Debt Advice (FCA Levy)

Philip Hollobone Excerpts

Tuesday 21st January 2014 Westminster Hall

[Several hon. Members]

rose—

[Mr Philip Hollobone (in the Chair)]

Order. Seven hon. Members are seeking to catch my eye. I do not want to call the Front-Bench speakers after 10.40 am, so we have just under an hour. I do not want to impose a time limit, but please, if we are to get everybody in on an equitable basis, Members should seek to limit their remarks to no more than eight minutes. Let us see whether we can do it without an imposition. With eight minutes each, everyone will get in. The hon. Member who will first demonstrate how to do it is Paul Blomfield.

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[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I would like to reiterate what the hon. Member for North Swindon (Justin Tomlinson) said about your commitment to Back-Bench involvement. I also thank the Backbench Business Committee for recommending this issue for debate.

Above all, I thank my colleague on the Business, Innovation and Skills Committee, the hon. Member for Worcester (Mr Walker), for having the foresight and judgment to table this debate at this time, because its timing is crucial. Last night, we debated payday loan companies in the Chamber. A number of headline-grabbing issues that have long been discussed publicly were debated, but there is a real danger that the significance of the BIS Committee’s recommendation on ring-fencing may have fallen below the radar. Certainly, in the numerous interviews that I have done with the media, I have yet to be asked a question on it. The sheer significance of it may well have gone unrecognised. He has taken up the issue and run with it, and the timing is impeccable. It is extremely important.

I emphasise that this is not just a dry academic issue. Debt advice does not sound very exciting, but I was first confronted with its importance in deprived areas when I was approached by members of my local branch of Christians Against Poverty, based at St Matthew’s church in Tipton, who wanted me to see the work that they had done. I have attended events run by the branch and talked to people who have spoken of the life-transformative experience of taking advice from Christians Against Poverty and adhering to the organisation’s recommendations and support. They were so grateful that it was almost unbelievable. It was very moving. Make no mistake: debt advice is not just about somebody sitting in an armchair talking to people on the other side of a desk. It is about talking to them, giving them support, comfort and advice, pointing them in the right direction and monitoring their life as they come out of the trough that debt imposes on them.

The issue is very important, and there is a danger if MAS goes for a flatline budget. We could be left in a position where although demand for the service is increasing hugely—all the indications are that it will continue to increase—the budget is static, meaning that an increasing number of people would not be able to access the support that they need to transform their lives. I support the recommendations made by the previous speakers. I will not go into all the detail, as they have argued the case effectively and I realise that others want to contribute to this debate, but to finish, I will say one thing to the Minister: this is an easy win. It does not cost the Government anything. Politically, it would be highly popular across the board to ensure that the major contributors to the problem fund at least part of the solution.

That is the positive side. The negative side is that the social cost of people running into heavy debt and the potential impact on families can be so devastating that the Government will incur costs by picking up the bill for the resulting social breakdown and deprivation. If the Government ignore the opportunity to get more money from the private sector that is creating the problem, they will incur greater social problems with a price tag, and they will have to pick up the tab. That is illogical and incoherent. There is an easy win that has popular and political support. It will benefit Government finances in the long run and address the problem that we confront.

[Mr Philip Hollobone (in the Chair)]

I am about to call the Front-Bench speakers. I thank all hon. Members for their contributions and for being so disciplined in the timing of their remarks. We have just over 35 minutes left. As this is a Back Bench-sponsored debate, I encourage Back-Bench Members who want to hold both Front Benches to account to do so through interventions.

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[Sajid Javid]

I value what the hon. Lady says. She has considerable experience of this subject from before she came to the House and she makes a good point. If she would find it useful, as I certainly would, I would love to sit with her and learn more about what she says, which could help to inform decision making. If she is agreeable, that would be a good step forward.

In the interest of time, I will answer some of the questions that have been raised. Spending time on debt advice, when there is a demand for it, is clearly the right thing to do, and it is crucial to establish how debt advice can best be delivered to reach consumers. My hon. Friend the Member for Worcester is right that debt advice should be funded appropriately to meet demand and to provide services that directly benefit consumers. Last year, 94% of MAS’s £34.5 million budget for debt advice was spent on front-line delivery services. MAS aims to provide 150,000 debt advice sessions this year; last year, it exceeded the same target by 8,000.

The shadow Minister asked whether I have had direct discussions with MAS about this issue. I have not had specific discussions about the levy, as it would not be appropriate for me to get involved at this stage, given the independence we rightly give to the FCA in its oversight of MAS regarding the levy structure. She may be aware that the FCA is still deciding the best way to structure the levy on the consumer lending industry, and it will publish details on that shortly.

The hon. Lady asked me about MAS more generally, and I again point her to the review that will take place, as the Government have promised, during this Parliament. She also rightly asked about alternative sources of lending, which we discussed in yesterday’s debate. She mentioned credit unions, and of course the Government are committed to helping to promote them. We have a credit union expansion project under which there is £38 million of Government funding to help credit unions to modernise and to increase their customer base across the country by more than 1 million. We also recently made regulatory changes to the interest rates that credit unions can charge to ensure that they are not losing money each time they make a loan commitment. As I said in closing yesterday’s debate, I would like to see what further action the Government may take to promote that important sector.

I once again thank my hon. Friend for securing the debate. He and many others made important points, and I know that he in particular cares deeply about consumer detriment in regard to the payday loan sector. He has already played a significant role in the Government’s response to consumer detriment in that area. He mentioned that he recognises that the FCA is independent, and I am sure that the authority has heard the arguments today and will reflect on them. I assure him that I will also further reflect on the points he and other hon. Members have articulated so well.

[Mr Philip Hollobone (in the Chair)]

I thank all who participated in that debate for their contributions. If they are not staying for the next debate, I ask them to leave quickly and quietly.