Budget Resolutions

Rachel Reeves Excerpts

Wednesday 22nd November 2017 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

It is a privilege to follow the hon. Member for Mid Bedfordshire (Ms Dorries).

I fear that today’s Budget delivers more of the same. It does very little to help people in the everyday economy who are struggling to get by—struggling to get a foot on the housing ladder, to grow their business, or to gain security in work. I shall focus on two aspects of the Budget. I shall deal first with GDP and productivity, and secondly, like the hon. Lady, with housing supply and house prices.

The biggest influence on our standard of living—on whether we can afford to pay the bills, on how we are doing, and on whether our families can get on and do better than the previous generation—is how fast the economy is growing, and in the context of that most important metric, I think we can regard the Budget only as a failure of Government economic policy. For every single year of the forecast period, economic growth has been revised downwards, and that is not from particularly high levels in the first place. There has been a further downward revision since March this year, which is very worrying for many families in all our constituencies. I believe that, by 2022, GDP will be 2.7% lower than was predicted in March, and about 80% of the downgrade is due to lower productivity during that period. Productivity is now expected to be 27% lower than it would have been if it had continued to grow at its pre-crisis levels.

That is incredibly worrying. If we are to compete with countries throughout the world in the years to come, and to do so outside the European Union, we desperately need to boost our productivity, our research and development, our business investment and our investment in infrastructure. However, all the data and all the numbers published today by the Office for Budget Responsibility suggest that we are doing exactly the opposite. We are going in the wrong direction with those most important economic numbers relating to GDP and productivity. Our productivity is already 20% behind that of the United States, Japan and Germany, and we simply cannot afford to have further productivity downgrades.

Of course, downgrades in our GDP and productivity also have a real effect on Government borrowing and debt. Over the forecast period—the next five years—the productivity downgrade adds a staggering £90 billion to our borrowing trajectory. That is incredibly worrying, given its effect on not only living standards, but the public finances. We are simply not able to invest the money that we need to invest in universal credit, infrastructure, our national health service and our schools, because we are not delivering on the requirement for productive, well-paid jobs. The Government must take responsibility for that.

I look forward to the industrial strategy White Paper, which will, I hope, be published next week, but I must tell the Government that it will have to be a lot better than the Green Paper that we saw earlier in the year, which was incredibly disappointing and simply will not deliver the productivity performance that we need. It is 18 months since the Government’s productivity strategy, and since then every single estimate of productivity has been downward, not upward. What a missed opportunity, and what a failed strategy.

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

The hon. Lady is making an extremely powerful speech. Does she agree that productivity will never increase while we continue to exclude important parts of society? The industrial strategy does not mention disabled people, and neither did the Chancellor today. The Budget simply is not inclusive.

[Rachel Reeves]

That is a very good point. If we are to ensure that everyone benefits from a growing economy—we just about have growth, but not very much of it—we must have an inclusive economy and an inclusive economic strategy that works for every member of all our communities.

The Government might respond by saying, “It’s okay Labour Members. There is a productivity investment fund worth £7 billion.” “Hurray,” we all say, but the money will not start until 2022-23. Why on earth do we have to wait five years for a productivity investment fund? We all recognise the desperate need to improve our productivity, so why wait five years before putting money and support into doing that? I should have thought that it would be an urgent priority for the Budget, not something that could be kicked down the road for five years.

Let me now deal with the issue of housing. I am afraid that I am much less optimistic about the Government’s plans than the hon. Member for Mid Bedfordshire, because over the last hour or so, I have been looking at the Office for Budget Responsibility’s “Economic and fiscal outlook”. I know that not everyone likes to listen to experts, but I am one of those people who still think that they are worth listening to. If we believe what the experts at the OBR are saying, all the housing measures—not just the stamp duty measure—in the Budget will increase house prices by 0.3%, and there will be no change in the supply of housing compared with that set out at the March Budget. Notwithstanding all today’s fanfare, the OBR’s verdict, which is on page 53 of its document, is that there will be no change in supply, just an increase in house prices, which is the exact opposite of what we need if we are to ensure that more young people and families can get on to the housing ladder. Although I think we all share that objective, it is not met by the measures that have been announced today.

[Mrs Anne Main (St Albans) (Con)]

I understand the hon. Lady’s interpretation of the report and her concern about it, but in areas such as St Albans where the average house price is more than £500,000, young people were helped on to the housing ladder by the previous Chancellor, and the present Chancellor will be helping young people to save some more of their money and put it towards buying their homes. That will be welcomed by many areas with high house prices. Surely the hon. Lady accepts that the stamp duty measure is welcome.

[Rachel Reeves]

I am not making my own forecasts; I am taking those of the Office for Budget Responsibility. What people in St Albans, Mid Bedfordshire and Leeds West want is affordable housing and the ability to get on to the housing ladder, and that requires stable house prices and an increase in housing supply. According to the OBR, however, there will be no improvement in supply on the basis of the measures announced today, and house prices will be 0.3% higher than they would otherwise have been, so the measures will not have the desired effect. I understand that the hon. Lady wants her constituents to have those opportunities, but it does not sound as though her Chancellor’s Budget will enable them to do so. In fact, I think it will have the opposite effect.

[Helen Goodman (Bishop Auckland) (Lab)]

Will my hon. Friend give way?

[Rachel Reeves]

I will make a little more progress, if that is okay.

On page 128 of its document, the OBR says that after the stamp duty changes, on the basis of its analysis, prices paid by first-time buyers will be higher with the relief than without it. Thus, it argues, the main gainers from the policy will be people who already own their properties, not first-time buyers. That is a terrible indictment of these housing policies. If that was supposed to be the Budget’s fanfare announcement, I am afraid that it has ended up being a bit of a damp squib.

[Helen Goodman]

Does my hon. Friend agree that it is absurd to have a stamp duty limit for first-time buyers of £500,000, which implies they have an income of £150,000?

[Rachel Reeves]

Yes. The OBR’s earnings forecast shows that that is another impediment to many people getting on the housing ladder. Incomes need to keep pace with the rising cost of living, especially house prices, but the average earnings forecast suggests that it will be harder still for many people to get on the housing ladder.

[Ms Dorries]

Does the hon. Lady accept, however, that an injection of 300,000 homes per year—if that target is reached—will stabilise the price of homes at the very least, because supply will be increased in a way that has not happened since the 1970s?

[Rachel Reeves]

The hon. Lady’s argument is not with me, but with the OBR. It forecasts no increase in housing supply and says that these measures will benefit existing house owners, rather than those trying to get on the housing ladder. That is disappointing.

The plan for an additional 300,000 homes a year is a bit like the national productivity investment fund because the homes are not set to be delivered until the mid-2020s. However, all hon. Members will recognise that we need to build the houses now. We do not have seven or eight years to wait; families and first-time buyers need these homes today.

I will finish with a couple of remarks about Europe because the truth is that the biggest economic announcements for the rest of the year will really be the decision made in the middle of December about whether to move the talks between the European Commission and the UK Government on to trade, and the final agreement between the UK and the EU on future trading relationships. Despite the Government’s announcements today, the most important announcements for all our constituents will be made just a few weeks from now.

I urge the Government, in that time, to reflect on some of the evidence heard in the past couple of weeks by the Business, Energy and Industrial Strategy Committee, which I chair. Honda told us that the cost of exporting a car would be about £1,800 more after we leave the EU than it is today, and that that amount far outweighs its profit margins, meaning that investment and jobs in this country are at risk. We also heard evidence from Aston Martin, which said that if it cannot get its vehicles certificated by the Vehicle Certification Agency in this country, it will have to stop production while it seeks such authorisation from the European Union. We took evidence yesterday from the aerospace sector, including Airbus, which said that countries are knocking on its doors and asking it to build aeroplane wings there, and that the risks of friction in trade will have real implications for its businesses and many others.

I urge the Government to do everything they can in the next few weeks to move the talks in Europe to the next level. If they do not, I am afraid that the issues of productivity, house building, earnings and all the other things we have been talking about will be pretty meaningless, because jobs could move overseas and we will not be able to have that free and frictionless trade from which we benefit so much today.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 18th July 2017 Commons Chamber

[Mr Philip Hammond]

I agree with my hon. Friend. The UK will have increased the tax-free personal allowance by over 90% compared with 2010, completing a decade of sustained tax cuts for working people. Over 31 million taxpayers will pay less tax in 2017-18, including 3 million taxpayers in the north-west. Since 2010, more than 4 million taxpayers have been taken out of income tax altogether.

[Rachel Reeves (Leeds West) (Lab)]

Personal contract purchase plans for financing cars have gone up by 394% in the past five years, and the Governor of the Bank of England has said that we are failing to learn the lessons of the past when it comes to easy credit. What action is the Chancellor taking to ensure that lending is affordable and does not pose a risk to the wider economy?

[The Economic Secretary to the Treasury (Stephen Barclay)]

May I first congratulate the hon. Lady on her appointment as Chair of the Business, Energy and Industrial Strategy Committee? As she will be aware from her Bank of England days, this is a matter for the Financial Policy Committee. Indeed, the FPC noted in its recent report that consumer credit is growing at a lower rate than it was under the previous Labour Government, but loss rates on lending remain low, as they are at present.

Economy and Jobs

Rachel Reeves Excerpts

Thursday 29th June 2017 Commons Chamber

[John McDonnell]

I will come back to the hon. Gentleman.

It is not only the Labour party that highlighted the consequence of the Tories’ failed economic approach. Last week the Governor of the Bank of England warned of “weaker real income growth”. He spoke about “markedly weak investment” and “rapid consumer credit growth”. Worryingly, he warned that the extent to which the UK’s current account deficit has moved closer to sustainability “remains open to question”, as we continue to rely on what he describes as the “kindness of strangers” to fund us.

[Rachel Reeves (Leeds West) (Lab)]

The shadow Chancellor mentions comments by the Governor of the Bank of England. Like the shadow Chancellor, the Bank is concerned about the rise in household debt, which is now 142% of GDP, with unsecured borrowing rising 10% just last year. Does the shadow Chancellor share my concerns that household debt reflects the falling real wages that we have seen under this Government, and that it spells problems for the future and households being able to sustain current levels of spending?

[John McDonnell]

I will come on to that. Household debt is at a record level. Why? Because wages are so low, yet housing costs, and other costs with inflation rising, are biting hard for working families. It is no wonder that they have to resort to increased levels of debt just to get by. Those are the JAMs—the “just about managing”, who were supposed to be protected in the last Budget.

--- Later in debate ---

[Rachel Reeves]

The Chancellor seems to be more interested in talking about what is in the Labour manifesto than about what is in his own Government’s Queen’s Speech. Is that because there is so little about the economy in the Queen’s Speech, or is it because he does not believe in it?

[Mr Hammond]

No; it is because I am about to come to it. The shadow Chancellor talked about his programme, and I wanted to make the simple point that, for all the rhetoric about somebody else paying, it is always the same with a Labour Government: it is always ordinary working people who pay, through higher taxes, higher prices and fewer jobs.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 18th April 2017 Commons Chamber

[Mr Hammond]

My hon. Friend has made the case for free ports, and the Government have heard that case very clearly. We will consider all options that have the potential to support our ambition to see Britain as a great global trading nation, but before making any decisions we shall need to consider carefully not only the advantages that free ports can deliver, but the costs and potential risks associated with them.

[Rachel Reeves (Leeds West) (Lab)]

If towns and cities in our economy—including those in the north of England —are to flourish, we need banks and building societies that support them. Does the Chancellor agree that those banks and building societies should keep their branches open? Leeds Building Society has just announced that it will close its branch in Armley Town Street, which is in my constituency, following the closure of branches of HSBC and Yorkshire Bank in the last two years.

[Mr Hammond]

Of course we want there to be a viable branch banking network across the country, but we must recognise that the nature of banking is changing. More and more of us are using online digital banking, and that is bound to be reflected in the configuration of the branch networks that the banks operate.

Class 4 National Insurance Contributions

Rachel Reeves Excerpts

Wednesday 15th March 2017 Commons Chamber

[Mr Hammond]

My hon. Friend is absolutely right: it is about the environment being conducive to people starting and running small businesses. I congratulate those in Rossendale who do that—who get up every morning and who are prepared to take those risks. They will now benefit from the abolition of class 2 national insurance contributions, making them that little bit better off.

[Rachel Reeves (Leeds West) (Lab)]

Will the Chancellor confirm when the decision to make this U-turn was made? Is not the truth that this was the Prime Minister’s decision, not his?

[Mr Hammond]

Clearly, that is the story the hon. Lady would like to believe, but, unfortunately, it is not true. As Members would expect, I have been discussing the Budget and these issues with the Prime Minister since last Wednesday, just as I have discussed them with many colleagues over the weekend, and we have had several meetings over the last few days. The final decision to make this announcement to the House was made this morning—just after 8 o’clock—and I have come here at the earliest reasonable opportunity to inform the House.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 28th February 2017 Commons Chamber

[Mr Hammond]

Yes. I welcome those investments by large companies, which will bring a large number of jobs to the area. It is also important that we support small and medium-sized enterprises, and the northern powerhouse investment fund will have a specific remit to target and support smaller businesses across the north.

[Rachel Reeves (Leeds West) (Lab)]

Fourteen months after the devastating Storm Eva floods, it is welcome news to people in Kirkstall that the Sheesh Mahal restaurant will reopen tomorrow. However, many other businesses in my constituency are still struggling with astronomical increases in the costs of insurance and we still do not have a date for having proper flood defences in my constituency. What assurances can the Chancellor give businesses in my constituency that he has not forgotten about us?

[Mr Hammond]

As I have said, we have put additional money into flood defence spending, but—notwithstanding the reopening of the Sheesh Mahal restaurant—I take on board the hon. Lady’s comments about the delay that others are experiencing and I will look at the facts.

Unauthorised Overdrafts

Rachel Reeves Excerpts

Wednesday 8th February 2017 Westminster Hall

[Rachel Reeves (Leeds West) (Lab)]

I beg to move,

That this House has considered fees and charges on unauthorised overdrafts.

Overdrafts are one of the most widely used credit products in the market. Almost three in 10 people in the UK with personal current accounts have been overdrawn in the past year. Overdrafts can be a flexible form of borrowing, and most people use theirs for only a couple of months in the year. However, a significant minority of people—around 10%—are much more frequent users and regularly go overdrawn for nine months or more each year. There are also people who regularly go over their overdraft limit and are hit by exorbitant and disproportionate charges. The major banks make more than £1 billion per year from charges on unauthorised overdrafts—the majority, according to the head of the Competition and Markets Authority, from financially vulnerable customers.

StepChange Debt Charity estimates that 1.7 million people in the UK are trapped in an overdraft cycle and consistently use overdrafts to meet essential and emergency costs. For many vulnerable customers who are already struggling, regularly having to go into an overdraft or over an overdraft limit can lead to and exacerbate financial difficulties. Many hard-working families live constantly on their overdrafts, and those in chronic financial difficulties often face impossible choices between meeting the costs of essential bills and going further overdrawn or over their overdraft limit. Those people can struggle to get out of their overdrafts, as fees and interest build up over time and make it increasingly difficult to get out of the red. Those households are also more likely to be on the edge of their overdrafts, and if they go over, they face substantial and punitive charges that push them into difficulties. If people do not have the means to get out of their unarranged overdrafts, that can lead to persistent charges, which make it successively harder for them to avoid financial difficulties each month.

Last year, StepChange surveyed its clients with overdraft debt to explore their experiences of overdraft charges. It found that people with overdraft debt who contact the charity regularly go into the red. On average, those people had been in an unarranged overdraft for 11 of the past 12 months. Almost two thirds—62%—of the people StepChange helps with overdraft debt regularly exceed their arranged overdraft limit as they struggle to make ends meet; they did so on average in five of the past 12 months. Borrowers face average charges of £45 a time for slipping into an unauthorised overdraft. That adds up to a massive £225 a year of unauthorised overdraft charges on average.

[Yvonne Fovargue (Makerfield) (Lab)]

Does my hon. Friend agree that the cap on payday lending has actually worked quite well and stopped unaffordable charges, so in its review of high-cost credit, the Financial Conduct Authority should look at introducing a similar cap on overdraft charges and more affordable ways of paying down debt?

[Rachel Reeves]

My hon. Friend has done a lot of work in this area, both as a Member of Parliament and before she came to this place, and she is absolutely right. I will come on to the difference between caps on overdraft charges and those on payday lending.

Research published today by Which? found that consumers needing as little as £100 could be charged up to £156 more by some major high street banks than the Financial Conduct Authority allows payday loan companies to charge when lending the same amount for the same period. For example, Which? compared the cost of borrowing £100 for 30 days and found that some high street banks’ unarranged overdraft charges were as much as seven and a half times higher than the maximum charge of £24 on a payday loan for the same period. And because bank overdraft charges apply to monthly billing periods, not the number of days money is borrowed for, consumers who need £100 could pay up to £180 in fees if they borrow over two calendar months from their high street bank in the form of an unarranged overdraft.

[Gloria De Piero (Ashfield) (Lab)]

A constituent of mine was made redundant and wanted to get back on his feet, so he set up a small business—a soft play area for kids, which was essentially a cash business. For every direct debit he paid, he had to pay 40p. For every automated debit and every internet payment, he had to pay 40p. Every time a payment was made to his account, the charge was 22p, and for every £100 paid to his account, he was charged 66p. Those are obscene amounts for what is essentially a cash business. I thank my hon. Friend for allowing me to put that on the record.

[Rachel Reeves]

I thank my hon. Friend for speaking on behalf of her constituent. We have all experienced people in our patches being ripped off by banks. Frankly, that is not what people expect. They expect to be able to trust their high street bank to give them a good deal and treat them fairly, yet in my hon. Friend’s constituent’s case, that just is not happening.

[Yasmin Qureshi (Bolton South East) (Lab)]

I congratulate my hon. Friend on securing this excellent debate. She talked about the Which? report. She will be aware that NatWest customers face fees of £180 for exceeding their limit by £100 for 30 days, and that Lloyds and Santander demand £160. That is completely uncalled for.

[Mrs Cheryl Gillan (in the Chair)]

Order. I remind Members that interventions need to be very short and punchy, particularly when we have only half an hour.

[Rachel Reeves]

My hon. Friend is absolutely right. We have a situation where people can be charged £5 or more per day by many high street banks for going just a few pence overdrawn. Those charges rack up very quickly. The issue is that they are totally disproportionate to the offence. Going just a few pence over an overdraft limit in one month could mean £100 of charges, and as she says, the charge for doing so over two calendar months is potentially £180.

It is simply not acceptable that banks are making large profits at the expense of pushing the most financially vulnerable people deeper into debt spirals. My hon. Friend the Member for Ashfield (Gloria de Piero) gave one example, and StepChange has told me about two other cases. The first is of a 42-year-old man who racked up overdraft charges after losing his job. Interest on his overdraft and persistent charges for going over his limit meant that on average, £80 a month was added to his debt. Over a year, his overdraft debt increased by more than £1,000 because of interest and unauthorised overdraft charges. The second case is of a 38-year-old woman who faced spiralling overdraft debt after getting divorced. The increased burden of managing financial commitments on her own meant that she slipped into an unplanned overdraft by £90. That led to a cycle in which she was constantly in and out of an unarranged overdraft, and her overdraft debt increased to £1,000 due to interest and charges.

Those people, like so many others, were already in difficulty and trying to manage their debt from day to day. The banks should have a responsibility to help them manage their finances and help them out of their cycle of debt rather than sending them deeper into crisis with extortionate charges. The banks know that those customers are financially vulnerable and struggling, yet they do nothing to help—in fact, they do the exact opposite by making it harder for them to get a grip of their finances.

[Chris Evans (Islwyn) (Lab/Co-op)]

I thank my hon. Friend for securing this timely debate. Does she agree that it is sometimes in the banks’ interest to allow customers to run massive overdrafts so that they can push them on to even higher personal loans and other products, which they might not need and might not be right for them in the circumstances?

[Rachel Reeves]

I agree. What really worries me is that most of the £1 billion that is made every year from unauthorised charges is made on the backs of those who are most financially vulnerable. It is a bitter irony that it is now a better deal for some people who need short-term credit to go to a payday lender rather than their high street bank. Most of us regard banks as more reputable and fairer to customers, yet for many people that is just not the case.

Huge progress has been made on the charges faced by people who access finance through payday lenders, as my hon. Friend the Member for Makerfield (Yvonne Fovargue) mentioned, with the introduction of a cap following great work by my hon. Friend the Member for Walthamstow (Stella Creasy), so why are banks still allowed to get away with these unfair practices? There was some hope last year that this problem would be addressed when the Competition and Markets Authority undertook a review of the retail banking market. The CMA recognised the issue and the inquiry’s chair subsequently told the Treasury Committee that unauthorised overdrafts are

“the biggest single problem in the personal banking market”.

The CMA published its review of retail banking on 9 August, but frankly its conclusions and proposals were a missed opportunity. It found that overdraft users make up almost half of those with personal current accounts and that many find it hard to keep on top of their arranged or unarranged overdrafts. It acknowledged that failing to do so can be costly, since overdraft users can accumulate high costs from the complicated mix of interest, fees and charges.

The review goes on to say that overdraft users, like other personal current account customers, have very low switching rates, which is particularly striking given that they often have the most to gain from switching. One reason for that is that overdraft users can be uncertain about whether they will be able to obtain an overdraft facility from a different bank or when such a facility would be made available to them and are therefore worried about moving accounts,. Anyway, none of the major high street banks has a great offer for customers who are financially vulnerable.

When it came to remedies, the CMA’s proposals, quite frankly, fell well short of the mark. Some measures will go some way to addressing problems for some people, but not for those who most need support. One proposal says that customers need to be given clear notice when they are going overdrawn and that banks will be required to notify customers when they are going into an unarranged overdraft. Customers also need to be given the opportunity to avoid incurring charges, and the alerts that banks will be required to provide will inform them of a grace period during which they have an opportunity to avoid charges by paying more money into their account.

Critically, the CMA fell short of proposing an independently set maximum cap on the charges on overdrafts, as we have with payday loans. Instead, the report said that banks will be required to set their own ceilings on their unarranged overdraft charges in the form of a monthly maximum charge. However, most banks already have that. The problem is not that banks do not have a maximum charge—they do, and it might be £5 a day or £90 a month—but that the maximum charge is much too high.

The major four high street banks, which make up 77% of the current account market, already set their own caps on charges, and those charges can be up to £100 a month. The CMA’s proposals represent little more than business as usual for those banks. Competition in this section of the market is weak, and in the past few years it has got weaker still with the merger of many of our high street banks. Heavy unarranged overdraft users are the least likely to switch banks accounts. Banks make more than £1 billion from unarranged overdraft charges and, given the substantial revenues they generate, there is little financial incentive to lower existing charges.

Ultimately, the proposals in the CMA report might take small steps towards helping some, but for the majority of people who are already struggling and do not have the means to prevent unauthorised overdrafts even if they are alerted to them, they will do little, if anything, to help. The monthly maximum cap as proposed by the CMA will likely do nothing to stop the deepening of a person’s debt crisis, with punitive and disproportionate charges.

I do not want to deny the banks the right to charge for the services they provide, but I do want some fairness and proportionality. It is not fair to charge £5 a day or £90 a month for being a few pence over an overdraft limit, and it is not fair to whack charges on customers who are struggling with debt, in the knowledge that the charges will make their problems worse, not better. Banks need to take some responsibility for their customers.

As the Competition and Markets Authority admitted at a meeting of the Treasury Committee, the measures proposed in the report are geared at everybody and not in particular those who are financially vulnerable, for whom no direct action is proposed. When I asked whether the banks were taking advantage of financially vulnerable customers, it conceded that those customers who are least likely to switch are a “captive audience” for the banks and their excessive charges.

Ultimately, the Competition and Markets Authority report was a huge opportunity finally to put an end to what it calls “uncomfortably high” charges and to address what it said was the

“biggest single problem in the personal banking market”.

However, the opportunity was squandered. In effect, it passed the buck by asking the Financial Conduct Authority to respond to the recommendations. Peter Vicary-Smith, the chief executive of Which?, said to the Treasury Committee that the Competition and Markets Authority had left the heavy lifting and the difficult decisions for the Financial Conduct Authority to make. In response to that buck-passing, the new chief executive of the Financial Conduct Authority, Andrew Bailey, has made the welcome decision to include this issue in its ongoing review of high-cost short-term credit, which will report later this year.

The Financial Conduct Authority needs to do more to tackle the detriment caused by persistent overdraft use. I have been pleased by the focus that the FCA has placed on this issue so far, picking up where unfortunately the CMA left off. StepChange Debt Charity says that the review

“should include looking at what more can be done by lenders to support people who are trapped in an overdraft cycle and give them better and more affordable ways of paying back their debts.”

[Yasmin Qureshi]

Does my hon. Friend consider that what the banks are doing is insidious, bearing in mind that they and the Government can borrow at very low rates of interest?

[Rachel Reeves]

My hon. Friend is right. The bank rate is so low and banks are being given access to money at such low rates from the Bank of England. The problem is that they are not passing that on to their customers, and certainly not to those who most need it. The banks should be doing much more to ensure that those low interest rates are passed on, because that would give the whole economy a boost as well as helping those people who most need it.

I have been calling on and will continue to urge the Financial Conduct Authority to look at setting a cap for banks on unauthorised overdrafts as has already been done for payday lenders. It must look at such lending by banks in exactly the same way and not shy away from setting a cap for banks, too.

I also urge the Government to take action, because while the Financial Conduct Authority undertakes its review, every single day more financially vulnerable customers are being exploited and more and more are being pushed further into a cycle of debt. That is simply not acceptable. The justification for a cap in these markets has been made with the introduction of a cap in the payday lending market, and those are two different sources for the same short-term credit for people who need it immediately. They can either go to a payday lender or go into an unarranged overdraft. Whichever option they decide on to meet their short-term needs, they should not be exploited. The Government recognised that for payday lending and now need to recognise that on unarranged overdraft charges.

Frankly, it is a disgrace that the banks are charging more than payday lenders for short-term lending and getting away with it, so the Government should take action. That is why I am calling on the Minister and the Government to legislate for a cap on overdraft fees and charges, as they have already done for payday lending through the Financial Services (Banking Reform) Act 2013. That would allow the FCA to implement such a cap without delay and without the risk of the banks taking the matter to the courts.

It is not right that the banks are making huge profits at the expense of the most vulnerable. Anything less than an independently set cap on overdraft charges will not be enough. I urge the Minister and the Government to act now, and I ask that as a first step the Minister will agree to meet me and representatives of Which? and StepChange to discuss this issue further so that we can ensure that all customers are afforded the protection they deserve.

[The Economic Secretary to the Treasury (Simon Kirby)]

What a pleasure it is to serve under your chairmanship, Mrs Gillan. I thank the hon. Member for Leeds West (Rachel Reeves) for securing this important debate on an issue that we share a keen interest in. I am here to listen and, hopefully, to be helpful.

It is clear that we all share a commitment to ensuring that people across our society can rely on the financial services that they need to manage their money effectively, securely and confidently. We want an economy that works for everyone. For most people, the bedrock of that is a transactional bank account that enables them to manage their personal finances on a day-to-day basis. Access to credit, including the use of an overdraft facility, is an important part of that.

For that reason, the Government are committed to doing two things. First, we will support and encourage competition among financial services providers, not only so that people have more choice over who they bank with, but because we know that more competition inevitably means better options on offer for customers, who can then vote with their feet. Secondly, we want to make sure that British customers are supported in the important financial decisions they make.

The hon. Members who have spoken have expressed the same aims, and I want to discuss the key issues that have been raised. I thank the hon. Members for Ashfield (Gloria De Piero), for Makerfield (Yvonne Fovargue), for Bolton South East (Yasmin Qureshi) and for Islwyn (Chris Evans) for making some thoughtful points, sharing their constituents’ stories and making some more general observations. I am sure that the FCA, which is reviewing high-cost credit, will listen carefully to the debate.

The hon. Member for Leeds West rightly discussed the Competition and Markets Authority. A key question is how to ensure that there is competition. That is why we set up the CMA in the first place as a single stronger and independent competition regulator. It is the CMA’s role to review the market, assess how effectively competition is working and, where appropriate, propose remedies to address any issues. Hon. Members have referred to the CMA’s retail banking market investigation, which was published last summer. I am aware of the variety of opinions on that. It represented a thorough analysis of how competition is working in retail banking, including the role of both unarranged and arranged overdrafts.

The CMA concluded that the retail banking market is not working well for overdraft users. To tackle that, it is imposing remedies to improve overdraft transparency, including setting a monthly maximum charge for unarranged overdraft charges. It also looked closely at whether a hard cap on overdraft fees was necessary on competition grounds, and reached the conclusion that it was not. However, as hon. Members may know, it also recommended that the FCA should assess the ongoing effectiveness of the monthly maximum charge and consider whether other measures, including the introduction of rules, could be taken to enhance its effectiveness further.

The hon. Members for Leeds West and for Makerfield mentioned the action of the Financial Conduct Authority. It is true that the FCA has an important role to play in relation to overdrafts. It is worth pointing out, of course, that it has a much broader set of statutory objectives in relation to financial services, duties, powers and tools than the CMA. It has the power to cap the cost of all forms of consumer credit if that is deemed necessary and proportionate to tackle risks to consumers.

[Rachel Reeves]

I thank the Minister for his response to the substantive points that I and my hon. Friends have made. Does he think it is inconsistent that the Government have set a monthly maximum charge for payday lenders, but not for high street banks in relation to unarranged overdraft charges? If he does, is it time for the Government to act by setting a monthly maximum charge for unarranged overdrafts as well?

[Simon Kirby]

I understand the point that the hon. Lady is making. What I think is appropriate is for the Government to listen carefully to what the FCA comes up with later in the year, and to act in consumers’ best interests. I am sure we both agree on that. There is clearly an inconsistency; otherwise we would not be having this debate.

The Government welcome the fact that the FCA is looking closely at what action might be necessary on overdrafts, considering the twin objectives of enhancing competition and protecting customers. That is why, in the light of the CMA’s recommendations last November, the FCA launched a consultation on high-cost credit, including high-cost, short-term credit—payday loans—and overdrafts. The FCA’s call for contributions remains open for another week—until next Wednesday, 15 February. I encourage those watching or listening to the debate, or reading it afterwards, to contribute to that, so that the FCA will be fully informed of the variety of opinion.

Today’s debate is timely, in view of that. It has—and I thank the hon. Member for Leeds West for this—attracted quite a lot of press interest; the subject is obviously of interest out in the real world. I am certain that hon. Members’ views will be heard clearly.

[Rachel Reeves]

I get the idea that the Minister is wrapping up. At the end of my speech, I asked whether he would meet me and representatives of Which? and StepChange. I hope that he will accept that invitation and that the meeting can be arranged soon.

[Simon Kirby]

I am not quite ready to wrap up yet; I have a few things to say that I am sure the hon. Lady will be pleased to hear. I should be delighted to meet her and representatives of Which? at an appropriate point—the most constructive time, when we can make the most difference. Obviously, while the FCA is considering the matter and the consultation is still open, the appropriate time may not be next week, but I should be delighted to work with her to come up with a solution that benefits everyone.

I think it is safe to say that the Government will be working alongside the FCA to understand the issues in the market. We will continue to do so, to ensure that it has all the appropriate tools at its disposal to take action where problems are identified. We have heard about some of the issues that people face when taking on overdrafts or other forms of high-cost credit. I can reassure hon. Members that the Government will closely monitor the work of the FCA in looking at that area. I am sure that the views expressed by hon. Members this morning will be taken into consideration as the regulator carries out its work.

We in the Government will also continue our efforts, complementing the work of the FCA. We have taken steps to encourage competition, to support credit unions and to improve financial education. The Government will, through that comprehensive approach, continue to take steps to make sure that British customers have quality choices, good information and strong protection.

It may be helpful if I say, in closing, that the CMA is not the final word in competition. There are important areas outside the scope of its work and the Government will keep a keen eye on the entire area. The Government will take the necessary action to ensure that our banking sector is not only the most competitive and innovative in the world, but fair.

Question put and agreed to.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 29th November 2016 Commons Chamber

[Mr Gauke]

My hon. Friend highlights the fact that digital must be key to improving productivity. That is why a £1 billion package was announced in the autumn statement. There was also specific help for rural areas through rural rates relief. Our ambition is clear: to provide the best digital infrastructure we can for urban and rural areas.

[Rachel Reeves (Leeds West) (Lab)]

In table 4.21 of the report Office for Budget Responsibility’s it forecast that the Government will underspend on infrastructure by £15 billion in the next five years—two thirds of the additional money announced by the Chancellor last week. Why should the public have any confidence in the ability of the Government to deliver on their promises when their own watchdog clearly does not?

[Mr Gauke]

The OBR has always taken a cautious view on delivery of infrastructure, but let us remember that we have already delivered 3,000 projects. We have set out an ambitious plan for delivery of infrastructure improvements in the course of this Parliament, and that is exactly what we will deliver.

Autumn Statement

Rachel Reeves Excerpts

Wednesday 23rd November 2016 Commons Chamber

[Mr Hammond]

My hon. Friend has been kind enough to come to see me over the past few weeks to make some suggestions in this area. I did announce in my statement that the Treasury will conduct a review of the availability of patient capital in this country, and I include in that genuine individual investment in start-up businesses and how we make sure that that is incentivised to stay in for the long haul. I thank him for his input and we will look at this further.

[Rachel Reeves (Leeds West) (Lab)]

May I start by associating myself with the comments made by the Chancellor and the shadow Chancellor about the verdict in the Jo Cox trial? I hope that the whole-life sentence for Jo’s murderer can at least give some comfort to her family at this incredibly difficult time, and will also enable us to remember Jo for the way she lived, rather than the way she was murdered.

May I ask the Chancellor about the changes to universal credit that he announced today? The taper rate will now be 63p in the pound, which means that for every additional pound earned, the recipient of universal credit will lose 63p. That marginal tax rate is three times higher than the basic tax rate. Does he honestly think that sufficiently rewards work and encourages people to take on those extra hours that we all want them to do?

[Mr Hammond]

Again, I associate myself with the hon. Lady’s remarks. I am sure that she is right that the entirely sensible sentence that has been handed down will be a source of some comfort to the family.

The hon. Lady asks whether the taper rate is a disincentive or an incentive to work. Of course the lower the taper rate, the greater the incentive to work—I readily recognise that. I said in my statement that I had listened carefully to representations about doing something in this area and balanced those against my judgment about our fiscal capacity. I have funded every single spending commitment made today. If we had gone further than 63%, we would have had to raise more money somewhere else, and I judged that at the present time that was not the right thing to do. I also gently remind her that 65%, never mind 63%, is a lot lower than a marginal withdrawal rate of 90%, which was what many people were facing under the tax credits system.

Oral Answers to Questions

Rachel Reeves Excerpts

Tuesday 25th October 2016 Commons Chamber

[Mr Hammond]

I reassure my hon. Friend that that is not the case. North-east Lincolnshire is very much a focus of the Government’s attention. We have agreed growth deals with the Humber local enterprise partnership worth more than £110 million, including support for a regeneration programme for the centre of Cleethorpes. I am sure that one of my ministerial team will be very happy to meet him and his council colleagues.

[Rachel Reeves (Leeds West) (Lab)]

The floods in Yorkshire, including in Leeds, last Boxing day caused devastation, and many businesses have still not reopened. What conversations is the Chancellor having with insurance companies, which have restricted cover, increased premiums and put up excesses, thereby not only risking creating ghost towns in many of our communities, but risking jobs, too?

[Mr Hammond]

That is a matter on which my right hon. Friend the Minister for the Cabinet Office leads, but I have a considerable understanding of the problem, as my own constituency was subject to serious flooding in 2013-14. I will talk to my right hon. Friend and make him aware of the hon. Lady’s concerns.