Financial Services Bill (Tenth sitting)

Stella Creasy Excerpts

Committee stage & Committee Debate: 10th sitting: House of Commons
Tuesday 1st December 2020 Public Bill Committees

[Mr McFadden]

As I said, I do not intend to press the amendment today. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I beg to move amendment 34, in clause 32, page 38, line 23, at end insert—

“(2A) After subsection (3) insert—

(3A) Where, by virtue of subsection 2, the Secretary of State makes regulations establishing a debt respite scheme, the time period that the debtor protections provided for by virtue of section 6(2)(a) and section 6(2)(b) shall be no less than 120 days.”

This amendment would require the breathing space to provide debtors with a minimum of 120 days protection from the accrual of further interest and charges and enforcement action.

[The Chair]

With this it will be convenient to discuss new clause 11—Extension of the Breathing Space and Mental Health Crisis Moratorium—

“(1) The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 shall be amended as follows.

(2) In paragraph 1(2), for ‘4th May 2021’ substitute ‘31st January 2021’.

(3) In paragraph 26(2), for ‘60 days’ substitute ‘12 months’.”

This new clause would bring forward the start date of the Debt Respite Scheme and extend the duration of the Breathing Space Moratorium from 60 days to 12 months.

[Stella Creasy]

It is, as ever, a pleasure to serve under your chairmanship, Mr Davies, and a pleasure to have this debate. I see the Minister is already smiling. I know he has been looking forward to this debate, because he and I have talked for some time now about how best to help our constituents with debt.

As a nation, we find it easier to talk about anything other than money; even our intimate relations tend to get more coverage in our national press now than the state of our bank balances. Each of us, as representatives in this place, will know from our surgeries how critical this issue is for our country and how important it is to get right the measures to help people with their financial position, because the honest truth is that this is a country not waving but drowning. We all see it in our constituencies.

Mindful of what you said about scope, Mr Davies, in speaking to the amendments I will first set out why I agree with the Government absolutely that we need a breathing space scheme. The amendments come from a desire to work with the Minister to get that scheme right. I know he shares my concern to get these policies right, because we see in our communities the damage—the financial damage, the social damage and the mental health damage—caused by problem debt.

I do not think we can start to have the conversation about whether the Bill needs amending until we define what we mean by problem debt, which is a term that we use interchangeably in debates and discussions. We know that when people do not talk about their debts, they can get into all sorts of debt without thinking that it is a problem until it is too late. All of us, whether we have been an MP for a year, 10 years or 20 years, will have encountered the person who comes to a surgery and says, “I’m going to be evicted next week. Can you help me save my house?” We know it is too late, because they have got into a level of debt they cannot get out of, but they did not see it as a problem.

One of the things that we must do in this place is to make it as popular to talk about our debts and the problems that debt can create, how people can be good with money and how we can help people be good with money—and, when it comes to the Financial Conduct Authority, how we make sure it is a fair fight—as it is to talk about people’s intimate relations. Indeed, the sidebar of shame in the Daily Mail should be more about companies seeking to exploit our constituents by offering them poor levels of debt that we want the FCA to regulate than the size of Kim Kardashian’s derrière. I put that out there as something we should be more concerned about.

Problem debt has been an issue for generations, and over the past decade it has got a lot worse. It is important that the Government are proposing a breathing space, because we can layer on top of that debt the Monty Python foot that is covid and the disruption to people’s lives and livelihoods. I know that some Members would rather be in that debate today than in this one, but I hope I can convince them that this debate in Committee and getting these measures right is the most important place we can be.

As a country we do not talk about problem debt. We do not even see it as a problem, but the problems that will face our constituents and communities in the coming months will be horrific. Let us consider how almost half the UK adult population went into 2020 with debt already hanging over their head, with almost 5 million of our fellow citizens owing more than £10,000 in credit and loans alone. That is unsecured personal debt. This is not about mortgages and housing debt; it is about people having too much month at the end of their money, and people finding ways to deal with that that do not seem to them to be a problem because, if they can keep cycling things through the cards and keep borrowing and making repayments, they can probably keep going.

The nation went into coronavirus already in hock in ways that make people financially vulnerable, but without an awareness of what that might mean for their communities. When asked about their debts at the start of 2020, 40% of those polled said the debt was due to normal living expenses. One thing that we need to knock on the head is the fact in this country debt is not about people buying flash cars and tellies, much though that sidebar of shame might like to make us think it is. It is about people trying to put food on the table and keep the car going so they can get to work, and yes, there are people putting their mortgage on their credit cards.

When I talk about problem debt, I do not just mean the Wongas of this world. I mean the credit card companies that have a sort of respectability because they have helped to keep people going. I am not against borrowing or any form of credit at all, but when we know how the country and our constituents were leveraged at the start of this year, and we see what has happened this year, getting right our proposals to help them, because debt will be a problem, becomes all the more important.

[Alison Thewliss (Glasgow Central) (SNP)]

Does the hon. Lady agree with me that there is a big problem around catalogues and debt for basics such as school clothes, trainers and jackets? People are building up debt for the essentials of life and are told they can pay it back in tiny amounts, but it is over a very long period, which means the debt is never really cleared.

[Stella Creasy]

I completely agree. Many a time have I had conversations with constituents about how they buy things, and they do not see it as a problem. They have no other option, so they use the catalogues and do not look at the interest rates. What they need is not more financial education, but more options. The brutal reality is that it is very expensive to be poor in this country. That is why it matters that the things we do to help them if they get into difficulty work.

[Ms Angela Eagle (Wallasey) (Lab)]

Does my hon. Friend agree that when it comes to debt and interest payments incurred—the price of having that debt—the concept of an unfair contract is far too lax on those who lend the money and far too harsh on those whose circumstances often, as the hon. Lady just mentioned, mean that they have to borrow?

[Stella Creasy]

My hon. Friend knows that I completely agree with her. She also knows that she is tempting me to discuss other amendments that I have tabled about that fair fight, and I do not want to disrespect you, Mr Davies, or the Clerk in trying to keep us to the issue at hand. My point is that when we talk about a respite scheme to help people with problem debt, we have to be clear about what we mean by problem debt and whether people recognise that they have a problem. The point of a breathing space is to be able to address that problem.

The hon. Member for Edinburgh West (Christine Jardine) and I tabled the amendments because we recognise that people do not necessarily see things as a problem until it is too late, so when we construct measures to help people in these difficult places, we have to be able to work with them and where they are at, and how people deal with debt. We might look at something and say, “That is an unsustainable financial situation that you have got yourself into,” but our constituents not see it that way.

I said at the start that it was worth thinking about where this country stood at the start of the year. There are conflicting figures, which I am sure the Minister has been looking at. I know he shares my concern about consumer debt and consumer credit. Bank of England data shows that during the coronavirus crisis people have actually been trying to pay down their debts—frankly, they have been stuck at home, so they have money and they think, “Well, I’ll try to pay down my debts.” Since March this year, £15.6 billion of household debt has been repaid, and credit card debt has fallen by 13% in the last year.

--- Later in debate ---

[Mr McFadden]

My hon. Friend has done a huge amount of work on this over the years. Amendment 34 seeks to extend the breathing space period to 120 days. Does she think that covid factors add to the case for having a longer period than was initially envisaged?

[Stella Creasy]

My right hon. Friend is right, and that was one of the points I was going to make. If we are dealing with a new group of people who have never been in financial difficulty before, one of the sources of help and support for them may well be our welfare system. Anybody who has ever dealt with people trying to make new claims in our welfare system knows that 60 days is an incredibly tight timeline for that to happen—to deal with any appeals and paperwork, and to even get a response to the claim that has been made. Yet experience tells us then when people do get into problem debt, sometimes they do not know what support they are entitled to.

The amendments speak both to the reality of people and to the practicality of making a breathing space work. I hope the Minister will see them in that way and recognise that that is why so many debt advice providers support the amendments and say, “Yes, actually, what’s proposed does feel too tight to get things right.” Some people’s situations can be resolved in 60 days; others’ will take longer. It is not right to close off the opportunity of a breathing space by setting a deadline or threshold that means that for some people who are waiting for information it will be too late. The amendments speak to how we can make the process work for everyone, giving debt advice providers the discretion to be able to work with people and to use the breathing space for its intended purpose, which is to give those who recognise they have a problem the chance to get it sorted before we go into some of the more serious options.

The brutal reality is that we know that, with jobs thin on the ground, debt already mounting up and the cost of living not reducing any time soon, not everybody who gets a breathing space is going to be able to breathe again. I know the Minister would be frustrated if, rather than the financial position of the people involved, it was that timing, that threshold, that meant the breathing space did not work in the way in which it is intended.

The Minister will have seen that I have tabled other amendments on we make this breathing space work. I know he cares about getting this right. In these Committees, there is always pressure on Ministers to say no to amendments, but I hope he will acknowledge that this is about making the policy work, recognising the evidence on the ground about what works with people who are in problem debt and how long it takes them to see that they have a problem. If he does not accept the timescales, if he does not accept the intentions of myself and the hon. Member for Edinburgh West in acknowledging the distress people feel when they have to front up and talk to a stranger about the financial position they are in and their fears in an environment where unemployment is widespread. Goodness knows, getting people to take debt advice at the start of this year, when there seemed to be jobs in our economy, was difficult—anybody who tried to refer a constituent to Citizens Advice knows that. Getting people to a point where they have the chance to breathe again means making this process work.

If the Minister does not think the extension is right, I am keen to hear what he thinks we should do to make sure that that threshold is not a cliff edge over which people fall and cannot come back from. We are all going to be seeing a lot of people in financial difficulty in the coming months in our surgeries—people who have nowhere else to turn, people who are very frightened, and people whose families, homes and mental welfare depend on us getting this right.

[Ms Eagle]

I wish to spend a short amount of time congratulating my hon. Friend the Member for Walthamstow on the focus and experience she brings to this very important topic. As she said, debt is one of those taboo subjects. People feel ashamed if they have got into debt and tend not to discuss it—sometimes within their own relationships, let alone with other people—because it is a source of shame.

To some extent, it is a bit like the people who fall for scams or fraud. It is a uniquely difficult thing because if someone has got themselves into that situation, it makes them feel ashamed of their behaviour or that they have fallen for something. They feel isolated and unable to discuss it and go to get assistance. To some extent, even getting to what my hon. Friend is suggesting in her amendment means someone has gone a considerable distance: first, admitting there is a problem, and secondly, seeking help and trying to see what can be done to alleviate the problem.

I also feel that when people get into debt in this manner, they are uniquely judged by those looking on. The taboo is reinforced by the judgmental nature of onlookers who think, “I would never get into debt like that,” or, “How on earth have they done that?” There are caricatures of how people who get into debt behave that are almost designed to blame them for their debts, suggesting that somehow they are incoherent with money, that they cannot manage, that they have inadequacies, or that they have gone on spending sprees all over the place and not thought about the future. I suppose in a minority of cases that might be true, but in the majority of cases, in my experience—certainly in my advice surgery—it is not. People get on a slippery slope.

We live in a consumer-oriented society where those who wish to sell us things, and the financial services companies that wish to provide us with the wherewithal to buy them immediately, are very sophisticated. We are in a culture very different from the one I grew up in. I will now reveal how old I am: when I was growing up, one had to put money away and pay for goods gradually before one could get them. Now there are all sorts of electronic currencies that can be used.

On Black Friday, I was shopping for deals from my room, but—uniquely—had no positive results because everything was out of stock. That demonstrates how easy it is to spend money to acquire things, and to get into debt. It is now instantaneous. With the shift to online, one does not even have to physically be in shops to buy things; one is two clicks away from having this kind of problem.

If ever there were something that made it easier for people to get into trouble, it is the speed and effectiveness with which they can click on things and spend money. We talk about that with regard to gambling, but buying goods can also be addictive. People are propagandised the whole time about how success comes with having goods, and that one has to have the right trainers and the right brands.

--- Later in debate ---

[John Glen]

Forgive me, Mr Davies; I did not acknowledge what a pleasure it is to serve under your chairmanship in my previous remarks, so I do so now. I will address amendment 34 and new clause 11, but first I feel that I should respond to the general context that colleagues have raised. The hon. Member for Walthamstow is right that I share many of her perspectives, if not always her solutions.

High-cost credit will always be with us; the question is about the terms on which it is made available and what we can do to make available better alternative provision of credit. As the hon. Lady acknowledged, we have had conversations and debates about the issue many times. It will be useful for the Committee to know that Chris Woolard, the former interim chief executive of the FCA, is currently conducting a review into high-cost credit, particularly looking at the explosion of new models of payment—“buy now, pay later” in particular.

I have also been very focused on making more of the alternatives, by supporting the credit unions to allow them to lend more easily and by looking with the Association of British Credit Unions, one of their trade bodies, at what legislation we can bring forward. That is something we have committed to. I have also committed to working on pilots for the no-interest loan scheme, because that could be really useful; if we can establish where that can be used, it would provide a meaningful alternative.

Some of my most compelling experiences as an MP have come from working on the all-party parliamentary group on hunger and food poverty with the hon. Member for South Shields (Mrs Lewell-Buck) and the former Member for Birkenhead. On a visit to South Shields in 2014, I remember seeing first hand some of the really challenging situations that people get into with debt. That has been echoed in my own constituency in Salisbury, where the Trussell Trust was founded. That is why it is really important we have invigorated the support that the debt advice sector can have. We have allocated an extra £37.8 million in May, so that it has £100 million this year.

The main objective of the breathing space mechanism is to get people to a place where they can evaluate their situation and find the right option. The effect of amendment 34 is to require the Government to provide protections that last at least 120 days when making future regulations concerning breathing space or the statutory debt repayment plan. The amendment does not amend the existing breathing space regulations, which, I believe, was probably the intention. The aim of breathing space is to provide temporary debt relief, and extending the duration by that amount of time does not align with the policy intent.

In the 2017 manifesto, we committed, as an aspiring Government, to a six-week moratorium breathing space period. That is what we consulted on and it was, I think, through my direction as the Minister two and a half years ago that we committed to extend that to 60 days. That was the expectation and consensus among those who contributed to that. The Government consider those 60 days to be an appropriate period for a breathing space moratorium. I have not received any direct representations from charities, although StepChange believes that 60 days is the right period, although that could be changed in exceptional circumstances. I recognise that that charity may consider that as being met, but I am told by my officials that I have not received direct representation about that.

[Stella Creasy]

Apologies; I just want to clarify. Some 80 debt advisers have written to the Committee to support the measure on precisely the grounds that I have set out. Is the Minister saying he has not seen those representations or that he does not see them as a voice of the sector? There is a difference and I do not know whether that is an absence we need to address.

[John Glen]

The difference is that, as a Minister, I have not been written to by them. I recognise that there is a range of views out there, but I also recognise that a significant piece of work was done to consult on and to establish these measures and to secure cross-party support for them.

We believe that the time period will allow individuals to identify and access a debt solution, while the fixed period will provide certainty to creditors. It is important to reflect on that: this is in the interests of both the debtors—the individuals who have significant debt—and also creditors, often small businesses, who are owed money. There is a judgment to be made about how that balance is achieved.

Given the current circumstances, I understand why Members believe that a stronger moratorium would benefit those in problem debt who are struggling with their finances during this difficult time. The Government have put in place an unprecedented package of support to help people with their finances during the covid-19 pandemic. We have worked with mortgage lenders, credit providers and the FCA from the outset to help people manage their finances. A lot of work has been done and is still being done by financial services firms to make those measures work.

During the consultation period, the Government explained their position on the duration of the scheme and were supported, as I said, by many stakeholders. The regulations were approved by Parliament in October and by the Welsh Senedd in November and have subsequently been made.

The amendment would also apply to any regulations made in the future on the statutory debt repayment plan—the second part of the debt respite scheme, which the clause is focused on. It would set a new minimum duration for an SDRP of 120 days. Of course, in practice, most SDRPs are likely to last for a period of years rather than months, allowing individuals to repay their debts to a manageable timetable. Introducing a minimum duration is not likely to be a necessary protection in this scheme.

New clause 11 would do two things. First, it would require the breathing space scheme to commence on 31 January 2021 instead of 4 May 2021, which was set out in regulations that we approved in October, as I said earlier. Secondly, the new clause would also extend the duration of a breathing space moratorium from 60 days to 12 months.

Increasing the duration of the scheme to 12 months would create much greater interference in creditor rights without increasing any of the corresponding safeguards. For example, the midway review process, which regulations stipulate must take place between days 25 and 35 of a breathing space moratorium, would need to be reconsidered and redesigned.

As the breathing space regulations have already been made and the proposed amendments would not achieve the policy intent, I ask, with some regret, the hon. Member to withdraw the amendment.

[Stella Creasy]

I thank the Minister for his response. I am sorry to hear that he did not see the document, which I know was sent to his office yesterday by the debt advice workers, because I think we all recognise that we are dealing with unusual circumstances. Covid is that Monty Python foot coming down on any of the plans that might have made the policy intent 60 days prior to our current situation.

Unless the Minister thinks that the Office for Budget Responsibility is wrong about the levels of redundancies, unemployment and financial contraction—we have not even mentioned the B-word, Brexit, on top of that—that will face the economy that we want to provide the jobs that allow people to earn the money to pay off their debts, he is having a bit of a tin ear to what people are saying. In this circumstance, we need to extend the breathing space for it to be a breathing space.

This is not just about high-cost credit; this is about the people who are stuck on credit cards as well—the people who will end up spending 25 years to pay back the credit card average debt at minimum repayments. He talks about small businesses. This is about people who have mortgages, for example—

[John Glen]

It is small businesses.

[Stella Creasy]

Well, but there are also major banks. If we push too quickly, problem debt will sink any possible financial recovery. We have never learned that lesson as a country. I really wish we would. With the greatest respect to the Minister and his talk about policy intent, he is in the wrong place on these measures at this point in time. I will press this to a vote because I think it is important that we set on the record the concern that we should listen to the debt advisers who say that we will need longer in the pandemic to sort the issues out.

Question put, That the amendment be made.

Division 6

Ayes: 6

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Labour: 5
Scottish National Party: 1

Noes: 10

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Conservative: 10

[Stella Creasy]

I beg to move amendment 35, in page 38, line 23, at end insert—

‘( ) After subsection (3) insert—

( ) Where, by virtue of subsection 2, the Secretary of State makes regulations establishing a debt respite scheme, these regulations shall not extend to placing debt advice providers under any obligation to initiate a review of debtor eligibility for the protections provided by the scheme.””

This amendment would remove the requirement in the current draft regulations for debt advice providers to conduct a ‘mid-way review’ of eligibility for breathing space.

This amendment follows in a similar vein to amendment 34 in trying to make the Government’s policy work. It is about how we translate policy intent into the practical reality of dealing with people who are in problem debt. I said in the previous debate that problem debt might be when people realise that they have a problem with their debts and finally seek help. A breathing space in those circumstances would be useful.

Amendment 35 is about the midway review. I encourage the Minister to check his inbox because he will see the note from the 80 different debt advisers, who are the people we will be charging to deal with the debt respite scheme and make it work. They say that there are two very practical reasons why they would like the clause to be amended. Any good debt adviser will be in continual contact with their client and will try to make the breathing space a genuine one that leads somewhere rather than simply limbo. To those debt advisers, the requirement always to have a midway review does not work for two very simple, practical reasons. First and foremost, it moves them from being somebody who might be able, finally, to offer a helping hand and wise counsel to being someone who is policing their relationship with that debtor. We have all had someone come into our constituency surgery who is in financial difficulty and had them cry because they are embarrassed and ashamed. At that point, censure is not helpful; for someone in debt, practicality and kindness are the things that get them through. To ask debt advisers to police the breathing space could have a negative impact on the relationship with the debtor. We are simply suggesting that rather than making the midway review a requirement, we should give the debt advisers the discretion to decide.

The second reason that debt advisers support the amendment is entirely practical and refers again to the policy intent that the Minister set out. The brutal reality is that there will be a big increase in the numbers of people needing debt advice. The Minister has given more funding to the debt advice sector, but that is being done in an environment where millions of people are out of work, and millions already have debts and limited credit options. I wish that the expansion of the credit union movement could happen; as a Co-operative Member as well as a Labour Member, we have been talking about that since I was elected in 2010, but that has yet to materialise. The reality is that people will be looking for credit and it is likely to be had at an expensive price; we can all debate what expensive is, and I know that later amendments refer to that. The reality is that there will be a lot of people who will need debt advice and to include the mandatory requirement of a midway review will limit how debt advisers can manage their caseload.

To put it into context, and I wager that I am not the only Member in this situation, in the last seven months, 42% of my constituents have come to be dependent on some form of Government support. People are in a completely new scenario; they have suddenly found themselves without the income on which they have always relied.

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[Mr McFadden]

Is my hon. Friend’s fear about the midway review that it is too onerous a burden on the debt advisers, or that it may exclude from the breathing space people who still need it, but who are pushed out halfway through?

[Stella Creasy]

My right hon. Friend raises a real concern. If we have a large influx of people needing to speak to a debt adviser, and there are no appointments, will they get access to help? One reason why they will not be able to get an appointment is because debt advisers will have to do a midway review with people. We should simply trust debt advisers. Anybody who has worked with them, as the Minister has, will know that they are part Martin Lewis, part Alison Hammond from “This Morning”—a kind person who makes jokes so that a person feels better about themselves. They are trying to help people in distress. Through the legislation, we are asking them to do a job; we should let them do it as they see fit.

I hope that the Minister will listen to the sector when it says, “Let us hold those reviews when we need to, rather than telling us that we have to hold them, because if we are overwhelmed by people, we can’t do the job that you are asking us to do.” I do not disagree on the policy intent, but the context is different, and if we do not react to the context, all this good work, and all the legislation, will be for nothing, because there will not be appointments. There will be a negative relationship between debt advisers and the people whom they are trying to help, which will affect whether people listen to what advisers are saying; debts will continue to rise; creditors will go unpaid; and for people, the breathing space will feel like holding their breath, rather than coming up for air.

[Alison Thewliss]

We should recognise the professionalism, expertise and qualifications of those giving debt advice to our constituents, and not try to put a provision in the Bill that prejudges what they do. Speaking from experience, they have worked incredibly well, over time, with my constituents, so I question whether the midway review is necessary.

Let me give a case from my constituency. A woman came to my office very upset, very much in the way that the hon. Member for Walthamstow described, because she was being evicted the next day. We had to swing into action and try to find ways around that, and spoke to the Glasgow Housing Association. It did take time to make that happen, but the GHA sat down with her, went through all her bills and outgoings and worked with her intensively over a period, to make sure it would get the rent money and that the other debts she had, that were also causing her problems, were taken care of.

I was struck by the professionalism of the GHA advisers and by the fact that they were experienced and were tough but compassionate with the woman. They made sure she could see a way through. If people see an arbitrary cut-off point halfway through, that will give them fear, not reassurance. There is a risk that the respite will be removed from people who are supposed to be helped by the midway review, if it is put at an arbitrary halfway point. The Minister should consider whether that is really the outcome that he wants to achieve. Yes, there should be some kind of review mechanism, but my experience is that it is done all the way through the process. There is no need for the midway review, because reviewing is already happening.

[John Glen]

Amendment 35, put forward by the hon. Member for Walthamstow, would restrict the Government’s ability to require debt advisers to complete any review of debtor eligibility in any future regulations made concerning breathing space or the SDRP. As the Committee will be aware, breathing space regulations were approved by the House in October, and they state that a debt adviser must complete a midway review after day 25 and before day 35 of the moratorium.

The amendment would not amend the existing breathing space regulations, which I believe was the intention. In addition, it would apply to any regulations made in the future on the SDRP and the second part of the debt respite scheme, which the clause is focused on. That would restrict the Government’s ability to require debt advisers to complete any review of debtor eligibility related to a plan. It is expected that SDRPs will be reviewed annually, or when requested by a debtor, to ensure that payments are set at the right level and the plan remains appropriate. If those reviews could not consider a debtor’s eligibility in any way, that could be a significant constraint on the design and effectiveness of the scheme in future, and would remove the safeguards put in place for creditors.

[Stella Creasy]

What the Minister has just said suggests he thinks there is a binary choice between debt advisers reviewing and being involved in seeing how the breathing space is working, and their being completely absent. Does he recognise that, in the words of a previous Prime Minister, there could be a third way? Debt advisers could be given the professional courtesy of having the responsibility of doing their job. As part of that there might, absolutely, be some people they would spend more time with, whereas they might know that others had got on the right course. It is not that debt advisers would be absent if not put under a requirement; sometimes red tape can be a burden, not a benefit.

[John Glen]

Absolutely; that is why we listened carefully to the sector in constructing the measure. For example, when we were designing the breathing space scheme, we worked with the Money and Mental Health charity to design a different pathway for different groups with chronic crisis in mental health, allowing them to re-enter the scheme on multiple occasions in a year, and giving an extra provision. It is not something where I am being prescriptive when, alongside the SDRP regulations, it is being consulted on. However, we are in danger of making arbitrary changes in a similar vein.

If I leave aside the question of drafting, which I think I have addressed, the Government consider that a midway review is necessary to the breathing space scheme, to assess whether the debtor continues to comply with the conditions of the moratorium. I see that not as a policing exercise but an appropriate step in reviewing the suitability of the mechanism. The breathing space mechanism will not work for everyone, and it is important for a review to take place.

During the consultation period the Government explained their position on the midway review and it was supported by many stakeholders. The regulations were approved by Parliament in October and by the Welsh Senedd in November, and were subsequently made. I respectfully ask the hon. Lady to withdraw the amendment.

[Stella Creasy]

Again, I am afraid that the Minister has a slightly tin ear to the reality of what people will be asked to do and what they are trying to do. We cannot have it both ways. It cannot be claimed that our amendments about how services should be run are too prescriptive but it is not prescriptive for the Government to specify that after 30 days there must be another meeting, something which puts at risk the ability of debt advice providers to manage their own diaries. That does feel like the dead cold hand of the state going overboard, and I am sure that many Conservative Members present who perhaps have pledged their lives to fighting such intervention would recognise that that requirement is rather prescriptive.

Above all, I am listening to the sector, and those debt advisers say that in the current environment, when they will be overwhelmed by so many people needing their help, they should be allowed to do it in the way that they know best. I do know that the Minister wants to get this right, but I think he is not listening, and I think it is important that Parliament does, so I will press the amendment to a vote. We can then say to the sector that we have tried to articulate its concerns about this particular prescriptive clause.

Question put, That the amendment be made.

Division 7

Ayes: 6

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Labour: 5
Scottish National Party: 1

Noes: 10

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Conservative: 10

[Stella Creasy]

I beg to move amendment 33, in page 38, line 38, after “applies.” insert—

‘(4B) The regulations must include provision for an assessment, before the introduction of any debt repayment plan, of the debtor’s resources by a debt advice provider which must—

(a) disregard the value of the debtor’s main residence, provided that this does not exceed the median house price reported by the Land Registry for the local authority in which the debtor resides;

(b) make a recommendation about the timetable under which the individual can repay the debt whilst maintaining a living standard at least equivalent to that of households in the second quintile of income distribution.”

(4C) The regulations must require any debt repayment plan to take account of the assessment under subsection (4B) in determining the timetable over which the debt can be repaid.

(4D) The regulations must make provision for a revised assessment in the event that it is not possible for the debtor to repay their debts within three years and maintain the required living standard during this period, in which the debt advice provider must consider, and offer advice on, insolvency options available to the debtor.”

This amendment requires any regulations for the Statutory Debt Repayment Plan to make provision for an assessment of a debtor’s resources and, should the debtor be unable to pay their debts within three years, for a revised assessment to advise on insolvency options.

I am hoping for third time lucky in convincing the Minister that there are things that we need to address.

Amendment 33 is about maths. It is about how debts are calculated and how we understand whether someone is able to take advantage of the debt advice scheme—I am sure we always looked forward to double maths on a Tuesday afternoon at school. It is about how we make the scheme work while recognising that some of the guidelines and regulations on how to deal with those in problem debt have not kept pace with the times. I am not talking just about covid but about some of the calculations that have made been over a period of time.

I am incredibly mindful of what you said, Mr Davies, about insolvency and not straying into a discussion of the Insolvency Act 2020. When we are thinking about debt advisers and what work they can do with people, however, it is relevant to consider the options, as the Minister said. That is what we have the debt adviser for—they may push people towards different statutory formats. The reality is that the cost of those options and the cost of living will, I believe, artificially restrict debt advisers’ ability to give the best advice. The amendment is about giving clarity to how those calculations should be done, so that we do not see people pushed into further difficulties, or indeed fail to seek help because of those artificial thresholds.

What am I talking about? At the moment, it costs £680 to file for bankruptcy. If someone is broke, filing for bankruptcy is often beyond their reach. That means that they are stuck in limbo. The breathing space protections are designed to operate before someone reaches that point, so that they have space to sort out what they are able to do. If the calculations mean that none of the available options are open to someone, because they have no money, which is why they need a breathing space and why they turned up at a debt adviser, that is no choice at all. It is the Henry Ford choice—every option is the black car.

I started by talking about the average debt of £10,000—in those Tuesday afternoon maths lessons we will have studied the mean, the mode and the median. Households with the worst debt, who owe more than £20,000, will be excluded from some of the available options. The debt adviser will be unable to have that conversation with those people because those debts mean that they are too far gone. In fact, a debt relief order is open only to the very poorest because people have to be at the point where their monthly surplus income is less than £50 after accounting for their expenses. That £50 threshold was set in 2009. We all studied inflation in our Tuesday afternoon maths lesson, so we recognise that a £50 threshold in 2009 does not make any sense in 2020.

The amendment would help to set out the level of living expenses we should expect people to have before we start talking about their debts, so that we are not asking people to be in penury. That does matter, because we could be talking about people being in that financial position for a very long period of time.

--- Later in debate ---

[John Glen]

Amendment 33, tabled by the hon. Member for Walthamstow, would dictate specific eligibility criteria for a statutory debt repayment plan, which would involve requiring debt advice providers to carry out a complex assessment of a debtor’s resources against external data and benchmarks and, where a debtor is unable to repay their debts within three years, to conduct a revised assessment of the debtor’s circumstances and advise on insolvency solutions.

I reassure the Committee that the Government are keen for any eligibility criteria to strike the right balance between allowing suitable debtors to enter the protections of an SDRP and ensuring that creditors are repaid over a reasonable timeframe. The Government set out the proposed eligibility criteria in their consultation response of June 2019, and they expect the principles to remain the same.

Imposing an additional obligation on debt advice providers to conduct an assessment of a debtor’s living standards, fixed by reference to income distribution and local house prices, could lead to inflexibility and inconsistency in the way the SDRP is provided. In any case, the appropriate mechanism for setting out that level of detail is the regulations, on which, I absolutely reassure the Committee, the Government will consult.

I turn to the suggestion that debt advice providers be required to conduct an assessment of a debtor’s circumstances, and to consider insolvency solutions if the debtor is unable to repay the debt within three years. Again, let me reassure the Committee that it is absolutely the Government’s intention for debtors’ plans to be reviewed regularly. In fact, our consultation response proposes that debt advice providers complete an annual review to ensure that a debtor’s plan continues to be the most suitable solution for them. This review can propose changes to the planned payments if the debtor has experienced a rise or fall in surplus income.

In line with the consultation response, we expect to include in the SDRP regulations provision for a debtor to request a review, and provision for payment breaks in the case of an income shock. The ability for an individual’s plan to last longer than three years, and up to a maximum of 10 years in exceptional circumstances, is intended to support sustainable repayment plans over time. If, once the SDRP scheme is up and running, a debt adviser considered an insolvency solution more appropriate for an individual than their entering into an SDRP over a longer period, that option would remain available.

[Stella Creasy]

I thank the Minister for what he is saying, and I appreciate that he is setting out that he thinks the amendment is not needed because there will be earlier interventions. Does he understand that the £680 cost of going bankrupt can be a barrier to taking up the options that he is talking about? It could lead to people above these very low thresholds staying in the same position not for a couple of years, but for seven, eight, nine or 10 years—not because they want to live like that, but because they have not got enough money built up to take the alternative.

[John Glen]

I recognise that these are complex matters. There will sometimes be a need to pay fees over a much longer period, and that option exists. The consultation on how the regulations will work will engage very closely with the sector, and I anticipate that it would get to the right place. I do not think that I have reassured the hon. Lady, but I hope that I have reassured other members of the Committee about the Government’s intentions. I ask her to withdraw the amendment.

[Stella Creasy]

I thank the Minister for what he said. If he is saying that he is prepared to engage on the subject of debt advice—perhaps the debt advisers’ writings for the Committee on this point were lost in translation—I am happy to withdraw the amendment. It is about recognising that the thresholds have to change, and it sounds like the consultation is the right place to have that conversation. If the Minister nods and says that that is the sort of thing that the consultation will consider, that is perfect.

[John Glen]

indicated assent.

[Stella Creasy]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

New clause 12—Impact of COVID-19 on the Debt Respite Scheme: Ministerial report—

“(1) The Treasury must prepare and publish a report on the impact of the COVID-19 pandemic on the implementation of the Debt Respite Scheme.

(2) The report must include—

(a) a statement on the extent to which changes to levels of household debt caused by the COVID-19 pandemic will affect the usage and operation of the Debt Respite Scheme;

(b) a statement on the resilience of UK households to future pandemics and other financial shocks, and how these would affect the usage and operation of the Debt Respite Scheme; and

(c) consideration of proposals for the incorporation of a no-interest loan scheme into the Debt Respite Scheme for financially vulnerable individuals affected by the COVID-19 pandemic.

(3) The report must be laid before Parliament no later than 28 February 2021.”

This new clause would require the Treasury to publish a report on the impact of the COVID-19 pandemic on the implementation of the Debt Respite Scheme, including consideration of a proposal for the incorporation of a no-interest loan scheme into the Debt Respite Scheme.

New clause 19—Report on functioning of debt respite scheme and compatibility with personal insolvency regime—

“(1) The Treasury must prepare a report on—

(a) the functioning of the debt respite scheme under section 32;

(b) the extent to which it is achieving its objectives;

(c) its compatibility with personal insolvency legislation and policy.

(2) That report must be laid before Parliament no later than one year after this Act is passed.”

New clause 25—Debt Respite Scheme: review—

“(1) The Chancellor of the Exchequer must review the impact on debt in parts of the United Kingdom and regions of England of the changes made by section 32 of this Act and lay a report of that review before the House of Commons within six months of the date on which this Act receives Royal Assent.

(2) A review under this section must consider the effects of the changes on debt held by—

(a) households,

(b) individuals with protected characteristic as defined by the Equality Act 2010,

(c) small companies as defined by the Companies Act 2006.

(3) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland; and

“regions of England” has the same meaning as that used by the Office for National Statistics.”

This new clause would require a review of the impact on debt of the changes made to the Financial Guidance and Claims Act 2018 in section 32.

[John Glen]

Clause 32 builds on existing legislation, and will allow us to implement a statutory debt repayment plan that will help people who are in problem debt. The Government want to incentivise more people to access professional debt advice, and to do it sooner. To this end, we are introducing a debt respite scheme.

The first part of the scheme is a breathing space, which commences on 4 May 2021. The second part is the SDRP, which will be a new debt solution for people in problem debt. It will provide a revised, long-term agreement between the debtor and their creditors on the amount owed, and a manageable timetable over which those debts are to be repaid. It is intended that during the agreement, debtors will be protected from most creditor enforcement action, and from certain interest and charges on debts in the plan.

The clause amends sections 6 and 7 of the Financial Guidance and Claims Act 2018 to allow the Government to implement the SDRP effectively, as set out in their policy consultations on the debt respite scheme. The amendments will allow the Government to make regulations that can compel creditors to accept amended repayment terms and provide for a charging mechanism where creditors will contribute to the running of the scheme, ensuring it is fair and sustainable.

The clause will also allow the SDRP to include debts owed to central Government, which is crucial to helping people in problem debt. In time, I hope that will encourage more people to access debt advice sooner and enable them to repay their debts within a more manageable timeframe.

We are debating a number of new clauses alongside the clause, and I will allow hon. Members to speak to those before I respond to them. I recommend that the clause stand part of the Bill.

[Stella Creasy]

I will speak to new clauses 12 and 19. New clause 12 appears in the name of my friend, the hon. Member for Edinburgh West, but I recognise that she and I share a similar concern about seeing these measures in the round. As the Minister has spoken this afternoon, he has made the case for doing that, because he has talked very strongly about the policy intent and all the work that has been going on, but he has said limited amounts about the Monty Python foot of covid coming down on those best intentions.

Both of these new clauses speak to that Monty Python foot and the very different circumstances people face in terms of having a stable income to be able to repay any debt, problem or not, over the coming years. We know that there is already a problem brewing on top of a problem—a double problem, as it were. I am sure I could think of a better analogy if it was not a Tuesday afternoon.

One in three of those people reporting a fall in income over the past seven months has already borrowed to try to make ends meet. They are already on that carousel, going round and round, putting a bit of money here, hoping they can put another bit there and wondering when it will stop—hoping that schemes will come through. I am sure we will have heard about the economic impact in the debate in the main Chamber today, so I simply say to colleagues on the Government Benches: “You cannot be concerned about the economic impact of the tier system if you turn a blind eye to the debts in our communities and what happens to them.” It is dangerous simply to presume that we can spend our way out of this, knowing that debt is not equally distributed in our country.

That is why the new clauses are about having that evidence in front of us. I am a big fan of evidence-based policy making—although it has not often been in vogue in the 10 years I have been an MP—particularly when it comes to debt. That is partly because the figures change. As I said in my first set of contributions, there is some evidence that people are paying down their debts and trying to be more financially resilient, but we know that a tsunami of unemployment and low incomes is coming our way, and we know it will hit people who have not had to deal with it before—people who have never had to budget in the way that they will have to budget in the coming months.

The new clauses are about having that information and understanding why people take up particular options. Again, I do not wish to prosecute the Insolvency Act 1986 and how it works, but I do wish to set out that, if people cannot access those mechanisms, the breathing space is no breathing space at all—it is just limbo. We will not know that unless we put those measures in the context that these new clauses create by asking to have that information and that detail. If we do not ask ourselves why it is that every six minutes a person is declared insolvent and bankrupt in the UK, is that going to change over the year ahead? If not, is the breathing space working, or is it that people are not able to access alternative support?

The Minister will need that information to be able to flex the policies, as he inevitably will have to because of the Monty Python foot of covid. The longer this place pretends that that is not going to be a problem—that debt is not going to be part of everyday life for millions of people who have never really had to deal with it before—the more the vultures will circle. I have tabled other amendments later on in the Bill, and I do not know whether we will get to them today, but I know we will get to them on Thursday. Those amendments are about how we protect consumers, but sunlight is the best disinfectant—knowing where the damage is being done.

These new clauses and this data are about recognising that we will not get everything right now. There may be all sorts of consequences. What happens if the implementation of the vaccine takes longer to do and more industries go bust? We have already seen Arcadia going into administration today. What happens if it comes in more quickly, but the jobs that are created or the jobs that are available to people pay a fraction of what they previously earned? There are huge uncertainties ahead in the policy context into which the policy intent is being put.

I hope the Minister will see the new clauses from myself and the hon. Member for Edinburgh West as they are intended, which is to be forewarned and forearmed so that we can take a muscular and proactive approach in this place to not just protecting consumers and our constituents, but preventing problem debt in the first place. We would then not have to have that conversation with people about whether it is a problem that they have put everything on the credit card, taken out a payday loan in one of its various forms, taken out an Amigo loan or gone to the buy-now-pay-later industry, which we are going to come on to.

--- Later in debate ---

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

It is a pleasure to be under your chairmanship, Mr Davies. I would like to speak to new clause 3, which calls on the Government to prepare and publish an annual report on the Help to Save scheme for each financial year that it remains open to new accounts.

The Help to Save scheme is a form of savings account that allows eligible people to receive a bonus of 50p for every pound they save over four years. The scheme is particularly good, as it targets people who are entitled to working tax credits or who are in receipt of universal credit. Given the failure to support jobs during covid-19, the number of households currently receiving universal credit has risen from 1.8 million in May 2019 to almost 4.6 million as of October 2020. I am sure everybody on the Committee agrees that that is a very high figure, although I appreciate that we are going through really difficult times because of covid.

One of the things that I am seeing as a local MP in my constituency—I am sure it is the same for everybody on the Committee—is a huge increase in universal credit claimants. We are likely to see an even bigger increase as people are no longer able to rely on their personal savings, so the Help to Save scheme is more important than ever.

After a two-year delay, the Help to Save scheme was launched by the Government in September 2018, to much anticipation. However, the scheme to date cannot be considered a success, and I am eager to find out why. We tabled the new clause because we feel that an annual report would help us in uncovering that. Of the 2.8 million people eligible to take up the scheme, only 132,150 accounts had been opened by July 2019—just 4.6% of those eligible for the scheme. I am still struggling to understand those figures and to believe that the Government are truly committed to a savings scheme and to creating a culture of household saving.

Furthermore, in last year’s spring statement of March 2019, the Government’s Budget watchdog slashed by half its forecast of how much the taxman would have to spend on Help to Save by 2021, citing lower than expected take-up. However, as I mentioned, I am in favour of the scheme and want it to succeed. That is, after all, why the previous Labour Government spent time highlighting the scheme and planning to launch it in 2010 as a savings gateway, only for it to be scrapped in 2010 by the then Chancellor.

Members may agree that the information we have so far does not paint a picture of commitment from the Government to supporting people to save. When the savings gateway was created, Labour worked with banks, building societies and credit unions, which invested in software and promotional literature for the launch. Some potential savers had received letters informing them of their eligibility and telling them about local providers just hours before the scheme was scrapped by the incoming Conservative Government.

I am really interested to hear what measures the Government have implemented to promote take-up of the scheme. I could raise many issues about universal credit and working tax credits, but as you advised, Mr Davies, we need to keep to the new clause, so I will raise them another time. My primary concern is to ensure that those who are eligible can access the scheme, now and in the future.

The Government’s pilot scheme found that 45,000 individuals saved a total of £3 billion during the trial period. We know that the scheme works. Charities and debt support services are hopeful that it can directly tackle asset poverty. The Help to Save scheme is due to come to a close in three years’ time, in September 2023, which means that we still have time to support people to save over £800, if we act now to make the scheme more widely accessible.

Publishing an annual report on the scheme, as provided for by the new clause, would allow us to see in detail where take-up has been successful and what we can do to ensure that people are aware of the scheme and how to engage with it. We feel very strongly that a report would help us to capture what areas we need to improve. The Minister mentioned that the Government are committed to providing support. I hope that they are, but agreeing to have an annual report would show further commitment.

In the meantime, I believe that more can be done, particularly to integrate with credit unions and debt management services so that the scheme functions more effectively in the years it has left to run. I would also be really interested, in lieu of an annual report for 2020, given that at the end of last year it was estimated that only 4% of eligible people have signed up to the Government’s Help to Save scheme, if the Minister could tell the Committee whether he thinks it has been unsuccessful and what the Government are doing to promote take-up.

[Stella Creasy]

I rise to support what my Front-Bench colleague said on new clause 3 and to speak to new clause 14, which seeks to underline the question that she set. Given that this is a good scheme, why has it not been taken up more widely?

The Minister may have thought that I was just a one-trick pony, obsessed with debt. Let me tell him that my difficult second album is very much about savings. I know that he had concerns about the drafting of my previous amendments and I want to put on the record my thanks to the Clerks, who have been incredibly helpful and patient with me in seeking to get the wording right. We all appreciate the hard work that they do behind the scenes to ensure that our drafting is intelligible, even if it is not inevitably accepted by the Minister.

I hope that the Minister will accept this new clause and my difficult second album about savings. This is two sides of the same coin of how people make ends meet. I would wager that that is why he has put them together in this portmanteau or Christmas tree Bill––given that it is 1 December, we may as well call it that. It is about how we make sure that people have the money they need, whatever the weather or time of year and whether things are going well or badly for them. Just as we would want people to get help when they get into debt, we also want them to get help to have rainy day money, as it might quaintly be called now. I said that to a member of my staff who looked blank and probably tried to look it up on Instagram.

Clearly, helping people on low incomes to save is critical. One reason why I support the new clauses is that I do not think we can have a conversation about savings without talking about assets. There are increasing inequalities in our society. Indeed, the new inequality is not so much about income as assets. We are looking at why people do not take up the scheme, what we can do to make it work and whether it serves the purpose that we are trying to get at. While we come from different political traditions, I hope that the Minister would agree that income inequality is of itself a negative draw on our economy and social cohesion. Perhaps that is the best way I can put it to him. One day, I will tempt him towards the more radical socialism of egalitarianism.

When we have people who have plenty and people who have very little, or indeed no access to anything, our society suffers. The Help to Save scheme is about improving that situation. It is increasingly obvious that in constituencies and communities like mine that are riven by gentrification and inequality, it is assets that are the difference between success and failure. That is necessarily different from savings accounts, and it is right that when we are looking at what we are doing to help those on the poorest incomes succeed in life, we are cognisant of that fact and include it in our thinking.

What do I mean in layman’s––or perhaps laywoman’s––terms? One in five mortgages are issued with the help of the bank of mum and dad. People with the bank of mum and dad are always going to be more successful and stable than many of those constituents who do not have access to that. Those are the people at whom the scheme is targeted. The 10 million households that have no savings at all stand in a very different place from the one in 10 children born in the 1980s who will inherit more than half average lifetime earnings. Property is the divider within our society and that trend has got a lot worse over the last 30 years, yet very little Government policy on tax and savings begins to address that and the income inequalities that it creates.

When we are looking at a savings scheme and expecting people to have money to put aside––even what might seem very modest sums––we have to set it in the context of the other assets they have access to if we really want to get to grips with those inequalities in society. In looking at tax and benefit policies, and savings policies, the fact that someone can inherit £1 million in property without paying any tax at all stands against those families with £15,000 of debt who will never be able to put any money aside because they will always owe somebody else. All Governments of all colours have been burned before in trying to address some of these factors, and in taking a narrow view purely of income levels. I am old enough to remember TESSAs—not just the fantastic Dame Tessa Jowell who is sadly no longer with us, but tax-exempt special savings accounts, which drove income inequality in this country in terms of people’s ability to put money aside.



It is right that we ask ourselves whether this measure will get to the root of that problem—to the communities and people we represent who will not be able to save and whose lives will always be askew, because their counterparts have been able to benefit from that growing asset wealth, whether that is people who have inherited property or people who are now in communities such as mine, where housing costs and housing values have risen to such an extent that their children will be able to benefit from them, including from schemes such as remortgaging. In situations such as that with covid, which we know is an income shock, people might be expected to use their savings account, but they cannot because they do not have any money in it, so it is even more apposite to ask whether they have other assets that they might be able to draw on in comparison with their counterparts.