verb, which means that the body to which it is applied will be doing things—implementing in an active way. Substituting “ensuring provision of” would mean a much greater accent on working with others to make sure that these things happened. The amendment applies to the pensions arrangements referred to in line 19 of page 2. In many cases, the pensions guidance function would be carried out mainly in house, or others would be commissioned to do the work, so it may not be the most appropriate place for the amendment, but we pick up the same idea as we move through the Bill and look at the other aspects of the work of the organisation.

It is a probing amendment at this stage to invite the Minister better to articulate what “provide” means here. We want to know in particular whether commissioning work is envisaged in this limb, whether it involves any direct provision and, if so, what that would be. Can the Minister give some broad breakdown of the balance between those two aspects? I beg to move.

[Baroness Kramer (LD)]

My Lords, I agree with the noble Lord, Lord Stevenson, that the amendment is possibly sitting in the wrong spot, because the various pension bodies being absorbed into this single body have provided guidance directly. It is advice provided through a commissioning, contractual arrangement, which I am sure everyone intends should remain in place. However, the underlying spirit of the point the noble Lord makes and the request for clarification are important.

I rise to speak merely because the Minister may answer that such issues are covered somewhat in Clause 4. I simply wanted to point out that that clause regularly uses “may”, whereas I think the Government’s intention —and that, I suspect, of many others in this Committee —is that this be a “must”. So, the argument that Clause 4 is the answer to the question raised may not exactly work.

--- Later in debate ---

[Baroness Buscombe]

I thank the noble Baroness for her intervention but I read it myself and I do not think it does—as she suggests—create that opportunity for the single financial guidance body to deliver the debt advice function. It says that it,

“may arrange for another person … to carry out any of the following functions on its behalf”.

The SFGB is the delivery partner. On the reference to “may” rather than “must”, from a legal standpoint it is already in the Bill that the guidance body can arrange for another person to carry out any of those functions. Indeed, it is implicit that it will.

I apologise but I have just been corrected in relation to the debt advice function. It is an option but not the plan—if that makes sense. I hope this explains what the wording of the pensions guidance function means in practice. I urge the noble Lord to withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her comments. “An option but not the plan” might go down in history as a rather interesting way out of a dilemma. We might return to this issue in the group after next, so I will not spend time on it now. I am afraid my worry is that “provide”, rather than some other wording, could be applied in future in a detrimental way to bodies that feel they have a role to play in this space, perhaps not so much in pensions but in other areas. For the moment, I would like to read carefully and reflect on what the Minister said before we consider how to go forward. I beg leave to withdraw the amendment.

Amendment 8 withdrawn.

--- Later in debate ---

Moved by

[Lord Stevenson of Balmacara]

11: Clause 2, page 2, line 22, leave out subsection (5) and insert—
“(5) The debt advice function is to commission the provision of sufficient debt advice services, which are to be free at the point of use, to meet the needs of people in financial crisis in England.”

[Lord Stevenson of Balmacara]

My Lords, we return to the question of provision, helped by the intervention of the Minister to say that the wording of Clause 2(5) is to be read as if it actually said, “the debt advice function is to provide”—with the assumption that it is an option but not a plan to do this by delegation to other bodies. That reflects comments made on an earlier amendment.

I should like to use this group of amendments to probe for responses on the scale, scope and funding, particularly of the debt space, because there are concerns in this area. Amendment 11 is a way to express the ambition across the debt space, and I recommend the wording. It is not open-ended; it sets down a few markers that could be used. It confirms that the debt advice services which are to be provided either directly or through commissioning bodies are to be free at the point of use and are to meet the needs of people in financial crisis in England.

Informed estimates suggest that there are probably about 2 million people in that category in England at the moment, of whom just over 1.25 million get a reasonable level of service from the existing bodies, primarily those which are offering pure advice, which are the Citizens Advice service, the Money Advice Trust and other smaller groups, but also those providing debt management plans, such as StepChange and some of the other smaller groups. There are also those offering solutions, which we talked about on earlier amendments.

The amendment would replace the current subsection. It clears up the question of what “provision” or “provide” mean and allows us to take the question forward on a secure basis, which will be comforting to those who are likely to be affected by the change from MAS to the new body.

Amendment 13 takes forward the point already made: this cannot be a top-down exercise. The single financial guidance body must work together with the existing debt advice services, which have been operating for 20 or 30 years—in the case of Citizens Advice, for much longer—know their stuff, are doing it well and are well respected by the industry, supported by it with cash and are able to operate largely on their own without support from central Government or any other body.

I said at Second Reading and I say again that the proportion of money brought in by the Money Advice Service is very small relative to the total expenditure on debt advice. It has largely come from historic funding made by grant to Citizens Advice when it was a body directly responsible for consumer support more generally under BIS, and now it has been transmuted into support through the levy and paid through MAS. But that is not the totality of what is available in the debt space. The wording suggested in Amendment 13 is on the basis of the consultation and makes a general statement about what it is to be used for—which, again, I think would be helpful in clarifying those who are involved in it.

--- Later in debate ---

[Baroness Buscombe]

My Lords, I thank the noble Lords, Lord Stevenson and Lord McKenzie, for tabling these amendments. The noble Lords have tabled a number of amendments that would make changes to the single financial guidance body’s debt advice function. The approach of this legislation is to enable the body to respond to changing needs and cultural and technological development by giving it broad functions. It is our intention that the body commissions out the delivery of its service, as appropriate. Debt advice is currently commissioned, and I cannot see this changing any time soon. If we had not intended that the body should commission for its delivery services, including debt, there would have been no need for Clause 4 to specifically provide for this. That is just in relation to the whole issue of debt advice. I wanted to start off with that.

Clause 2 sets out the functions and objectives of the new body, including the debt advice function. The provision of debt advice is a core function of the new body. Problem debt can blight individuals’ lives, and it is crucial that support is available to those who need it. Amendments 11, 13, 35 and 43, proposed by the noble Lords, Lord Stevenson and Lord McKenzie, offer a substantial revision of the new body’s debt advice function. They are made up of five key parts, which specify that: first, the body must commission advice; secondly, advice must be free at the point of use; thirdly, advice must meet the needs of people in financial crisis in England; fourthly, advice must be commissioned on the basis of consultation with relevant bodies involved in the provision of information, guidance and advice on personal debt; and, finally, sufficient funds must be dedicated to the body’s debt advice function. I shall address each of these components in turn.

In the first instance, it will be important that the new body commissions other parties in its efforts to ensure that debt advice is available to members of the public when they need help. As drafted, Clause 2 and Clause 4 together enable the delivery of regulated debt advice through delivery partners. Noble Lords will know that MAS currently acts as a commissioning body for debt advice; the Government intend the new body to fulfil the same, or a similar, function.

In the second instance, the Government absolutely agree that any help funded by the new body should be free at the point of use. The Government’s intention is to ensure that help is available to those who need it, and we would not wish to prevent members of the public from accessing help on the grounds of cost. Pension Wise, the Pensions Advisory Service and the Money Advice Service currently offer free-to-client help and, as the Government have noted in their consultations, the new body will do the same. Indeed, by bringing together pensions guidance, money guidance and debt advice into one organisation, this measure allows for greater provision of free-to-client help. The Government expect that savings will be made as MAS, TPAS and Pension Wise are brought together and, as a result, we expect a greater proportion of levy funding to be made available for the delivery of front-line services to members of the public.

On the third point, on the needs of people in financial crisis, it is of course critical that those in crisis receive support. However, I am concerned that the proposed amendment restricts the activities of the new body, placing too great an emphasis on those who are already in crisis while failing to mention help that the body might give to members of the public who are approaching moments of crisis. I think of the example of Emma, who the noble Earl, Lord Listowel, referred to on an earlier amendment. As the noble Earl quite rightly said, if only it could have been possible for her to approach something earlier—that has to be an aim of this body. It must be able to help not only those who are in real crisis but those sensing that they are getting into what we might colloquially call “hot water” and need help.

On the fourth point, I agree with the intention behind this amendment, which I believe is to ensure that the new body will work closely with those it is commissioning and that there is a comprehensive strategy for the sector. The spirit of this amendment is already captured by the body’s strategic function and its stated objectives. The strategic function explicitly states that the body will be required to work with others in the financial services industry, the devolved authorities and the public and voluntary sectors, which together capture the organisations specified by the noble Lord in his amendment. The body’s five objectives, including delivering its functions to those most in need, in areas where it is lacking and in the most cost-effective way, would not be deliverable if the body did not consult others.

Finally, I turn to the final point on ensuring sufficient debt advice funding. The Government agree that it is important that the body is able to meet increasing demand for debt advice in England if it is required to do so. As drafted, the current clauses allow funding for debt advice to increase so that debt advice is available when there is increased demand from members of the public. The body will submit a business plan for approval by the Secretary of State, which will form the basis on which the Secretary of State will instruct the Financial Conduct Authority to raise funds from its levy. The Government are confident that these arrangements are robust and will give the new body the ability to ensure that its debt advice function is properly funded. Decisions about how the body should allocate its resources, including to debt advice, are best taken by the management of the body in the light of its agreed business plan. It is, after all, accountable to Ministers for its decisions, who are in turn accountable to Parliament.

I would also like to observe that the Money Advice Service is working closely with partners on the plans for an independent review of the funding arrangements for the sector. Under its strategic function, the new body will be able to continue this valuable work as part of its aim to improve the ability of members of the public to manage debt.

Having heard these explanations, I hope the noble Lords will agree that the amendments are not necessary. I therefore urge the noble Lord, Lord Stevenson, to withdraw the amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her very comprehensive response. I would like to read it in more detail in Hansard but in the meantime I beg leave to withdraw the amendment.

Amendment 11 withdrawn.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 6th September 2017 Lords Chamber

[The Earl of Listowel]

I support Amendment 24, to which I have added my name, and I hope that the Minister will find it helpful. I am particularly concerned about parents and children involved in indebtedness and the pressure on families that arises from that—something that we discussed during the first day in Committee. At a time of crisis, when Governments have to make very difficult decisions, they often seem to make short-term decisions that can have a long-term, adverse impact on society, particularly on families. There are many routes to productivity or failure to be productive, but family dysfunction is a core basis of the failure to produce productive citizens.

More and more evidence is becoming clear that if children—even those up to the age of 25—experience adverse circumstances or difficult relationships within the family, particularly during the pregnancy or immediately after birth, their ability to do well at school, make and keep relationships, and have good physical and mental health well into adult life is impaired. This is a helpful amendment to give us a bit more breathing space and think more about the decisions that we as parliamentarians come to in the heat of very difficult economic circumstances, and about what impact they have on the long-term success and productivity of our society.

I visited Germany earlier this year and was impressed to learn that none of the shops is open on Sundays. It is not permitted for businesses to send emails after 8 pm at night. It is a cultural norm not to work beyond 6 pm in the evening. It is seen as inefficient to do so. Germans seem to have a far better work/life balance than us and are renowned to be more productive than we are. I am sure that there are many more factors to take into consideration, but under pressure and in the heat of the moment, with the short-term decisions that seem so important, perhaps we lose sight of the fundamentals.

I give credit to the Government for recognising the fundamental importance of family life and the significant investment that they have made in supporting couple relationships. The high levels of employment that the Government have achieved have reinforced couple relationships. Professor Melhuish makes clear that high levels of employment tend to conduce to less family breakdown. These are complicated matters, but a report of this kind could give us space to step back and think about the implications of the decisions that we are feeling pressed to make at the moment, particularly what impact they may have on families and the ability of our children to thrive in the future. I hope that the Minister can give a sympathetic response to this amendment.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I support the amendment introduced forcefully by my noble friend Lady Drake. I am not sure who is responding from the other side—whether it will be a transatlantic journey or just a short hop—but I am sure that it will be entertaining nonetheless. I have three points to make and I hope that the Minister will be able to fit them into the very brief swoop around the skies that he is about to make.

The amendment tries to flesh out a little more of our earlier discussion. In so doing, it makes this point: there needs to be a body that has responsibility for assessing many of the activities that either advertently or inadvertently are made by government at all levels, whether regional or national, and by other bodies involved in the space that we are talking about—people’s lives and their capabilities to cope with the financing of them. The method chosen by my noble friend in her proposal, supported by the noble Earl, Lord Listowel, is to think about how other policies initiated by government as a whole need to be measured and impacted.

My noble friend mentioned the impact assessment. I have the impact statement for this very Bill. Those who have read it—and I have—can see that, as well as the broader discussions about the intricacies of the costs of this provision, there are statements around the impact of the measures that we are discussing on competition, innovation, the wider economy, equality, the environment, and social and sustainable development. This is not new ground, in terms of what the Government have to do to assess that the proposals they are bringing forward for legislation are properly considered.

I have reflected a little on what was said in our earlier debate this evening. The noble Lord made a point in relation to trying to sort out the impact that it could have been alleged was being made on the SFGB, as opposed to the FCA or indeed the Government. It would be sorted if more work were done by those preparing policies across the range of government activities in the manner specified in this amendment. Therefore, I commend it to him.

--- Later in debate ---

[Lord Sharkey]

My Lords, I shall speak to Amendment 27A in this group. This amendment makes a very small change to Clause 2(8)(b), which sets out the objectives of the SFGB. The second objective currently reads,

“to support the provision of information, guidance and advice in areas where it is lacking”.


We agree with this objective, but we feel that it does not go far enough. It is good to support the provision of information, guidance and advice, but it is surely better also to support the use of this information, guidance and advice. Provision is necessary, but it is not sufficient. Provision without use risks wasting time, money, effort and opportunity. This amendment reworks that paragraph by adding “and use”, so that it would read: “to support the provision and use of information, guidance and advice in areas where it is lacking”.

I can illustrate the point by talking briefly about Pension Wise. The service provided by Pension Wise is excellent: 94% of users said they were likely to recommend the service to others; 91% were either very or fairly satisfied by their experience; and 85% said that Pension Wise helped to improve their understanding a great deal or a fair amount. But the problem is that the level of take-up of this excellent service is very low. Research published in June by the Treasury and the FCA suggested that just 7% of eligible pension savers planning to retire in the next two years received guidance from Pension Wise.

Low take-up, both of public and private advice and guidance, would not necessarily be a cause for concern if UK pension savers were generally engaged and well-informed, but they are not—the opposite is the case. Financial capability in the UK, as we have been hearing this afternoon and this evening, is poor. The Financial Advice Market Review baseline report found that just 27% described themselves as capable of sorting out their own finances, and 34% of those who had purchased a financial product later regretted the decision.

Specifically, there is a problem with the levels of knowledge and awareness about pensions and retirement. The International Longevity Centre UK, under the aegis of the noble Baroness, Lady Greengross, who is not in her place at the moment, has published extensive research on consumers’ understanding of retirement planning. In 2015, only half of those with a DC pension said that they understood, either quite well or very well, what an annuity is. Only 3% said they understood what income draw-down was.

There is not just a lack of understanding; there are also dangerous misunderstandings. July’s PLSA survey found that over half of DC pension savers incorrectly believed draw-down products offered a guaranteed income in retirement. Perhaps worse, 25% believed draw-down carried no investment risk at all. This illustrates that the need for guidance and advice is clear. More accurately, the need for people actually to use guidance and advice is clear and pressing.

This is the problem that Amendment 27A sets out to address. The amendment requires the SFGB to have the objective of promoting the use of guidance and advice, not just the provision of guidance and advice. This is a simple but vital change, and I hope the Minister will be able to agree to it.

[Lord Stevenson of Balmacara]

My Lords, I support the amendments in the names of my noble friend Lady Drake and the noble Lord, Lord Sharkey. The noble Lord’s rather graphic descriptions make it very clear that there is a bit of a problem here in terms of how one ensures that any body—not just the new body we are talking about today—is able to get someone to do something which they clearly are not willing to do, and how to engage with, and learn from, the experience of taking out the loans, or preparing for the retirements which they are going to encounter later in their lives. I suspect that the Government will come back and say that, while the wording is admirable and something that they could support, they are not quite sure how it could ever be measured, or whether “use” is in fact the right term here, because getting people to the point where they recognise that they have a problem is not the same as getting them to do anything about it.

When I was working at the StepChange Debt Charity, one theme that we developed in my time there was that there was a sense in which those who had responsibility for activity in this area relied on generic, rather than specific, advertising or advocacy of another form. We took the view that was not where action was likely to be most profitable. What worked was this: when you had someone going through a really serious incident, sad and difficult though that was, the learning that took place as a result of that process was so incredible and so obvious that it was almost worth going through the process. We all have similar experiences with our own friends and family. It is only when reality sinks in, that the credit card bills do not get magically paid by themselves and that the bank is not going to continue to provide the money-tree support that it has done in the past, that you have to learn how the world actually works and what you are going to do about it. I wish the noble Lord, Lord Sharkey, well with his amendment, but I think it probably needs a bit more work before we have got the right balance between knowledge and understanding, in terms of information, guidance and advice, and the practical learning that can come from actually operating in that world.

On my noble friend Lady Drake’s amendment, which we definitely support, in some senses our debates this evening have run the slight danger of demonising debt as a feature of our society today, whereas most of us need to borrow money at some points in our lives. For many people, it is an affordable way to make large purchases or to balance competing financial priorities. The problem is when one does not plan for or anticipate, but then experiences, unexpected events. We have had examples given, and the numbers or statistics are incredible. A recent report published a month or so ago gave two headline figures, which I will focus on rather than go into the detail. In Britain today, almost 2 million people a year suffer an illness of such length that they are absent from work such that, as a result, their income is reduced. That is a very large number of people. Another 2 million people experience job losses or loss of overtime or condition pay in other ways. In terms of the overall working population of about 23 million or 24 million, nearly 4 million—almost one-sixth—are affected by that. In a sense, it is not surprising that we are having problems in this area, and it is something that we need to think about.

On the question whether income shocks are sufficiently important to require changes to the Bill as currently drafted, it will be interesting to get a response. I think that this issue has had less attention than it needs, and the amendment plays back into the points made by my noble friend Lady Drake about the impact on other persons who would otherwise not be affected, such as young people, those in care and those who are dependent on those who are affected. The amendment also brings back all the points that we have been hearing about in terms of mental health, those who suffer from disability and vulnerability in other ways, and those who are preyed on by others who wish to make them do things that they do not want to do. It brings together a number of the issues we have been talking about this evening and focuses on the need to have some sort of balance and arrangement.

Finally, the amendment also picks up the point about whether the market could provide, if left on its own and not subject to any exert or constraint. With respect to the noble Lord the Minister—our aviator for this evening—I think he is being incredibly naive about this. The noble Baroness, Lady Kramer, is absolutely right. The competition imperative imposed on the FCA drives out the possibility that there is any agency around, not in central government, which could provide the changes that are necessary in order to provide these services. Left to their own, financial services will never come up with that. Financial services, without any imperative to take into account a duty of care, or fiduciary duty as we call it, will never see it as their responsibility to bring forward the insurance, the payment protection and other issues that are so necessary to try and underpin not just the income shock issue but the broader issue as well. Therefore, to rely on a simple transparency and information flow as being the way to do that is just naive.

Take the example—I have used this before, but I make no apologies for doing so again—of the payday loans scandal that this House had so much to do with, with notable contributions from all sides of the House, including the most reverend Primate the Archbishop of Canterbury. We took the view that the existence of those who were offering payday loans was on such a scale that action needed to be taken. The Government initially resisted that completely, saying that what we needed was more transparency, but the final result was that action was taken. That action was based on what the FCA could do, and it is defective. What the FCA said to us, in essence, was that its vision of cleaning up the payday loans scandal was to create a fairer market in which there were fewer operators, but that they would operate efficiently at a reasonable profit margin and be well capitalised. At its best effort, at the end of the day that did not stop loans of more than 1,000% APR from populating this market. Recent research from the StepChange Debt Charity, which I had the honour to chair until a few years ago, shows that nearly 20% of people still rely on high-cost credit, including payday loans, to pay their basic end-of-month bills. This is outrageous, and I do not think that the market works to the benefit of consumers.

We will need to come back to a lot of the issues raised today by my noble friend Lady Drake and others, but it is really important that the Government get a grip on this.

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Moved by

[Lord Stevenson of Balmacara]

31: Clause 2, page 2, line 44, after “organisations” insert “and prioritising the allocation of resources to front line advice and guidance delivery”

[Lord Stevenson of Balmacara]

My Lords, I can be relatively brief because I have heard both noble Lords who have spoken for the Government express their concern that in some of the amendments we have already discussed, we are overloading the new body to such an extent that it will become diverted from its main purpose. This amendment is in that vein, so I am sure it will commend itself. Indeed, it may be our first hint that the Government are listening and willing to work with us on these matters—we have not had much success until now—to ensure that resources available not just as a result of efficiency savings, but because of a conscious decision on behalf of the management of the new body, mean that front-line activities and services are what counts. In recent years, some of the work of MAS in its current and previous incarnations, has been criticised, however unjustifiably, in that the money was not spent well.

Before I finish what I promise will be a very short speech, I wish to flag up that we have not really had a chance, so far, to discuss in any detail the implications of the new financing arrangements for the new body which are embedded in the Bill. At this stage, I do not think we have a particular concern that would be addressed by an amendment, but I hope that at some point, at the Dispatch Box or perhaps by letter, we could have some information on the Government’s assessment of the changes being made. Noble Lords will be aware that the Bill changes the fundamental arrangements under which the current MAS is funded. At present, MAS is an independent body which is related to the FCA, to the extent that its business plan is reviewed—I am summarising to make the point—and the funding required for the year is agreed; it is then levied directly from the companies in scope to the FCA and passed directly from the FCA to MAS. In future, the Treasury will inform the FCA of the moneys it judges will be required by the single financial guidance body. The FCA will raise a levy on the companies under the present arrangements, but that money will not go to the new financial body directly but back to the Treasury, which will adjust the DWP’s baseline RAB grant for the year in order to allow it to make a grant to the single financial guidance body. That raises all sort of questions about why the Government decided to do this. We had an offline discussion about this but we did not get satisfactory answers, so I would like this detail.

I speculate—I know it is wrong to do so in the circumstances of this debate—and I worry about the implications of things such as Barnett. Since this is now a tax on financial companies being paid into the Consolidated Fund, then being paid across to DWP, in effect, and then being issued to a non-departmental body, we are talking about public expenditure to be recorded in the books as such, and there will be requirements in the national regions for their funding to be increased pro rata. I wonder about that. Is it really the most efficient way of doing this? I am sure there will be an argument on that.

My worry is that companies will be concerned that the funding they are used to paying to the FCA will be added to by what is in effect a tax on business. There is an issue about how that is managed in making sure that information gets out correctly. For those who are currently funded by those very same companies by direct application or through some system such as the fair share agreement, there is obviously a worry that the new funding mechanisms will impose an additional strain on companies that might not wish to continue to fund at the present level. I am sure there are good reasons why the Government have decided to go down this route, but I do not think I have heard them properly and I would be grateful if today or in the near future we can get some information on that. I am speaking from the perspective of my former chairmanship of StepChange, but this affects other bodies such as Citizens Advice, the Money Advice Trust and Christians Against Poverty. As a result of the Barnett implications, the situations in Scotland and Northern Ireland are going to be considerably more complex than is set out in the Bill.

--- Later in debate ---

[Baroness Buscombe]

My Lords, I shall cut straight to the quick, as they say, with the noble Lord, Lord Stevenson, and say that I will be very happy to discuss the issue of expenditure in detail. It is covered in Clauses 8 to 10, which I think we will be covering on day three in Committee. That said, I want to address this amendment in full and in so doing will be touching on the issue of expenditure, in broad terms, in the provision of services and so on.

I thank the noble Lord for tabling this amendment. Amendment 31 proposes that, as part of its objective to ensure that information, guidance and advice be provided in the clearest and most cost-effective way, the single financial guidance body prioritise the allocation of its resources to front-line delivery services. As the noble Lord noted at Second Reading, we need to learn lessons from our experience when the Money Advice Service was set up. One of those lessons is to ensure that this body has a clear focus on front-line services and that delivery of those services should be its priority. The legislation places a duty on the body to have regard to a range of objectives in exercising its functions. The objectives as they stand collectively prioritise the body’s activities on meeting customer needs and working collaboratively with other financial guidance and debt advice providers to meet those needs.

In restructuring the public financial guidance landscape and creating the single financial guidance body, the Government want to provide a more joined-up, customer-focused approach to the delivery of public financial guidance. In the Government’s response to the consultation on creating a single financial guidance body, we were clear that:

“By rationalising the provision of services, the government expects there to be long term operational efficiencies that will mean more funding can be channelled to front line delivery of debt advice, money and pensions guidance”.


The new body will need to harness the opportunities created by bringing the three existing services together and be innovative about how resources generated by rationalisation can be utilised to best effect in delivering better services to the public.

We do not want the body to spend unwarranted sums on, for example, untargeted marketing. The Government were clear on this in our consultation response. Instead, we want the body to link up with industry, the voluntary and public sectors and the devolved authorities to promote its services in a targeted and value-for-money way.

However, this does not mean that the single financial guidance body should not look to devote resources to investing in other activities where to do so would be in the interests of its customers. For example, in discussing previous amendments, we have already been talking about investing in research that builds an evidence base on matters such as what type of front-line interventions have the highest impact for customers. This sort of activity will help the body design and target its front-line services more effectively.

We want the body to keep pace with developments in people’s financial guidance and debt advice needs. We want it to evolve and adapt in line with technological advances, so that its services continuously improve. I do not think any of us want the body to stagnate and fail to deliver what people need. Requiring the body to prioritise its allocation of resources to front-line services could do that.

Clause 2 sets a framework within which we want the single financial guidance body to use its expertise, skills and knowledge and to have the flexibility to design its services so that they meet the financial guidance needs of UK citizens now and in the future. We should also remember that the body has a strategic function to work with others to support and co-ordinate the development of a national strategy that will aim to improve the financial capability of members of the public, their ability to manage debt and the provision of financial education to children and young people.

This is not a front-line delivery service, but it is a critical function, and the body will need to allocate resources to it. The strategic function of the body will bring together the body, the financial services industry, the public and voluntary sectors, and the devolved authorities to develop joined-up plans and activities that are more likely to deliver improvements in financial capability than activities undertaken by each party individually. I hope the noble Lord, Lord Kirkwood, heard what I just said. We very much take on board that it is really important that we involve, as far as we can, devolved authorities in this and work with them. Debt advice is separate, of course, but it is very important that we all work together on guidance, for example.

I do understand the concerns of the noble Lord, Lord Stevenson. It will be important that the governance and accountability arrangements for the body are transparent and robust. It is important to keep in the forefront of our minds that, as a statutory non-departmental public body, it will be accountable to Parliament for its activities, and the Department for Work and Pensions will be the sponsoring department.

Key elements of the body’s accountability and governance arrangements are set out in the Bill, including the requirement to prepare a statement of accounts in respect of each financial year, which must be laid before Parliament. It must also inform Parliament of its activities and expenditure through an annual report that must be published. Here, I reference the question previously posed by the noble Lord, Lord Sharkey, about what happens if certain money is not spent. This should all become clear in its annual report.

The relationship between the single financial guidance body and the Department for Work and Pensions will be set out in a published framework document that will follow the principles in the Cabinet Office’s Partnerships between Departments and Arm’s-Length Bodies: Code of Good Practice and Her Majesty’s Treasury’s Managing Public Money. The framework document will also provide further details of the governance arrangements under which the body will operate, including requirements for preparing, securing approval for and publishing its corporate and annual business plans.

The single financial guidance body will deliver guidance which supports the policy of both Her Majesty’s Treasury and the Department for Work and Pensions. Although the Department for Work and Pensions will be the sponsor department, both the DWP and Her Majesty’s Treasury have responsibility for ensuring the body receives the support it needs to deliver its statutory functions in an effective and efficient manner that meets the needs of citizens.

As I said at the beginning of this debate, we will go into further detail on the funding at a later stage of Committee. On that basis, I urge the noble Lord, Lord Stevenson, to withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the Minister very much for that full and considered response. I look forward to the discussion and wait to be enlightened as to the intricacies of international and national funding across the various parts of the United Kingdom that will come together to cement the changes that have been made.

On the broader question about efficiency and effectiveness and the objectives, can I just check one point? A simple nod will suffice. Given that the body is likely to be judged to be an NDPB—because that is an objective test after the body has been set up, not something that one can assert beforehand—and given the nature of its relationship to its sponsoring department, will it in fact both be audited by and subject to periodic review by the National Audit Office? I did not get a nod—maybe we will need more information. But I get the sense that that is correct, and will be happy with a later response on that.

At some point we might also have a discussion about the role of Parliament in this, which would be helpful. Clearly, the PAC will look very closely at the NAO, but it is often necessary to make sure that the DWP Select Committee is also engaged, because Parliament’s role is most effective, as already referred to, through committee work. With that, I beg leave to withdraw the amendment.

Amendment 31 withdrawn.

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Moved by

[Lord Stevenson of Balmacara]

33: Clause 2, page 3, line 5, at end insert—
“( ) The single financial guidance body should seek to ensure that all communications with individual members of the public about their services are clear as to whether they are receiving advice or guidance, as defined in this section.”

[Lord Stevenson of Balmacara]

My Lords, I will also speak to Amendments 34, 36 and 37. I am afraid this is quite a wide-ranging group, so I may have to put a little time into each of the amendments. We are pointing in slightly different directions here, but there is a common theme, so it is useful to have them together in one group.

We start with our old, standard question about what is advice and what is guidance. The Government are beginning to get themselves into rather bad habits here, if I might be so rude as to suggest that more thinking needs to be done. I am not sure whether other Members of the Committee will also have had the background note to all Peers on defining advice and guidance that I got at 3.46 pm this afternoon. I have not had time to look at it. It was circulated from the Government Whips’ Office. It is quite helpful, and I have been reading it in the interstices of the debate today but, obviously not wishing to miss a word from either of the Ministers or from others participating, I have not been able to focus on it entirely. However, although I look forward to what the Minister may say in response, if I judge it correctly it repeats, in essence, the wording that she used at Second Reading and in earlier stages of Committee on the difference between advice and guidance. I accept that that is probably as far as we are going to get on this, as it is a three-page document and has quite a lot of detail in it, but I am sure that others present—I am not looking at anyone in particular—might wish to come in on this point later, or indeed on later amendments.

I mention this because Amendment 33 is again probing the definitions of advice and guidance. There is not much point in going into this in any detail other than to say that we now have more information, which may allow us to get a little further down the line on this. If I am right, the advice now being given is that there are quasi-statutory and statutory definitions which will take us down the road of defining financial advice as an activity that involves a personal recommendation to an individual about a particular course of action, rather than the provision of information about a range of options that may be available to them; and that guidance is generally understood to be any service to support clients making investments that is not advice. That presumably needs to be interpreted for the wider range, with an additional comment on what the definition of debt advice is, which is different to the guidance functions delivered and involves activity specifically regulated by the FCA. I will use those as the basis for the further remarks I will make tonight.

Amendment 34 would ensure that if a member of the public comes to the new body seeking advice from two or more different functions of the body, they will be able to access it if needed, as opposed to only one function. The intention here is that catching someone as they come into the system means that they stay in the system until the advice or guidance that they want is resolved. I think we all agree that that is important, but it is more obvious in the breach than in the observance. The technology has not always been as good at picking up as we might wish.

The word that is often used in these circumstances is “hot-keying”; in other words, once you have someone on the phone or through a computer system who is engaging with you in the process of trying to resolve their problem regarding any one of the issues that have been dealt with by the SFGB, you do not lose them until you are at least in progress or on a programme—that is, you are informing them or if possible, if it requires more than that, making sure that they stick with it until such time as it is resolved. The amendment is meant to strengthen the arrangements to ensure that we get to the point where we have a seamless approach, however many bodies are involved and however many different operations are required to provide the information, advice and guidance sought.

--- Later in debate ---

[Baroness Buscombe]

My Lords, I thank all noble Lords for their contributions to this debate, particularly the noble Lord, Lord Stevenson, for introducing Amendments 33, 34, 36 and 37. Straightaway, I apologise that the all-Peers note arrived at only 3.40-something this afternoon.

[Lord Stevenson of Balmacara]

According to those with better intelligence than I in the use of electronic devices, it was actually circulated at 10 o’clock but, because it was circulated to our Whips Office, which took a dim view of it, it did not get around until 3.49 pm.

[Baroness Buscombe]

I am very grateful to the noble Lord, who has mitigated the situation. Even so, it is very last-minute, and let us put the blame at my door as the Minister responsible. It is important that we try to address this to the best of our ability.

I can assure all noble Lords that we have spent a considerable amount of time this summer, when perhaps I should have been on the beach, discussing this issue with different people in the industry along with MAS and TPAS. What I hear from consumers and those involved on a day-to-day basis is a very different tale from what I hear from noble Lords this evening. The public have the ability to understand the difference between advice and guidance, but we need to convince noble Lords of that—I appreciate that.

I thank noble Lords for the opportunity to clarify the important issues raised by these amendments. I begin by discussing Amendments 33 and 34, which concern guidance and advice; I will then move on to Amendments 36 and 37, which concern collaboration with the financial services industry and the devolved Administrations. Amendment 33 would add an objective for the body to ensure that at every stage of communicating with members of the public about its services, people are clear whether they are receiving guidance or advice. It will, of course, be important that members of the public are aware whether they are receiving financial guidance or financial advice. We discussed the distinction between guidance and advice in some depth in July, and I believe our conversation has highlighted the importance of clarity in this issue. Indeed, we have taken on board the points made by noble Lords, and I have had a number of meetings with officials, who have worked on a detailed information paper, which I hoped would be helpful.

In the meantime, I do not think that the amendment as drafted is appropriate or necessary. We fully appreciate the risk that members of the public may receive guidance, take it as advice and then go on to make financial decisions when they ought to seek further assistance. However, I can reassure noble Lords that there are already appropriate measures in place to mitigate that type of risk. In fact, I can quote the exact wording currently given to customers by the Pensions Advisory Service and Pension Wise on this matter. In the case of TPAS, clients who ring the helpline will hear a message telling them that it does not provide regulated financial advice and that its service provides generic information and personalised guidance on occupational and private pension-related matters.

As Michelle Cracknell, the chief executive of TPAS, said to me:

“We give a simple disclosure: ‘We cannot tell you what to do’”.


She also said that, as debt advice is defined as a regulated activity, it would be confusing to describe it as anything else in the Bill. She has made that point very strongly, as have others in the industry. When I was sitting with an incredibly experienced, thoughtful and helpful group of people working at TPAS, giving advice to people and working through their systems on the web and on the telephone, I was hugely impressed. They have not had one problem in 34 years with people being confused or complaining about thinking that they were receiving guidance when they were actually receiving advice. It has never been a problem. So we are getting a different story outside, with the user, and we must not underestimate the public, who have the ability to understand the difference between advice and guidance. The whole purpose of this body is to provide a more seamless customer journey so that people can obtain guidance and advice without there being a problem.

--- Later in debate ---

I thank the noble Lord, Lord Stevenson, for these amendments and all noble Lords, particularly my noble friend, for their contributions to this debate. I hope that I have been clear that, while I understand the intention behind these amendments, the Government’s position is that they are unnecessary and may be overly prescriptive to enshrine in primary legislation. As such, I urge the noble Lord not to press Amendments 34, 36 and 37—I mean 33, 34, 36 and 37.

[Lord Stevenson of Balmacara]

I am very grateful to the noble Baroness, Lady Altmann, and the noble Lord, Lord Kirkwood, for their support and for opening up the debate, in particular on Amendment 33. I thought that the Minster made a bit of a Freudian slip there, because she wanted me not to press Amendments 34, 36 and 37 and then realised that she should have included Amendment 33. In fact, I do not think that is what she meant—she means that we need a further discussion on this.

There is a really important issue that we want to sort out. The current regulatory phraseology may fit the legal requirements of the current situation but, as the noble Baroness, Lady Altmann, said, the game’s a bogey—that is a Scottish expression. It is no longer as it was; we are in a different world now with auto-enrolment and all the ways in which technologies are coming forward. Fintech is the word on everybody’s lips in the sector. We need to think harder about future-proofing the current legislation. At its heart, sadly, this problem is probably of the Government’s own making. Had they decided to stick with the two-body solution, we would probably not have had this problem, because we could then have had different regulatory structures for debt and for pensions or other activities. Because they have been bolted together, however, the issue is not going to go away.

If we are to have an integrated, warm-key, hot-key, all-singing, all-dancing issue, we need to face up to it and be very clear about it. It may be true that the people the Minister talked to did not have difficulties with this, but I can tell her that, out there in the country, people do not follow you when you start talking about regulated and non-regulated advice. In the regulated pensions area, if it is possible that regulated pensions advisers cannot tell people what to do, but it is also possible that regulated debt advisers can tell them what to do—it happens—then we have a problem and we need to resolve it. If we are to be seamless, why settle for less than that? We should get it right but, with that, I beg leave to withdraw the amendment.

Amendment 33 withdrawn.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Committee: 2nd sitting (Hansard - continued): House of Lords
Wednesday 6th September 2017 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

45: Clause 4, page 3, line 46, at end insert—
“( ) When arranging with a primary SGFB delivery partner to carry out on its behalf the debt advice function, the single financial guidance body may contract only with organisations and companies which are established for charitable or not-for-profit purposes.”

[Lord Stevenson of Balmacara (Lab)]

My Lords, it is well past my bedtime and I will therefore be very brief. I think I can be. I was going to say that these are two sides of the same coin but there are three amendments. Let us be imaginative and say they are grouped around a common theme, which is again to get on record the idea that the work that is going on either directly or through the SFGB must ensure that the services delivered are free at the point of use. That is the main point of Amendment 45, which restricts the operations to,

“companies which are established for charitable or not-for-profit purposes”.

It may be argued, and I think I would accept, that many companies operate in a way that has different branches and it may be that the particular branch which deals with, for example, debt advice might be a not-for-profit operation. Provided it is understood that the advice is always free, the actual status of the company is probably of a lesser order and I would understand if the Minister were of a mind to mention that in his very brief response.

Amendment 46 deals with how the objective attaching to the SFGB also applies to the overall system, in the sense that it would be perverse if the arrangements were such that the initial interactions with the partners and organisations working with the SFGB were free at the point of use but these were also referring clients to profit-seeking or charging operations. This is primarily a probing amendment but, again, I am looking to make sure that the advice circle is complete by retaining this free-at-the-point-of-use idea.

Amendment 47 picks up the possibility that with regard to the general governance arrangements that are set in place—which the Secretary of State has responsibility for, as we have learned this evening—the FCA may have an involvement but the single financial guidance body certainly has an arrangement for making sure that governance is properly arranged and the level of accountability is appropriate. One might ask why that was necessary but it would be a rhetorical question and I do not expect a lengthy response. Given that the delivery partners are being supervised by the FCA in most cases, and certainly where clients’ money is concerned, it is a requirement that they be authorised by the FCA. Given that most of these are charities and therefore also subject to the regulatory requirements of the Charity Commission, it is unlikely that the SFGB would be in a situation where governance arrangements were falling short of absolutely perfect. Again, reassurance from the Minister would be most welcome. I beg to move.

[Lord Young of Cookham]

My Lords, I am grateful to the noble Lord, Lord Stevenson, for moving Amendment 45 and then demolishing it, which saves me the task of so doing. I confirm that we are absolutely clear that any help funded by the new body will be free at the point of use. The difficulty we have with his amendment is that it may be appropriate for the body to enter into arrangements with organisations which provide free-to-client advice but also make a profit elsewhere. He made it clear that as long as it is free at the point of use to the client, he was relaxed. That deals with that amendment.

Turning to Amendment 46, we agree it is important that delivery partners refer members of the public to additional help when they are unable to provide the information themselves. The difficulty with the amendment is that it prevents delivery partners referring members of the public to the most relevant source of help in the first instance. For example, if a member of the public needs legal advice, we do not believe that delivery partners should be obliged, as the amendment requires, to refer that individual back to the SFGB. They should be free to refer that person for appropriate legal advice.

Finally, I may need to write to the noble Lord on Amendment 47. Given the SFGB’s relationship with government, it would be inconsistent with the precedent set by other arm’s-length bodies if the sponsoring department sought to interfere with, or have direct involvement in, the contractual arrangements that the body seeks to enter into. But I assure the noble Lord that as an arm’s-length body the SFGB will be required to comply with government policy on public procurement. The sponsoring department will support the SFGB in dealing effectively with any issues that may arise in the area of delivery partner governance and accountability. If the noble Lord wants more information on that, I would be very happy to drop him a line. Against that background and given the hour, I hope he will be able to withdraw the amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for his comments and his brevity. Hansard will have an interesting time trying to unscramble all our mixed-up shorthand for the body that is still yet to have a name. I wish we would get a name quickly and then we would not have to worry about “F”, “S”, “G” and “B”, and my teeth falling out. I will read Hansard very carefully, and I am sure that any additional information that might be provided by letter will be most welcome. I beg leave to withdraw the amendment.

Amendment 45 withdrawn.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Committee: 3rd sitting (Hansard): House of Lords
Monday 11th September 2017 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

49: Clause 6, page 4, line 23, leave out from “must” to end of line 24 and insert “create and publish a commissioning framework based on the competencies of the provider, against which it will satisfy itself when it commissions and procures services from—”

--- Later in debate ---

[Lord Stevenson of Balmacara (Lab)]

My Lords, in moving Amendment 49 I shall speak also to Amendments 54 and 55 in this group. I am grateful to the noble Baroness, Lady Meacher, for adding her name to the first of those amendments.

The amendments continue the debate we have had about standards and seek to draw out a response. In that sense they are probing amendments and I do not expect them to be accepted as they stand. They are probing in the sense that they are trying to draw out more clearly what standard setting will involve. As has been mentioned, Clause 6 states simply:

“The single financial guidance body must from time to time set standards to be complied with”,


but does not specify what the standards are. Are they about dress codes or eating habits? Presumably they relate to the more detailed work of how it deals with its customers. I would hope that it is the latter but that does not exclude the former. A word of comfort from the Dispatch Box might ease troubled concerns outside.

The underlying problem is that for many of the bodies to which the standard setting will apply there is an existing regulatory framework operated by the FCA and therefore we are in danger of seeing dual regulatory powers. This is not just a trivial point about bureaucracy. In a recent report from the StepChange Debt Charity, in which I have already declared my interest, the chairman points out that the arrangement under which it receives its regulatory authority from the FCA has added 7% to the charity’s costs. This is a body with a £20 million turnover so it is a significant sum for getting itself ready, and rightly so, to be regulated by a body. To think that more of the money that StepChange raises for charitable purposes will have to be spent on satisfying another regulatory body would seem to be unusually onerous.

To be clear on what we would like the Government to say on this point, there is a case for something to be said at the Dispatch Box which makes it clear that the SFGB’s currently broad and largely unconstrained regulatory powers should be moderated by some sort of framework. We propose in our amendment that the regulation should be specifically addressed to a commissioning framework, because certainly in the debt space the intention is that the bodies concerned will be commissioned to provide particular services which the single body thinks should be available. We have taken wording from other legislation which suggests that the commissioning framework should be based on the competencies of the provider against which it will satisfy itself when it commissions and procures services. That would give a route in towards the thinking here.

When we are talking about charities, we are also talking about those that are regulated separately by the charities regulator on certain aspects of their work. Again it is important to recognise that additional and triple regulation would be unnecessary.

The powers will come mainly from the FCA. Once more, it would be helpful if the Minister could respond to the likelihood of that. There is only one comparable situation at the moment where the FCA regulates bodies operating in the debt space, and indeed it has just completed a full review of a number of them. At the same time it has been asked to look at the current rules as they affect the Money Advice Service. When the authority did that, it said that it would not review or comment on the particular requirements of MAS—here I give a sense of its comments—because it felt that its standards were sufficiently high to encompass anything that would be involved in MAS and relating to the bodies that it funded. Again, what that would mean in practice is a little uncertain and perhaps the Minister will think about whether it will be necessary to get a better specification from the FCA, which perhaps could be done through correspondence, of the type of regulatory framework it thought it would be looking for from the SFGB, at which levels there would be any overlap, and in what sense any additional work would be needed. In short, we are looking for legislation that is concise and focused along with a broader statement of practice prior to the passing of the Bill which would give us more detail on how the body will operate in practice and the impact and burdens on those bodies it commissions. I beg to move.

[The Lord Speaker (Lord Fowler)]

My Lords, I should inform the Committee that if this amendment is agreed to, I cannot call Amendment 50 by reason of pre-emption.

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In conclusion, this has been an important debate, scrutinising the crucial issue of the standards for the services provided or commissioned by the single financial guidance body. I hope to have convinced the Committee that the outcomes sought by tabling these amendments are largely already achieved through other mechanisms. I very much take on board that two words the noble Earl, Lord Kinnoull, referenced—“friendly” and “helpful”—are a really important part of the process. I urge noble Lords to withdraw or not press their amendments on the basis of my explanations.

[Lord Stevenson of Balmacara]

I thank the Minister for a very full response. There were points where I felt she was in a bit of a hole and continuing to dig, and we may well have to come back to them. They were largely in response to the rather sharp questions posed by the noble Lord, Lord Deben, on which I do not think we have reached the end of the journey. We will need to come back to this.

It was very nice to see support from the noble Earl, Lord Kinnoull, and the noble Baroness, Lady Altmann, on different aspects of the same thing. As the noble Earl said, the fact that we have eight amendments in this group and a few more in the next on this area shows that this part of the Bill is not as well baked as some of the rest of it. There are areas that we have some concerns about, but I will read what was said in Hansard and we can perhaps pick up some of the points in correspondence before we come back on Report.

I wonder, however, whether we are not in a bit of a car crash—a hard word to use. I do not think the Bill has quite taken the trick here on a number of the issues that have surfaced. First, we have a body called the FCA which has responsibility for overseeing operations in the financial services area, but its remit, as we have pointed out on a number of occasions, has a different focus from that which we expect for the SFGB. With its overriding responsibility for making sure that markets are fair and that competitive markets are operating in those areas, it is not right for the Minister to say that the FCA can be relied on to have regard to the position of consumers. Indeed, our debate last Wednesday on amendments on exactly this point, which were supported right around the Committee, pointed out a number of glaring exceptions to the feeling that all was all right in this world in relation to those who are generally called vulnerable customers. These range across those not included in any financial arrangements at the moment, whether by desire, function or mental or physical disability. These people who do not currently participate, cannot currently participate and are not finding the services and opportunities for participating that they would expect to find will not be served if the end result of this operation is the FCA’s mode of operating and not what we currently have, which is much more consumer-led. We shall have to come back to that.

On what the standards are doing and how they are operating, enough has been said in Committee to feel that there is a bit of uncertainty about exactly what is being done here. In pensions, where there is direct provision, the standards are internal and operating, but they will not be the same in the debt space, where very expert bodies, which, as the Minister said, have been doing this work for some 30 years, will not take it kindly if some new body, although it has a history as a previous organisation, starts setting standards without consultation and without some sort of specification. I hope the wording is sufficient to take that point.

If we are in a situation where all the services are to be done under existing regulations, does that imply that bodies not currently in the UK might also have to be offered the chance to bid for these services? Presumably this will be done under the EU procurement directives. Is that right? Will the Minister respond to me on that point, not necessarily today, but perhaps in writing? It changes the ball game if we are talking not about Citizens Advice but about a body with a similar but different name and perhaps the German republic offering to operate it because it is able to fulfil a document that has been prepared to elicit bids at an appropriate price. We might be heading for a bit of trouble.

Finally, there is advice and counselling. I am on a bit of a journey here, I confess. I was more firmly in favour of leaving things as they are when I started my work on this Bill than I am now. I am beginning to think there is a problem here because I do not think the consumer is with us in the way the Bill is being drafted. I do not think a consumer has the same expectation about the words “information”, “advice” and “counselling” as is displayed in the Bill, and I appeal to Ministers to use the time between now and Report to reflect quite hard on this. We have to be where the consumer is. If we are saying that there ought to be a body that can deal with people’s genuine need for information, advice or counselling about their financial situation—and I agree with that—we should not set preconditions about how, in what manner and under what regulatory framework that information, guidance and advice is to be delivered. There may be necessary constraints on what can be said, but it is important that we try to align this more closely with people’s motivations when they come forward. That is the first point.

The second point is that this body will not be the success that we all hope it will be if it cannot give the information that is being sought promptly and efficiently to the person making the request. We have already established that that will be difficult in the pensions area from day one, but we also expressed our hope, at Second Reading and subsequently in amendments, that it would be looked at very closely and, indeed, that the pensions dashboard would be under the ownership and control of that body.

[Baroness Buscombe]

It is very helpful that the noble Lord, Lord Stevenson, is giving such a full reply, but perhaps I may ask one question. He made a very interesting point in day two in Committee, saying that the whole problem of debt advice and guidance would have been resolved if we had gone down the path of having two separate bodies, one giving guidance and one giving advice. Is he therefore suggesting that if there were one single financial guidance body, we should expect that one person would have the expertise—for the convenience, in a sense, of the customer—to give all kinds of guidance and advice to one person, so that they would not have to be directed to other people to talk about specific issues?

[Lord Stevenson of Balmacara]

That is a very good question. I think the answer is that yes, I am saying that; but I am also saying that it is probably impossible. I want to unpick that slightly. It would be fantastic if somebody approaching a body—let us call it the single financial body—primarily for debt advice also had embedded in their series of questions about their unmanageable debts the possibility of going in, or not going in, to an auto-enrolment situation for pensions, or has equity in a house that could be released which might resolve those things. At the moment, there is no way in which any one person could answer those questions effectively and efficiently. I think we all hope that that is where we will be at some point in the future, perhaps with much more use of automation and expert systems which would be able to take a person down a much longer and richer journey on these issues. If we build in barriers now to say, “Oh no, that’s guidance, not advice. We’re not going to go that way—we’re not even going to build a design or even think about how we might do that”, we will build in problems for ourselves further down the line.

We have a bit of time before the Bill goes to its next stages. I think I am asking whether we can use that time constructively to try to get really certain in our mind that, even if it is not the perfect solution, we are progressing with the right approach to this. As I said at the beginning of this little section, I had started on the basis that debt advice was straightforward and I understood it, and I was confident that I knew that because I had worked in the area. I am now not so sure. I have a feeling that we need a broader, higher-level definition that takes us a bit further down that route, where we think about things in terms of perhaps what is paid for and what is not paid for—anything which involves the offering up of clients’ money to be held in trust for them would need a completely different level of care and scrutiny and everything else.

Even with the simpler questions, such as whether people should join a new pension scheme or take money off an existing pension scheme—which will be real to the person asking them, although they may not be aware of the regulatory and other functions behind them—we might be making a terrible mistake. I am sorry to cast problems in what has already been a well-worked-through field—I know that a lot of this stuff has been discussed and debated ad nauseam and we should know better than this going forward—but my feeling is that we might have not quite got there yet, and we need a bit more help.

[Baroness Buscombe]

Before, I hope, the noble Lord withdraws his amendment, I should say that between last week and this week we in the department have constantly visited this issue, and we continue to do so. I do not want to test the patience of the Committee but I have further information on how this might work. I confirm that we will have meetings for all interested Peers so that we can discuss this in more detail between now and Report.

[Lord Stevenson of Balmacara]

I am grateful to the Minister for that. I think that those meetings will be helpful and useful. In the meantime, I beg leave to withdraw the amendment.

Amendment 49 withdrawn.

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Moved by

[Lord Stevenson of Balmacara]

57: Clause 7, page 4, line 35, leave out subsection (1) and insert—
“(1) The single financial guidance body must monitor and report on its own and SFGB delivery partners’ compliance with the commissioning framework.”

[Lord Stevenson of Balmacara]

My Lords, this amendment is really the second half of the debate that we have just been having so I think we can skip quite a lot of the introductory part and get straight to the main point. The focus in the amendment in my name—I think other issues will be raised by the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, regarding their amendments, as they bear on the matter in a slightly different way—is Clause 7(2)(b), which states:

“The FCA must, at least once in every three years, carry out a review of … how the single financial guidance body is monitoring and enforcing the standards”.


I have searched reasonably hard through the documentation and I cannot find out what that enforcement is. At the heart of my amendment is a probe—actually, a direct question—to find out what the enforcement would be. Is this in relation to commissioned services being given some sort of penalty? Are fines to be involved? Is it going to involve reporting them to the FCA for a rap on the wrist or worse by some disciplinary body that the FCA might have? We do not know about that and I do not think we understand it. The sensibility is right—there is no point in having standards and asking that they be informed if you cannot do something if they are not informed—but we need a bit more detail before we can take what is in the Bill as being the right approach to this.

In Amendment 59, which I am speaking to but not moving at this stage, the assumption is made that some movement has taken place on earlier amendments and that the SFGB is doing the process of commissioning through a set of standards and a framework. That amendment has been withdrawn so it does not apply, but I still think the sensibility is right. If we are going to ask for reviews, they should be in relation to a specific issue. As it stands, Amendment 59 would give a slightly more flexible framework for that than every three years because it would relate to the success or otherwise of a judgment made by the SFGB on whether or not the work it is doing was going well, and therefore it would have a bit more teeth. I beg to move.

[Lord Sharkey (LD)]

My Lords, I will speak very briefly to Amendments 58, 60 and 61, tabled by my noble friend Lady Kramer and me. We agree with the Bill’s requirement in Clause 7(1) that the SFGB must monitor its own compliance with standards and that of its delivery partners. However, we feel that the results of this monitoring should be in the public domain; in fact, it would be extraordinary if they were not. Our Amendment 58 would rectify what seems to be an omission. It says simply that the SFGB must produce and place in the public domain an annual report of its assessment of its own, and its delivery partners’, compliance with the standards. We hope that this is completely uncontroversial and the Minister will feel able to accept the amendment.

Amendment 60 is equally simple and straightforward. In Clause 7, dealing with the monitoring and enforcement of standards, and in subsection (3), the Bill lists those to whom the FCA must provide a report on its review of whether the standards continue to be appropriate and how the SFGB is monitoring and enforcing those standards.

The Bill specifies that the FCA must provide its report to the SFGB and to the Secretary of State, but there is no mention of Parliament and we think there should be. Parliament will have set up the SFGB. It is a matter of transparency and accountability that Parliament should also have sight of the FCA’s report. Our amendment simply adds Parliament to the list of those to whom the FCA must provide its report.

In Clause 7(4), the Bill provides that the FCA’s report may contain recommendations to the SFGB. But that is it—the Bill does not say what should happen when the SFGB is in receipt of these recommendations. Clearly, something should happen and it should happen in public. Our Amendment 61 provides for this. It simply says that when the SFGB is in receipt of recommendations in an FCA report on its review, the SFGB must then publish a substantive response within three months to any recommendations made by the FCA.

The changes proposed, I hope, in all three amendments are completely uncontroversial. They are nothing more than an application of the principles of transparency and accountability to this new public body. We hope that the Minister will see their merits and feel able to accept them.

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[Baroness Buscombe]

My Lords, I thank noble Lords for Amendments 57 to 61. Clause 7 requires the single financial guidance body to monitor and ensure compliance with its standards. It requires the Financial Conduct Authority to periodically review the standards, and how the body is monitoring and enforcing those standards. After completing its review, the FCA is required to provide a report for the single financial guidance body and the Secretary of State. Once again, I reassure the Committee that the standards will not apply to all debt advice providers. These standards will apply only to the body itself and its delivery partners.

First, I shall address the Amendments 57 and 59, tabled by the noble Lord, Lord Stevenson. I have made the argument previously that the framework set out in Clauses 6 and 7—for the body to set and monitor compliance with quality standards—is the right mechanism for assuring the quality of the services provided by or on behalf of the body. I refer the noble Lord to our discussion on Clause 6, where we discussed the proposed commissioning framework for the procurement of services. There I made the point that it was unnecessary specifically to require the body to publish a commissioning framework, since we would already expect the new body to publish its requirements and expectations, with adequate time for prospective delivery partners to prepare their propositions. I also pointed out that, when contracts are above a certain value, the body will be required to comply with the public contracts regulations, including the requirements to advertise its requirements and undertake a competitive tendering exercise. We hope that those expectations and requirements on the body meet the spirit of the noble Lord’s amendments.

The noble Lord’s proposed commissioning framework would also have replaced the requirement on the body to set and monitor compliance with quality standards. I made the argument that the standards actually play a different role to a commissioning framework, in that they will assure the quality of the services provided by the body and its delivery partners. The standards therefore play the crucial role of enabling members of the public to have confidence in the services that they receive.

I disagree with my noble friend Lord Trenchard that there is a concern about the possibility of the culture of the FCA becoming similar to the culture of the body—or maybe that would be a good thing. The body would not necessarily be influenced by the culture of the FCA, because it has a statutory duty to put the consumer first, as I said under the last set of amendments.

[Lord Stevenson of Balmacara]

I am sorry to interrupt, but I think that we have had this debate before. It is not right to say that the primary purpose of the FCA is to give the consumer pride of place. That is not what it says in the statute. We had endless discussions about this when this was going through the House, and the Government were adamant that it was an economic regulator and that the main focus had to be on the efficiency of the markets that it served. I think that the noble Baroness, Lady Kramer, made the same point on Wednesday. I understand why the Minister would want to say that, and I am sure from discussions with the FCA that it has regard to consumers and their interests—but there is no consumer representative on the board of the FCA. It has a consumer panel, but it is not allowed to have a main position. I think that there is a representative with an Australian background on the board who has some expertise in consumer affairs, but that is not the same thing as building in from the bottom and ensuring throughout the work of the FCA that it focuses on the consumer, which is the impression that the Minister gives.

--- Later in debate ---

In conclusion, I believe that there are already measures in the Bill and elsewhere which provide sufficient scrutiny of the activities of the single financial guidance body, and I urge the noble Lord to withdraw the amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her very full reply, which I look forward to reading in detail in Hansard; we will consider what she has said. The noble Viscount, Lord Trenchard, made a rather good point on a common theme which we need to come back to. Two regulators doubling up—having a second one—is a worry, and we need to make sure that the statute reflects the difference between the two, if there is to be one. He is right to make that point. I thank the noble Baroness, Lady Meacher, for her support. We anticipated it when discussing a previous amendment, when she was not present, so her name is recorded in Hansard in that regard.

What I am missing from the long response—I mean that in a positive sense; I welcome a long response—is a sense of what enforcement there is in practice. I would be grateful if the Minister wrote to me about that. It is important for people hoping to engage with the SFGB that they should understand what they are going into. The relevant word is in the Bill.

I return to the difference between the FCA and the SFGB in terms of consumers. I am grateful to my noble friend Lord McKenzie for providing me with the evidence submitted by the Financial Conduct Authority to the Lords committee dealing with financial inclusion, which stated that when considering what degree of protection for consumers may be appropriate, the FCA must have regard to, among other things, the differing degrees of experience and expertise of different consumers. Therefore, we are not talking about a single response. We are also required to have regard to the general principle that consumers should take responsibility for their decisions. That is hardly putting consumers at the very forefront of the decisions. The FCA recognised that consumers can do this only if they have access to appropriate financial services that meet their changing needs, and that under its objective to secure an appropriate degree of protection for consumers, regard must be had to consumers’ need for timely provision of information and advice that is accurate and fit for purpose. In other words, this is entirely about market-facing competition and efficiency, not those in vulnerable circumstances. In the interim, I beg leave to withdraw the amendment.

Amendment 57 withdrawn.

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Moved by

[Lord Stevenson of Balmacara]

64: Clause 8, page 5, line 16, leave out from “to” to end of line 18 and insert “consultation on the single financial guidance body’s funding settlement and such arrangements with SFGB delivery partners as the Secretary of State thinks appropriate (including conditions as to any loan repayments).”

[Lord Stevenson of Balmacara]

My Lords, I shall speak also to Amendments 65 and 66. They bear on the financing arrangements for the new single financial guidance body. We have talked about how the money is to be raised and the change from the current arrangements, with a move away from a straight levy system within the financial sector to an arrangement whereby money goes to the Government and into the Consolidated Fund before being paid out in grants.

The amendments are not meant to be taken word for word, but probe the way in which the case for this funding is built up. Amendment 64 would make sure that the single financial body did not underestimate the amount of money it would require by virtue of not having sufficient information to hand about the costs that it would be likely to have to meet given the aspirations for it. An earlier amendment referred to assessing this on the basis of the likely number of those in need of financial advice being the main element in building up the funding envelope. Obviously, there is difficulty in trying to assess that. This amendment adds a little more in terms of the consultation and guidance.

It would be to the advantage of the Bill if it provided for a little more accountability for the funding received. We set out in the amendments the specifics, which may well be covered by other points that the Minister may raise when she responds. At the moment, there is nothing very much in Bill about monitoring the use of the funding and making sure that the information gathered is published, particularly for Parliament, so that due scrutiny can take place.

Amendment 66 deals with how funding is to be established for the national regions. There is nothing exceptional in what is being said in terms of the mechanics—I am sure that the Bill is drafted with due concern for the proprieties involved. A number of the bodies that will be in partnership with the SFGB, or funded by it, already operate in Scotland, Wales and Northern Ireland and offer direct services themselves. If the Treasury is to get information on that, as is specified in Clause 11(1), it will need information which it is not clear that it will be able to get—or, if it is, I have not spotted it—on the costs and expenses of the existing bodies operating existing services in Scotland, Wales and Northern Ireland and how that matches what the devolved Parliaments think should be spent there. There is a lacuna there on which I look forward to hearing a response. I beg to move.

[Lord Young of Cookham]

My Lords, it is the co-pilot again. I thank the noble Lord for tabling these amendments to Clauses 8 and 11. Clause 8 provides for the Secretary of State to give financial assistance to the single financial guidance body; Clauses 9 and 10 provide for those expenses to be recovered respectively from the levy on pension schemes and through the financial services levy.

At Second Reading and in earlier Committee debates, the noble Lord has questioned this funding framework and the money trail, suggesting that it represents a fundamental change in the way in which things are done currently and that it would radically alter the way in which people operate, particularly in respect of the services provided by MAS. I am not sure that the changes are that fundamental, but, in any case, we think that they are both necessary and beneficial.

One criticism of MAS made by the Farnish review was that it lacked accountability for the activities it delivered and the money spent. As the noble Lord suggested, we need to learn lessons from our experience with MAS. These funding clauses provide a basis for strong accountability and governance arrangements. We want the body to have a clear focus on undertaking its statutory functions. As happens now with the existing organisations, the body will prepare an annual business plan setting out its planned activities and the associated budget required to deliver its proposals. That plan will be discussed and agreed with the DWP.

--- Later in debate ---

I thank the noble Lord for tabling these amendments. If I have not covered all the points, I will, of course, write to him, but they have given me the opportunity to explain in slightly more detail the money trail for the funding arrangements for the single financial guidance body. I am also grateful that this amendment has allowed me to provide the Committee with more detail on the funding arrangements for the provision of debt advice in the devolved nations. I hope that noble Lords are clearer about the provisions in Clauses 8, 9, 10 and 11 and that the noble Lord will withdraw his amendment.

[Lord Stevenson of Balmacara]

I am very grateful to Minister in his capacity as co-pilot, first for the ministerial looping of the loop to allow him to correct the earlier misstatement about the role of reserves in NDPBs. We were concerned about that issue and we would have come back to it, so I am grateful to have the clarification that in certain circumstances—although he did not disclose them—it is possible for NDPBs to hold reserves. That accords with our experience.

Flying has lots of problems and hazards, and one is undoubtedly fog. The Minister did well when he was soaring high on some of the more general points, and I am very grateful to him for his full responses on the way the funding will operate. When they are read in Hansard they will be as clear as daylight at midday, and I will be very happy with them, but two things occur to me. First, we still have not had a response to a point raised earlier—not explicitly in today’s debate, but it is still part of it—about the way the financing system has been constructed. While many of the companies that will receive the benefits of better advice, more financial inclusion, less financial exclusion and all that goes with that will be funding the SFGB, which will be operating many of the services, not all the companies will. I am thinking particularly about the utility companies, which we have discussed already, for which substantial work is done to help their customers who get into debt problems. I know directly of a number of such cases. I do not want to overegg the case, but increasingly, other organisations such as HMRC, DWP and local authorities are involved in trying to sort out debt problems and do not currently contribute to the way that is funded. The levy system is a clean and efficient way of doing it, and I understand all the points made by the Minister, but it misses out a sort of “polluter pays” principle, and it might have been rather more satisfying had we been able to include that. Individual organisations and companies receive funding from other bodies involved in debt advice and other money guidance operations, but not all of them, and a little more pressure and help from the Government on this would have been helpful.

My second point in this general whinge on fog is that I am not sure whether we got to the bottom of where UK national bodies operating in Scotland, Wales or Northern Ireland—whether or not based in Scotland, Wales or Northern Ireland—are going to get their funding from. If Scottish Ministers, for example, are shortly—is that the same as “soon”?—going to agree a system in which funding for debt advice operating in Scotland is to be funded through the Scottish block grant, does that mean that funding will not be available to UK national bodies such as the Money Advice Trust, which operates in Scotland but is currently funded from England? It is probably too complicated an issue to get an answer to at the Dispatch Box, so I would be very grateful if the Minister wrote to me. There is logic in trying to align geography with the funding settlement. But it would be perverse if, as a result of the good and effective work done by StepChange, which runs an office in Glasgow and in Wales and has a franchise arrangement in Northern Ireland, it was unable to be funded and had to be shut down or taken over by somebody else. I am sure that is not the intention, but it is an implication of what is being said.

The situation in Scotland is relatively well developed: there are good systems operating there, a long history of funding from the Scottish Government and local authorities for good debt advice, and good education and training for the advisers. I am sure that will continue and that the Scottish Government, who have always been in the lead on this, will want to see it continue. However, I hope it will not be at the expense, for instance, of work directly funded by MAS and the organisations themselves in Scotland in recent years.

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[Lord Young of Cookham]

I have some in-flight refuelling. We are working with the devolved authorities on a final agreement and will write with more detail once discussions with the devolved authorities are completed.

[Lord Stevenson of Balmacara]

Gosh—that was worth waiting for! I look forward to any information that can be provided on a more direct basis, preferably soon, but I think we have covered enough ground there.

Finally, some good points were made about the need for flexible funding solutions when there are crises, and I would like to read those in Hansard. This is very recent history, so it will be in the forefront of the minds of the bodies concerned. When the FCA was going through an accreditation process regarding debt management companies, it became fairly clear that about 50% of them were going to go out of business, leaving many people with debt management plans paid for through these commercial companies, but which those companies were going to withdraw from. MAS was able to organise substantial additional funding to all the bodies concerned to cope with that. That would not neatly fit into an annual financial cycle, so it is important that we have flexibility at the edges. I am completely open to that being done by government grant or by the holding of reserves, but it is important that it be built into the systems. However, as long as that point has been taken, and I gather it has been, I beg leave to withdraw the amendment.

Amendment 64 withdrawn.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Committee: 4th sitting (Hansard): House of Lords
Wednesday 13th September 2017 Lords Chamber

[Viscount Trenchard]

My Lords, I, too, strongly support my noble friend Lord Hunt’s amendments. I was completely horrified to hear the statistics relayed by the noble Earl, Lord Kinnoull. It does not surprise me because I travelled to Spain last summer—not on a package tour but they nevertheless somehow know where you are and I started to receive unsolicited texts and emails from people inviting me to make claims for the bad food or being sick. I just deleted them, of course.

I also agree with my noble friend Lady Altmann that, where possible, the cap on fees should be broadened because I would have used a CMC to pursue a claim against an airline. This was not this summer but the summer before, when our flights were cancelled and I tried to get refunded by an airline. My daughter had booked on the same flights through a different travel agent, but in the end neither of us has made a successful claim, although we are both entitled to. It was too difficult because the airline had contracted the flight to another airline. When you are entitled to a refund for a service that was contracted but not delivered—as in the cancellation of a flight—then, as the Committee is well aware, it is made extremely difficult for you to receive reimbursement. When I received an unsolicited email from a CMC about cancelled flight claims, I was quite tempted to use it. But even though I had virtually given up on the claim against the airlines, I decided not to because a quick examination of the company made me suspicious. I also thought it would absorb in fees most of what it might get back, so I decided not to proceed.

Once such companies are capped in what they can charge, I will feel much happier about using their services because of what they specialise in and because it is made extremely difficult for individuals to pursue refund claims themselves. In many areas there may be a route whereby the individual can do the same thing as a CMC, and do it for free, but it is often made so difficult. It is intended that people will get bored or be too busy to go on waiting, while listening to music and pressing “1” or “2”.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I support the amendments in the name of the noble Lord, Lord Hunt. Once again, he has made his case brilliantly and without having to resort to metaphors about drones or anything else. He seemed this time to be firing a set of missiles rather closely to his right. I am sure progress can be made on this important issue and want to make two points.

First, to pick up on the point made by the noble Baroness, Lady Altmann, in the representations that many of us have received there was a slightly larger package than just the question of claims management companies. There was a question about the small claims limit going from £1,000 to £5,000 and I would be grateful if the Minister, when he responds, could give us some better information about how that impacts on this issue. There is also a narrower question about an amendment to the public liability protocol, which I do not fully understand. But I hope the Minister will rise up in his helicopter, or whatever he is currently riding in to get to his scenic views, to give us a view of what this is about. There is an exception for claims arising overseas in these areas, which seems a little unfair because if a claim is genuine then it should be possible to mount it in whichever jurisdiction. If the package travel regulations are UK law and need to be resolved in that way, it seems odd if an exception is made for those who want to claim from an overseas position.

My other point would be that while I think we are all in the same place in wanting to see this issue resolved, I hope it will not be at the expense of genuine illnesses. The Minister might want to make sure that there is an avenue open when he comes to respond. Rather like the noble Viscount who has just spoken, I had a problem with a holiday—not a package holiday but one booked through an agent. It was in Italy, at a villa which was a nice place to be, but it became overrun with rats; I think this was on day three. So numerous were these creatures, and of such an extraordinary puissance, that they climbed up on to the veranda and entertained us while we tried to eat. They then ran round the bedroom while we tried to sleep, knocking over our toothpaste and other things in our bathroom. We eventually had to retreat to the top floor of the villa and barricade ourselves in.

The response from the locals was that they were “ratti”, which I think is the Italian for rats. We were therefore fairly clear what they were. At one point the locals produced some materials to capture these rodents. It consisted of a large plane of wood, about the size of the Dispatch Box, on which was placed some translucent gooey substance. They did not want to kill these things—they were very eco-friendly and against that—but just wanted us to capture them. But the blooming things were so strong that when one ran up and landed on that sticky substance, it could not quite get all four legs off at once but it got one limb up and then just hopped off. It was not very effective.

We sued the company that let us this property. The interesting thing about suing holiday companies—I am sorry, this is a long way into my point—is that holidays exceptionally attract damages because holidays are not repeatable instances. In other words, under English law you can claim for exemplary damages for a holiday lost in a way that you cannot for other damage. That is an issue that need not detain us in the Bill, but given that that particularity exists in the law, I hope that the sense of the amendments would not damage genuine claims. Illness does occur on holiday, and sometimes rats invade, and we would want to make sure that people can sue properly and, given that it was a holiday that was spoiled, get the additional money available without any recall or loss.

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[Lord Stevenson of Balmacara]

I rise briefly to support the noble Earl, Lord Kinnoull, in his quest for a more equitable arrangement with the powers that be in terms of the FCA. I think he would be the first to admit that this is a recurring theme in many of his contributions to debates around financial guidance and similar issues. On the surface, it seems extraordinary that a body so well resourced and organised as the FCA should be so diffident in coming forward with helpful advice to get people to work better and more constructively within the sector it is regulating.

This amendment has had to be framed to get it into a debate around claims management but it touches on a much wider issue about all the aspects of the FCA that we are talking about. Indeed, it is about an attitudinal and possibly a conduct approach, which is also part of it. I hope that there is a way to get this matter resolved one way or another because it is part and parcel of the other issues we have talked about in terms of duty of care and responsibility for consumers and the vulnerable. If the FCA—and indeed, by implication, the SFGB—took a more interactive and supportive stance, we would all be better off.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, it is my turn to rise to my feet to support my noble friend Lord Young, who has been more than a co-pilot for this part of the Bill. Perhaps I see myself more as flight observer.

The amendment moved by the noble Earl, Lord Kinnoull, aims to ensure that the FCA helps firms to interpret the FCA rules. I absolutely accept and understand his reasons for tabling this amendment in terms of the importance of that interpretation and in order to be helpful. I agree that ensuring that firms understand the FCA’s rules will be vital to the success of this new regulatory framework, and I would like to draw the noble Earl’s attention to the steps the FCA already takes to ensure that firms are well informed of regulatory requirements.

The FCA undertakes a range of communications activities, including monthly e-newsletters summarising all the main changes that have taken place over the previous month and a programme of regional events across the UK for firms to discuss regulatory issues. The FCA holds round tables and other briefings on specific issues with trade associations and firms to help them better understand how new policy may impact their business models. It also maintains a smaller business practitioner panel which represents smaller regulated firms which may not otherwise have a strong voice in policy-making. I have noticed that the noble Earl has, quite rightly, throughout our debates in Committee focused on those smaller businesses that may not have their own strong voice.

On top of this, the FCA is aware of the need to engage with firms about new regulatory provisions. Building on the approach taken in the consumer credit transfer, the FCA will develop a clear communications strategy to engage with firms as a key part of the transition process. The FCA is committed to alerting firms to changes in regulation that affect them and has several well-established channels to support this—for example, in its regulation round-up, which is a monthly e-newsletter sent to more than 50,000 recipients summarising all the main changes that have taken place over the month. That will have links to further information on the FCA website. There is a programme of monthly regional events called “live and local”, across the UK, for firms to discuss the changes, and round tables and other briefings on specific issues. In addition, the FCA sends over 500 speakers each year to talk at industry conferences and events to discuss regulatory issues, and maintains regular relationships with trade associations.

These actions will help to support CMCs through the authorisation process as they work to meet the FCA’s regulatory requirements in the provision of claims management services. The FCA’s strategic objective is to ensure that the relevant markets function well, which will ensure that the market for CMCs’ services functions well. Communication on that basis is vital. The FCA also has a competitive objective, which requires it to have regard to the ease with which new entrants can enter the market. Of course, being able to understand the rules is critical to that.

I hope that the actions that I have set out help to support CMCs through the authorisation process. This short debate with the noble Earl and the noble Lord, Lord Stevenson, will, I hope, give a nudge to the FCA that it is of critical importance that it undertakes this important issue with care to make sure that the process works. For those reasons, I hope the noble Earl will withdraw his amendment.

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[Lord Stevenson of Balmacara]

My Lords, we have Amendment 75 in this group, and I shall speak to it briefly. It is a gentle prod to the Government that in the clause that deals with commencement there is an extensive list of the various sections that come into play. Then at the top of the next page is just a general provision stating:

“The other provisions of this Act come into force on a day appointed by regulations”.


No date is given for that. It would be helpful if the Government could urge themselves to do a bit a more than just leave it open that regulations will come forward at some future date. A lot of what we have been talking about in this area would be helped if there was urgent action, and the urgency should apply to the regulations that need to come forward as well. I hope that will be well received by the Government at this point.

The noble Earl, Lord Kinnoull, has done another good service to us in bringing forward a possible lacuna in the approach being taken by the Government. It fits in with the various sensible amendments that I have been tabling, asking the Government to look again at the way in which the financing arrangements for debt advice in Scotland, Wales and Northern Ireland operate. I sense that there is also an issue around CMCs that needs a response. I look forward to hearing from the Minister.

[Lord Young of Cookham]

My Lords, Amendments 74 and 76, tabled by the noble Earl, Lord Kinnoull, seek to extend Part 2 to Scotland. I am grateful to him for the way he set out the case for this extension. The Government carefully considered the scope of claims management regulation during the development of this policy. The current framework for claims management regulation, set out in the Compensation Act 2006, limits the extent of claims management regulation to England and Wales only and this will remain the case as we transfer regulation to the FCA. The matter is currently reserved, so we cannot simply make regulations to devolve the matter to the Scottish Government.

In reaching this decision, the Government had a dialogue with the Scottish Government to establish their view. Their view, as outlined in correspondence from the Scottish Business Minister, was that there is limited evidence of malpractice by CMCs in Scotland, and they concluded that extending the scope of claims management regulation would be unnecessary and disproportionate. That view is clearly challenged, and is about to be challenged again.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Report: 1st sitting: House of Lords
Tuesday 24th October 2017 Lords Chamber

[Baroness Kramer]

My Lords, I join in thanking the Minister for bringing these amendments forward. I think she recognises that the three existing bodies to be merged all have a reputation for impartiality. Their services are free and she is making it absolutely clear that those vital elements which she respects and appreciates so much in the existing bodies will carry through into the new body. It seems to me that stating it clearly, rather than leaving it to be read and potentially misconstrued, is exceptionally helpful.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the noble Baroness for making the statement she did at the Dispatch Box at the start of this debate. We are very appreciative of the acceptance of Amendment 7, which goes with the spirit of the way we have conducted the discussions over the Dispatch Box and in meetings over the period of the Bill. It has been one of the happiest Bills I have been involved in and I have been involved in some very happy Bills. I extend the thanks to the Bill team for their good supportive work. It has been a very good experience all round. This amendment is another example of that, because Members will recall that in Committee the Government’s line was that—although they absolutely agreed that advice, guidance or information given by the new body or by its contracted other bodies must be free at the point of use—they did not think it necessary to amend the Bill. However, over the time we have been talking about it, it has grown on them that there might be an advantage in doing so, for all the reasons my noble friend Lady Drake gave. Having those words at the heart of its mission statement and affecting all the work it does will make it a much better body, so we are very grateful and we support the amendment.

Amendment 3 agreed.

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Moved by

[Lord Stevenson of Balmacara]

9: Clause 2, page 2, line 32, after “children” insert “, care leavers”

[Lord Stevenson of Balmacara]

My Lords, I will speak also to Amendment 10 in this group. We may repeat some of the ground that has just been covered. Perhaps we can move at the speed of a jet engine rather than that of a turbo prop to expedite things, if I can extend the metaphor a little, as this issue is broadly similar and was raised in Committee.

I make two points. When we raised what is now Amendment 9 in the form of the then Amendment 16A, which I think was in the names of the noble Earls, Lord Kinnoull and Lord Listowel, and the then Amendment 18, which was in the name of the noble Baroness, Lady Kramer, we thought that there was room to explore further the detail that we wanted to see in the wording of the Bill itself. However, we were reassured by many of the Ministers’ remarks in both these debates, so to that extent did not push it. It is interesting to reflect on what might be contained in the Government’s response to the report from the Lords Select Committee which deals with these two important issues. We are talking here not so much about the broader strategic and other issues but particularities about the way in which some of the detailed work that is expected of this body might take place. That work should include care leavers. We had a rich discussion about what care leavers needed in terms of financial strategy and support. The Minister picked that up in her response and we had a sense that there was a government push behind this in view of the recognition that people leaving care who had not been given proper financial support or financial education would need additional help. The hope was that the SFGB would be able to provide that in whatever form seemed appropriate.

As regards Amendment 10, there have been a number of discussions around the question of whether or not one can segment the people who need financial education into groups, perhaps by age or lifestyle. The noble Lord mentioned the report from the FCA on the lifestyles of those who experience difficulties with finance, which I read with great interest and found very interesting. It is a wonderful piece of work which tries to cover the whole United Kingdom. It examines how people live their lives, how difficult and chaotic those lives can be in some cases and how well planned and organised in others—not mine, I should say. It is interesting to reflect on some of the figures mentioned by my noble friend Lord McKenzie. We are talking about a lot of people—4 million people who regularly are at a point where their lives could collapse because of a small incident. That is a terrifying thought. If we cannot provide the education and support necessary for them, we fail as a society.

Amendment 10 attempts to move away from that slightly broad segmented picture to consider the various stages of people’s financial lives when they make major decisions on the purchase of houses, cars or whatever it is we do with our lives. We have learned from those who have spoken in these debates that the educational process that goes on in people’s minds is accelerated and assisted when it is either going through a period of stress or when a particular event is happening. For example, when you buy a house you have to know about mortgage rates, the issues that are going forward and the prospects you have for insuring it, reinsuring it, and all the stuff that goes with that. That tends to fall back once you have done it and you are not thinking of moving again but the point at which the education can take place is tied into an event, not to an age group or particular activity in life. These amendments try to get a sense from the Government of how the SFGB would operate.

The general response which we have already covered, was encapsulated in a previous debate where the noble Baroness said:

“We believe that it is unwise to give the new body a requirement to advise the Secretary of State on explicit issues, as worthy as those issues are. There are several topics that the body may wish to look into as part of its strategic function. Choosing a few could risk limiting the body’s ability to look widely at the sector and have regard to emerging issues in future.—[Official Report, 19/7/17; col. 1726.]


You can agree or disagree with that. I think there is a case for flagging up and embedding certain policies in the Bill. However, sufficient account may be taken of the comments made in the debates in Committee and on Report to allow that to flow naturally into the work that the SFGB will do.

The point about repositioning these amendments for discussion tonight is that time has moved on since July. The Bill itself has changed a bit and some of the thinking around it has benefited from the wider discussions which have taken place, not least the visit by the consumer affairs director at the FCA, who, as the noble Lord said, spoke at a meeting last week and made some very interesting remarks about what the work entailed and what approach would be taken to it. That will complement the knowledge and understanding we have about the SFGB when it comes forward. In that sense it is important that we revisit these areas not because they are important in themselves, although they are, but because of the way in which they tell us more about how the SFGB will operate. If some material on this emerges in the Government’s response to the Select Committee’s report, it would be helpful to take up the issue again at Third Reading, if it should prove necessary. I beg to move.

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[Lord Stevenson of Balmacara]

My Lords, I am very grateful to the noble Lord for his comments and for dealing with such speed with the issues concerned. One always has to be a bit suspicious about a pilot who is very determined to be right about what he is doing. We hope they receive messages from outside when they have gone off course to get them back on course.

I think we have given this a fair knock. The issue between us is whether care leavers and others in vulnerable situations should be mentioned explicitly or whether there is another way. I suspect that will be raised in the next amendment—I await that. I broadly agree that the framework and nature of the Bill suggests that we should not be looking at particular details which will just cause difficulty, but I also hope that the words mentioned in these debates are read by those who will take on this position and that they will use them to inform and enhance their understanding of what Parliament wanted out of this process. I beg leave to withdraw my amendment.

Amendment 9 withdrawn.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Report: 2nd sitting (Hansard): House of Lords
Tuesday 31st October 2017 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

22: After Clause 2, insert the following new Clause—
“Debt respite scheme
(1) As part of its debt advice function, the single financial guidance body must operate a debt respite scheme (“the scheme”) under which authorised debt advice providers who approach the single financial guidance body for further advice or guidance in relation to a specific case may receive statutory protections for their clients in respect of the relevant debts for the period during which advice or guidance is being sought.(2) The Secretary of State must make regulations by statutory instrument detailing the operation of the scheme by the single financial guidance body under subsection (1).(3) The regulations must limit access to the scheme to persons who have received debt advice from a debt advice provider who has been authorised by the FCA.(4) The regulations must make provision about the length of a period or periods where the protections under the scheme will apply.(5) The regulations must set out the terms of the scheme, including but not limited to—(a) the nature of relevant debts for the purpose of the scheme; (b) the process and conditions of eligibility under which FCA authorised debt advice providers are able to apply for statutory protections for their clients under the scheme;(c) the criteria under which FCA authorised debt advice providers will be authorised to advise persons on the scheme, support applications to the scheme, and operate designated debt management plans for persons while under the statutory protections of the scheme;(d) the limitations to be placed on actions that may be taken by creditors against persons in receipt of statutory protection under the scheme;(e) the method for determining the level and timing of debt repayments by a person while under the statutory protections of the scheme;(f) safeguards to protect the integrity of the scheme;(g) the arrangements to be made to create a central register of persons admitted to the scheme; and(h) the arrangements to be made to ensure that creditors of persons on the scheme are kept informed.(6) A statutory instrument containing regulations under subsection (2) may not be made unless a draft instrument has been laid before, and approved by a resolution of, each House of Parliament.(7) The Secretary of State must make regulations under subsection (2) within 12 months of the commencement of this section, subject to subsection (6).(8) This section commences on the day on which this Act is passed.”

[Lord Stevenson of Balmacara (Lab)]

My Lords, in the film “Groundhog Day”, the same character repeats experiences on a number of occasions until, mercifully, he is eliminated from it. I feel a little like that, not least because people stream out when I stand up to speak. But I gather that there are rival attractions about to start elsewhere and I can understand why people might wish to be present for those. I thought that we had also lost the Minister as well, but she was just temporarily unavailable.

Group 1 today contains a single amendment, Amendment 22, which is in my name and the names of the noble Baroness, Lady Altmann, and the noble Lord, Lord Sharkey. I am grateful to them for their support. One of the good things to come out of the Bill has been the incredible willingness of people from all around the House to work together and seek progress, not only on this important issue but on a much wider range of topics. Before I get into the detail, I will declare my interests. I am a former chair of StepChange Debt Charity and a commissioner on the independent Financial Inclusion Commission. I thank debt charities and in particular the Children’s Society for their support of this amendment.

I also want to mention the water companies. Rae Stewart of Water UK wrote to me recently and gave me permission to quote him, so I would like to set the context for the Bill in the light of this industrial comment. He said:

“I understand that your ‘breathing space’ amendment to the Financial Guidance and Claims Bill may be debated today. I thought that you might like to know that the water industry backs a breathing space for those people struggling to pay bills and who are seeking financial advice. But although we already operate that way as an industry, we believe that such a scheme will only be properly effective if other companies follow suit. After all, any responsible creditor—whether in the private sector or public sector—would support a breathing space. It’s something that’s been talked about for years, so we very much support its introduction soon”.


It is interesting to look back at the progress we have made in realising this vision of a breathing space. It has the support of all the political parties, as evidenced in the manifestos for the recent election. More by accident than by design, we have arrived at a system where a group of charities, including StepChange, Citizens Advice, the Money Advice Trust, Christians Against Poverty and a number of others, have created an effective system of debt counselling, which enables hundreds of thousands of people in need of help to receive advice, support and access to formal mechanisms that enable them to pay off their unmanageable debts. I pause to pay tribute to Malcolm Hurlston CBE, who was largely responsible for much of the current debt-counselling activity and was my predecessor as chair of StepChange.

We have the infrastructure and, with the support of the financial companies, it is free at the point of the use to those who wish to be part of it. However, these organisations have struggled for far too long to do their job properly. Basically, the only solutions that are readily available to people with unmanageable debt—such as payday loans, guarantee loans, logbook loans and the rest—push people further into debt. The additional charges, punitive interest rates and appearance of bailiffs compound the situation. The combination of this with the stress of dealing with making ends meet causes what is estimated to be some £8 billion-worth of social cost to the economy each year through illness, relationship breakdown and suffering to children.

All this impacts on creditors, too. Most banks, credit card companies and other lenders have good systems in place to deal with people who have problems meeting monthly repayments. But these companies cannot cope with the situation that so often arises, when people owe money to several different creditors. That is where the debt charities largely come in. Creditors need certainty; they need a timescale and they are entitled to receive 100% of their borrowing back—although in practice they will and often do settle for a lot less.

In my experience most people with unmanageable debt and sufficient resources, most of whom want to repay their debts, can be brought on to a formal repayment plan which ensures that their creditors will receive more of their outstanding debt—and in a shorter timeframe than if those creditors had had recourse to legal action. But it is abundantly clear that this whole process is enhanced if the person with unmanageable debts can be given some time to sort out what their actual financial situation is; to work out with advice what constitutes a sustainable budget; and to sign up to a formal debt-management plan. This is at the heart of the amendment which I am moving.

What we have in Amendment 22 may not be perfect; it has had to be constructed within the very narrow limits of the Long Title of the Bill. Even so, it would introduce the breathing space that we all want to see. It is based on the Scottish system, which has evolved over the last 15 years and does what is required. The amendment has the following key elements: the Secretary of State will have the power to set up the scheme; a body will be designated which will be able to designate authorised charities to operate the scheme; it establishes a flexible regime with reasonable time limits; it identifies categories of protections to be offered; and it ensures that creditors are kept informed.

There is a case for considering this amendment on its merits, but there are also ways in which it might be expanded in future, particularly in its territorial extension to make sure that England, Wales and Northern Ireland follow what is happening in Scotland. It is unreasonable and unfair to have a differential approach, because this problem is common to the whole of the United Kingdom.

--- Later in debate ---

For that reason, I hope that noble Lords can work with the Government to achieve consensus and ensure that this important scheme can be implemented quickly and effectively, with minimum risk to both the scheme and the single financial guidance body. Therefore, I would like to take the time between now and Third Reading to take this issue away, review it and consider it further. For those reasons, I ask the noble Lord to withdraw his amendment.

[Lord Stevenson of Balmacara]

I am grateful to all noble Lords who spoke in the debate. There was a question about public sector responsibilities. In the Bill, as in the amendment, it was intended that that be subject to further consultation. The Minister made the point that there was no reason to suppose that public sector bodies would be excluded from that; it has to include all the pressures on the families affected, and the answer would be yes. Behind the question was a certain amount of knowledge about the situation affecting those who have public sector debt. The arrangements in local authorities, in particular, but also in central government, are not of the standard that we would wish to see. There is far too easy a recourse to bailiffs and to worse measures, and it is time that this was looked at—and I hope that that will be part of the consultation.

I thank in particular the noble Lord, Lord Kirkwood, for his contribution on the situation in Scotland. He made a point that I should have made—it is absolutely right —that the introduction of the scheme would affect the behaviour of those involved in it. If it changes behaviour for the good and leads to a broader and better discussion and debate, it has to be the right way forward.

The Minister has suggested that the Government want to see a breathing space introduced, and introduced quickly, that it should have as part of its processes a statutory repayment plan—I certainly welcome that—and that she generally wants it to be designed to be the best possible way in which consumers can repay their debts and creditors obtain the benefit of that. I think that she is in agreement with all the principles that I identified in introducing this amendment. She shares our desire that, given that there is a Bill passing through, we should attempt to latch on to it as quickly as we can.

I noted the Minister’s reservations about the drafting. However, we are where we are because the Long Title of the Bill is very tightly worded—and I do not want in any sense an impression to be left that we have deliberately chosen the single financial guidance body because we thought that it was the best fit, because it is not, for all the reasons given. I do not need to repeat them, and there may well be others. Indeed, there was a hint in what the Minister said about what the Government might be thinking, and I would support that. I mentioned making sure that there was parity of action across the country.

We seem to be in a consensus on this, and I would like to work with the Government. Therefore, in answer to the question whether we would work together to try to achieve a resolution, the answer is yes—we would. There is only one condition that I would make, and I would like the Minister to respond so that I can get a nod from the clerk that we are on the right track. She said that she would like time to discuss matters before Third Reading; she did not give the magic formula that she would come back with an amendment or permit us to bring back this amendment for further discussion at Third Reading. I would be grateful if she could signify that so that I can get the necessary assurance from the clerk that we are in the right place.

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[Lord Elystan-Morgan (CB)]

The Minister tangentially mentioned devolution here, raising the question as to whether there has been any discussion between Her Majesty’s Government and the Ministers in Wales, for example. It is in the realm of devolved authority, I believe. The Welsh Government would be wholly justified in saying, “This is a matter solely for us”. As she will know, on many occasions such as these, the devolved Administration will say, “We’re quite happy for you to legislate on this matter”. Has any discussion to that end taken place at all?

[Lord Stevenson of Balmacara]

My Lords, during that helpful intervention I was able to glance across to the clerk. I was looking for a nod but I got more than that. I got a small written note which confirms that the Minister has said enough to ensure that this issue can be discussed again at Third Reading. Without any commitment from the Minister to bring forward a particular form of words, the intention to look further and come back is sufficient on this occasion. On that basis, I beg leave to withdraw the amendment.

Amendment 22 withdrawn.

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[The Earl of Kinnoull]

My Lords, I will be very brief indeed, as we have heard two very clear and good speeches from the noble Lord, Lord Sharkey, and the noble Baroness, Lady Altmann. The first point I made at Second Reading was on the importance of maintaining access to justice for our citizens. The point I make now is that I see nothing in Amendment 42 which in any way fetters access to justice. I see only good features of it, and I very much hope that we will hear good news from the Government in due course.

[Lord Stevenson of Balmacara]

My Lords, I too support this amendment, which we discussed earlier and which I think has been re-presented in the expectation that it will commend itself to Ministers, and in the hope that they will look kindly at it. It is absolutely right to consider these cold-calling activities as one of the greatest nuisances of the modern age. Indeed, the Minister herself admitted that they had led her to give up her landline so that she could not be persecuted. But that does not seem to stop them; they just find your mobile phone and get on to that as well, using texts and other means. I cannot wait until they start using drones and other things to deliver their messages in the hand. Maybe at that stage we would have the Government on our side, as they might recognise aerial bombardment as taking it a step too far.

But at the heart of this is the question of trust. The noble Baroness was extremely persuasive on an earlier amendment in suggesting that she could be trusted and was a person of trust. Her work with all of us around the House—we have all had a chance to talk to her about issues of interest to us—can be seen in the amendments that she laid herself and the support she has given to other amendments coming forward. Here is a classic: she gave a commitment at an earlier stage, admittedly in slightly different circumstances, to bring something forward. She let slip that the civil servants are already working on it, which suggests that a great deal of activity has probably gone on around Parliament and departments, because she would not have mentioned it if she did not have some confidence that what was being proposed could have been seen and agreed by other Ministers who have an interest in this area. So I suspect that things are well primed. I do not like defence or guns in metaphors, but if the gun has been so charged and so primed, it seems rather odd that it has been left in a loaded position somewhere close to her office not being used. Trust is something we want to see exercised in practice, and I look forward to hearing the noble Baroness’s comments.

[Baroness Buscombe]

That is quite an interesting one: any gun should be locked in a cabinet. The amendment tabled by the noble Lord, Lord Sharkey, my noble friend Lady Altmann and the noble Earl, Lord Kinnoull, seeks to ban “unsolicited direct approaches” such as phone calls,

“by, on behalf of, or for the benefit of companies”,

providing claims management services. It also seeks to prevent these companies using data obtained through the use of such methods.

I have spoken previously about the significant steps taken by the Government to address these issues. We have increased the amount that regulators can fine those breaching direct-marketing rules. We have forced companies to display their number when calling you. As we have previously discussed in your Lordships’ House, cold calling is already illegal in certain circumstances, such as where a person has registered with the Telephone Preference Service or has already withdrawn consent.

The Information Commissioner’s Office enforces restrictions on unsolicited direct marketing. The Data Protection Act 1998 requires organisations to process data fairly and lawfully. Organisations must: first, have legitimate grounds for collecting and using personal data; secondly, not use the data in ways that have unjustified adverse effects on the individuals concerned; and, thirdly, handle people’s personal data only in ways they would reasonably expect. A serious contravention of the data protection principles could result in a monetary penalty notice being issued by the Information Commissioner. Depending on the circumstances, this could include a CMC which sought to use data that it had originally obtained through unlawful means.

However, we have listened carefully to the views of your Lordships’ House and fully agree that more needs to be done to tackle the prevalence of nuisance calls across the UK. As I previously explained, there are complex issues to work through, including those relating to EU directives. But I can reassure your Lordships’ House that the Government are working through the details of a cold-calling ban in relation to the claims management industry. To that end, I am pleased to say that I revisit the offer made in your Lordships’ House last week and repeat that the Government intend to bring forward an amendment in the other place to meet the concerns of this House. This amendment will look to ensure that the onus is no longer on the consumer to opt out of marketing calls.

Unfortunately, the amendment tabled by noble Lords would give the FCA a duty it cannot enforce under its current regime. I assure noble Lords that the Government are committed to tackling this issue properly and will consult with the FCA, the CMRU and the ICO to ensure that the government amendment addresses these issues in the most effective way. But if Amendment 42 were accepted, it would not achieve its aim. For these reasons, I urge the noble Lord to withdraw the amendment.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

3rd reading (Minutes of Proceedings): House of Lords
Tuesday 21st November 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I declare an interest as a member of the Financial Inclusion Commission and a former chair of StepChange, the debt charity. Before I get on to the nature of the amendments, which we support, I want to pick up on the tone that has already established itself around the House of a group of people with expertise and knowledge, willing to put aside any political differences they might have at the start of such a Bill, and with a fierce commitment to work together to improve what we have before us. We have just heard a series of short comments which are redolent of a much greater and more important truth: namely, that when the House does this, it really does it well. I am very grateful to all concerned who have been part of this. We are seeing today a Bill that has been transformed, not because of any particular line or argument in a political or wider sense but because people genuinely believed that there were things here that could be made better and that, as a result, the lives of people right around this country would be improved. I think it is very important that we hold on to that.

I thank the Minister, as everyone else has, for introducing this group of amendments which reorganise and expand the objectives and functions of the new single financial guidance body and set the tone for its future activities. We are pleased to support the group of amendments, as I said. It is important to get a sense of the journey we have been on: we made it clear at Second Reading that, although we agreed with the Bill, we thought it was a framework Bill and not a Bill that had the substantial and important powers that we thought were needed. We wanted to make sure that by the time it left your Lordships’ House it had been changed a lot—and of course it has.

As originally drafted, it was too narrowly focused on the near-term task of bolting together the three separate functions that were being brought together—debt advice, pensions guidance and financial capability—and on transferring the very important responsibility for claims management to the FCA. It was really short—a lot of people picked this up—on the vision that the body should have and what the sector was going to be in the medium term. It seemed to devalue the work on strategy that was so important and is now at the centre of the activities. The fact, as the noble Baroness said, that the original Clause 2 led on functions and only later referred to objectives meant that the Bill, I think unintentionally, gave the impression that the main purpose was the enactment of what would be simply a series of structural adjustments.

This, as we have been reminded, was at a time when the Government had decided to change the terms of trade in financial inclusion by creating a new Minister at the DWP, the department that is sponsoring the Bill, but had not set out clearly what they expected the Minister to do. We all agreed, I think, right around the House, that the Bill and the new functions of the SFGB would actually be about delivering a holistic financial inclusion policy. As we have already learned from its chair, the excellent Lords Select Committee that reported at about this time on a range of issues around financial inclusion made the case for extending the Bill to cover a number of specific proposals.

Towards the end of Report, when it was clear that the Bill had changed and was going to contain much more about the application of financial inclusion policies, as we will hear again later today, we suggested that Clause 2 should be revamped. What we wanted was a bit more of the longer-term vision that the SFGB should be aiming for, and we argued that putting the objectives first and then dealing with the functions at the new body’s disposal was a better way of doing that—and I think that splitting the original clause into separate groups is a concrete way of doing it. So we are very grateful to the Minister for seeing the merit of our arguments and we thank the Bill team for working very hard to get the new draft into shape. I have a reputation in your Lordships’ House for not being very good at drafting, so I was delighted when they agreed to take it away and bring it back in the form in which we now have it: it is so much better.

The noble Baronesses who spoke on the vulnerability issue did the House a great service by raising with great passion the need to make sure that the Bill, as well as generally describing the new body, focuses on vulnerable people. We are very grateful to see that amendment here today. With that, we support these amendments.

[Baroness Buscombe]

My Lords, I thank noble Lords for this short debate and for their support for this amendment. In reply to the question raised by the noble Lord, Lord Kirkwood, yes, we expect persons in vulnerable circumstances to be robustly signposted to UC and other benefits where appropriate.

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[Baroness Buscombe]

My Lords, I turn to the protection of indebted consumers, in particular the idea of providing a breathing space scheme, referred to in the amendment as a debt respite scheme. I thank noble Lords for their insightful and constructive contributions to previous debates on the subject.

I promised on Report that the Government would do further work on the issue in time for Third Reading. My officials and I have worked hard to produce an amendment that enables breathing space to be delivered quickly and effectively, a case for which noble Lords—in particular, the noble Lord, Lord Stevenson—put forward eloquent and powerful arguments. Indeed, the wording of the amendment builds on the amendment tabled by the noble Lord, to which the noble Lord, Lord Sharkey, and the noble Baroness, Lady Altmann, added their names on Report.

The best of your Lordships’ House has been on show in the development of the amendment. The way in which the Government and the Opposition have worked together to achieve consensus on a workable amendment which will enable the successful delivery of a breathing space scheme has been impressive, and it is my pleasure to introduce the amendment to your Lordships’ House. I know that there is broad agreement across your Lordships’ House that a breathing space scheme is both necessary and important. It has the potential to help thousands of vulnerable families out of problem debt, and provide a better life for individuals and their families.

I reassure the House that the Government remain strongly committed to the implementation of a breathing space scheme that is well designed and delivered at the earliest opportunity. We have already set out a clear timetable for developing the policy; the amendment provides the legislation that will allow us to implement it. Beyond enabling the introduction of a breathing space, the amendment contains many similarities with the one tabled by noble Lords on Report. For instance, it provides for details of the scheme to be set out once more detailed policy design has taken place. This is crucial, given that the Government are committed to listening to expert views put forward in the call for evidence. It also requires the Government to receive advice on the design of the scheme from the single financial guidance body, which will be important given the body’s expertise and central role in supporting indebted consumers. However, noble Lords may also notice a few differences from the amendment tabled on Report.

The noble Lord, Lord Stevenson, and I are in agreement that the Government’s amendment enables breathing space to be designed in a more effective way, building on, rather than duplicating, the work already commenced through the call for evidence, while still allowing for its introduction to take place swiftly.

I will outline a couple of the specific changes. First, the amendment enables the single financial guidance body to be involved in the design of the policy in a more suitable way. The Government plan to complete an extensive policy development and consultation process over the next year. As set out previously, we published a call for evidence last month on this topic, and intend to consult on a specific policy proposal in the first half of 2018. Through this process we will have established a robust blueprint of a breathing space scheme, informed by the expert views of the sector. Given this, we have agreed that it would not be the best use of the new body’s time and resources to require it to redo this work in its entirety once it is set up. Instead, our amendment would require the single financial guidance body to provide advice on specific issues requested by the Government.

The body must provide this advice within 12 months of its being established, which we expect to be in late 2018. On receipt of this advice, we will make regulations to set up the scheme as soon as is practicable—and certainly within 12 months of receiving the advice. This process will enable the body to supplement, rather than duplicate, the policy work the Government will have done up to that point. It could also speed up the introduction of the scheme, given that the advice is likely to be more targeted.

Secondly, we are in agreement that the amendment provides for more flexibility in designing the eventual scheme, potentially allowing for a scheme with a wider scope. For instance, our amendment enables—but does not mandate—the scheme to extend to Wales and Northern Ireland. We will assess the preferred geographic scope of the policy through our consultation, and the amendment allows us to deliver on the outcome of this process.

These are important changes, which we have reached a clear consensus on. However, after long and exhaustive discussions with House officials we have been informed that, for these changes to remain within scope of the Bill, we must take a power to make these regulations rather than a duty. I must be clear: in our view, this wording change has no practical impact. We have been clear, here and elsewhere, that we will deliver a breathing space scheme. This was a manifesto commitment and we are already midway through an intensive policy consultation process. This is simply a necessary step to give us the power we need to establish the scheme through this Bill. The Government’s position is clear. This amendment reflects the strength of our commitment to implementing a successful breathing space scheme. It sees the scheme delivered quickly and effectively and it ensures the sound design, implementation and operation of the scheme.

I turn to Amendment 33, tabled in the name of the noble Lord, Lord Sharkey. I begin by making it clear that this amendment is, with respect, neither necessary nor meaningful; it is actually entirely meaningless. As the House will have seen, the Government have tabled their own amendment to ensure that the Long Title of the Bill reflects the content following the additions made on Report. I must stress that my view remains that it is standard practice to add wording such as that tabled by the Government to the Long Title, and that it is perfectly adequate as tabled.

I also take this opportunity to remind noble Lords that the content of the Bill informs the Long Title; it is not the other way around. Indeed, the Companion to Standing Orders says that,

“amendments to the long title are not in order unless they are to rectify a mistake in the original title, to restate the title more clearly or to reflect amendments to the bill which are relevant to the bill but not covered by the former long title”.

Clearly, it is the third of these purposes which is relevant to this instance. Any amendment to the Title must therefore reflect amendments made, or being made, to the Bill. It is for this reason that we tabled an amendment to the Long Title to accompany the amendments that we tabled in respect of debt respite. The purpose is not to enlarge the scope of a Bill by amending the Long Title.

I am afraid that I must also express my disappointment that the noble Lord, Lord Sharkey, did not feel that he could discuss his original amendment, which he has now withdrawn, with me. Had he done so, I would have pointed out to him that I did not consider that it accurately reflected the contents of the Bill. His current amendment accurately reflects the content of the Bill so—in the spirit of consensus and because, as I have described, the amendment does not affect the scope of the Bill—I am prepared to accept it. On that basis, I shall not move Amendment 34 standing in my name and shall accept Amendment 33, tabled in the name of the noble Lord, Lord Sharkey.

[Lord Stevenson of Balmacara]

My Lords, I thank the Minister for introducing the amendments in this group which, as she says, will primarily establish a much-needed statutory debt respite scheme. As she also said, it is necessary and important. We have signed some of the amendments in this group and are absolutely delighted to support their inclusion in the Bill.

The failure to include a breathing space in the Bill left a substantial gap in the services which the debt charities need, if they are to offer the best support to those struggling with unmanageable debt, so we have been pursuing it through the various stages of the Bill and challenging the Government to up their game and honour their manifesto commitment. Initially, I think it was clear to the whole House that the Minister was under strict instructions to agree to nothing. But it is to her considerable credit that, after listening to the arguments and consulting widely, she decided that the case had been made. She and her Bill team then went out to bat for the proposal and, from a standing start, secured support for the amendment from her government colleagues. Only those who have witnessed the turf wars that this sort of decision—to introduce a breathing space—must have precipitated can appreciate what has been going on in Whitehall over the last few weeks. I have seen that at close quarters and it is not a pretty sight. I therefore salute the hard work that the Minister and her team have put into this, and I am lost in admiration at their ability to persuade—at ridiculously short notice—her ministerial colleagues to back this amendment today.