Payday Loan Companies

Simon Danczuk Excerpts

Monday 20th January 2014 Commons Chamber

[Simon Danczuk (Rochdale) (Lab)]

I thank my hon. Friend the Member for West Bromwich West (Mr Bailey) for introducing this important debate and for chairing the Business, Innovation and Skills Committee. I want to make four points, and I shall do so as quickly as possible, not least so that I can listen to my hon. Friend the Member for Sheffield Central (Paul Blomfield), who has done some excellent work on this matter. I am keen to hear what he has to say.

First, I endorse the Committee report’s recommendation for limits on payday loan companies’ advertising. That should apply particularly to advertising on children’s television channels. There should also be health warnings in relation to advertising, as the report suggests. Secondly, I endorse the report’s recommendation about ring-fencing the levy that is to be placed on payday lenders, in order to fund debt charities. Those charities do excellent work, and I welcome any measure that would ensure that the payday lenders funded them.

My third point relates to payday lenders on the high street. There is no doubt in my mind that there are far too many of them, and better regulation will be critical in that regard. There are 10 payday lenders on Rochdale’s main shopping street alone. Their presence creates difficulties for the regeneration of our high streets, and I endorse Labour’s proposals to change the use classes available to local authorities in order to limit the number of payday lenders on high streets. It has already been mentioned that local authorities could do more to help credit unions to gain a greater presence on the high street. I supported the Manchester credit union in setting up a pop-up shop in Rochdale for three months, which was extremely popular. Local authorities could do more, not least by implementing a 100% business rate waiver for credit unions to enable them to have a greater presence.

While I am on that point, various alternatives to payday lenders have been discussed today. The directly elected mayor of Salford is proposing to establish the bank of Salford, which would see the local authority getting directly involved in providing an alternative to payday lenders. I thoroughly endorse that proposal, and I will be interested to see how it develops.

I am conscious that there has been a lot of cross-party consensus in this debate, and I do not want to make anybody’s chips soggy by moving on to something more contentious, but I want to make an important point about the Government’s effect on the discretionary social fund. It used to be administered by the Department for Work and Pensions, but from last April the Government passed it down to local authorities to manage. There has been variable performance by local authorities in how effective they have been in getting that money to people in desperate straits. So the Government, first, reduced the social fund budget and then passed the responsibility to local authorities, and we heard just before Christmas that they intend to scrap it completely from 2015. It appears that they would rather the private sector, through payday loan companies, met this need. We should remember that this crisis fund has been a safety net for people at a critical time, and the Government are now proposing, in effect, to privatise it, because they want payday lenders to step into the breach to meet that need. That is wholly unacceptable, and people will reach their own conclusion as to why the Government are so enthusiastic about payday loan companies providing this safety net instead of the Government. The Government should remain the lender of last resort and provide a safety net when people are really in crisis. At that point, I will leave the Floor open to my hon. Friend the Member for Sheffield Central.