Oral Answers to Questions
Stella Creasy Excerpts(11 years, 1 month ago)
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Kerry McCarthy (Bristol East) (Lab)
2. What recent assessment he has made of the effect of fiscal policy on family incomes.
Stella Creasy (Walthamstow) (Lab/Co-op)
8. What recent assessment he has made of the effect of fiscal policy on family incomes.
Pat Glass (North West Durham) (Lab)
10. What recent assessment he has made of the effect of fiscal policy on family incomes.
Sajid Javid
I must say that if the hon. Lady is genuinely interested in the challenges that families face, she should recognise the causes: Labour’s recession, the deepest in our post-war history; Labour’s record budget deficit, the deepest in our post-war history; and Labour’s bank bail-outs, the largest the world has ever seen.
Stella Creasy
With working families’ incomes on average 1,500 quid down and millionaires taking tax cuts, does the Minister really think that we are all in this together?
Sajid Javid
As the hon. Lady has already heard, all millionaires will be paying a higher tax rate under this Government than they did for the whole 13 years that the Labour party was in power. She should also welcome the tax cut we provided for the lowest income families, 25 million people, with 2.7 million taken out of taxation altogether. I note that the Labour party has recently talked about reintroducing the 10p tax rate, which they abolished. Well, I have news for it: all those people are now paying a 0% tax rate on that income.
Living Standards
Stella Creasy Excerpts(11 years, 2 months ago)
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Rachel Reeves
We have said of the private rented sector that we would require a new national register of landlords.
This Government are presiding over the lowest level of house building since the 1920s. We have said that we would build new affordable homes, and the IMF has said that the Government should bring forward investment in infrastructure. Perhaps we should listen to the IMF.
The Prime Minister and the Chancellor now claim that their economic plan has worked after all, but two quarters of positive growth do not begin to repair the damage from three years of flatlining. Three wasted years have left permanent damage as businesses have lost vital investment opportunities, and almost 1 million young people are out of work. That is why families are suffering; that is why deficit reduction is so far off track. Yet we have a complacent Government. They have no idea of what they have put families through, no idea of the damage they are still doing, and no plan to put things right. Three years in government and still no British investment bank; three years in government and banking reform is being watered down; three years in government and one in five apprentices say they have received no training; three years in government and the number of 16 to 18-year-old apprentices is down by 13% this year; three years in government and major infrastructure projects are stalled; three years in government and life is getting tougher for ordinary families.
Stella Creasy (Walthamstow) (Lab/Co-op)
My hon. Friend is making an incredibly powerful case about the warped priorities of this Government and the consequences and costs for households. It is little wonder that 80% of payday loans are for the basic costs she is talking about—housing, travel, rent and food. Is it not another example of this Government’s warped priorities that in three years of clear warnings they have done nothing about the legal loan sharks in our society, and is that not why we would make a difference in government?
Rachel Reeves
She has done fantastic campaigning work on that issue. Labour has said that we would cap the cost of credit, as she has called for.
A one nation Labour Government would be taking action now to secure the recovery and to build a more balanced economy that boosts the living standards not just for the few at the top but for the many. We would act on the recommendations of the IMF to support and secure the recovery by bringing forward £10 billion of infrastructure investment. We would build 400,000 affordable homes, creating more than half a million jobs and making our economy stronger for the long term. We would support house building, encourage private sector investment, and create apprenticeships. A one nation Labour Government would be confronting the scandal of youth and long-term unemployment by introducing a compulsory jobs guarantee.
Greg Clark
Where has the hon. Lady been for the past three years? We have reformed the planning system. Since the national planning policy framework was adopted, which I had something to do with, planning permissions for new homes have risen by 22%. That is the action that is required if the problems that she identifies are to be solved.
The Labour motion talks about the standard of living, but no Government in living memory have done more to scupper the standard of living of ordinary working people in this country than the last Labour Government.
Stella Creasy
The Minister wants to talk about his Government’s record, so let us talk about the last six months alone, during which the proportion of people in this country who are worried about their personal debt has risen to 50%—20 million people in this country are desperately worried about the level of personal debt that they are in. Does he accept that his low-wage economy is part of the reason why so many families in this country are lying awake at night, frightened about how they will put food on their table and make it through to the end of the week?
Co-operatives
Stella Creasy Excerpts(11 years, 4 months ago)
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Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Hollobone. I pay tribute to my hon. Friend the Member for Islwyn (Chris Evans) for securing this important debate. In his speech, he not only highlighted some of the best practice in co-operatives but made a strong argument about how many current public policy problems in this country could be addressed by taking a more co-operative approach. In particular, I thank him for mentioning co-op housing and my Co-operative Housing Tenure Bill, which I believe has huge potential to address some of the housing challenges that this country faces.
It is with great pride that I sit in Parliament as a Labour and Co-operative MP. I am fortunate to represent a constituency steeped in the co-operative tradition. The first co-operative store in my constituency was opened in Mossley in 1856, and to this day there is a Co-op store on the same site. The co-op movement was active in parts of my area well before the Labour party even existed, and my constituency, of course, is only a stone’s throw away from the co-operative movement’s spiritual home in Rochdale. It would be wrong to claim that the values championed by the co-op movement—democracy, openness, trust and social responsibility—are characteristic only of areas such as mine or south Wales, because the modern co-op movement is nationwide, but it is not mere coincidence that we started it.
I cite these things not just as an amusing historical preamble to my speech, but because it is extremely important, particularly for those of us on this side of the political divide, to remember and stay true to the political tradition that the co-operative movement represents. For many reasons, not least the success of the 1945 Labour Government in creating national institutions such as the NHS, which celebrates its 65th birthday this week, the Labour party in modern times has prioritised a statist, top-down view of politics, but we should never forget to combine that with the earlier tradition of bottom-up, grass-roots and community campaigning.
It is interesting that in recent years, through the work of the co-operative movement and through things such as community organising and living wage campaigns, we have begun to get back in touch with that tradition, which is good. We should recognise that at times, domination by the state can be as detrimental as domination by the market. The co-operative movement is a fine example of something that has always been balanced between the two.
We are obviously still in a difficult economic situation, facilitated by the failure of the Government’s plans to get things going at any level. I am of the firm belief that co-operatives are vital to the economy of this country, not just for their economic value but for their social benefits. More than 15 million people in the UK—nearly a quarter of the population—are members of a co-operative. That is no small number. It is a sign to all of us that there is more to be explored in co-operatives and the value that they can bring.
I want to discuss how co-ops can have a positive impact on our economy and the social fabric of our communities. It is timely that in a week when the Government have organised a summit with the heads of payday loan companies, this debate gives us the opportunity to showcase the value of credit unions, which offer a brilliant example of how co-operative values can have a positive effect on local economies.
More than 1 million people in the UK use credit unions. Research by Salford university on behalf of Leeds city council found that for every £1 the council invested in credit unions, there was a £10 benefit in retained income for the local economy. Manchester credit union, which serves people in my constituency, can trace part of its roots to the Hattersley area, which I represent. Today it has more than 10,000 members and lends out more than £4 million a year. In a few weeks, Cash Box, a local credit union in Hyde, will open its first high street branch, which we should celebrate.
Yet credit unions account for only a small proportion of the total consumer lending market. Given that their average annual percentage rate is 26.8%, we must ask why people are attracted to payday loan companies that get away with APRs of more than 4,000%. Something has to change. Many of us believe that payday lending in this country is out of control.
Stella Creasy (Walthamstow) (Lab/Co-op)
I apologise for not being able to be here at the start of this debate. My hon. Friend is making a strong case about the importance of credit unions. Does he also agree that one thing that credit unions bring to the debate about the cost of living crisis in this country is how they help members, not just by giving loans but by giving debt advice? That is precisely the value of a co-operative mindset: to think in the long term and to think about the whole person and what they need from services. That is why credit unions are so important.
Jonathan Reynolds
I agree completely. We all pay tribute to my hon. Friend for her tremendous campaign against payday lending. My hon. Friend the Member for Islwyn discussed trust and the wider benefits to a person, rather than the exploitative relationship that many of us believe payday lenders have. My hon. Friend the Member for Walthamstow (Stella Creasy) is absolutely right to address the wider benefits of that approach for people and their communities.
I recognise that the Government have relaxed the rules on how credit unions can operate, allowing them to reach out to more of the community, but to echo the point made previously, I regret the Government’s refusal to accept the Co-operative party’s amendments to the Financial Services Bill, which would have helped promote mutuals and create a more competitive financial services industry. In a climate where people feel increasingly detached from the banks, credit unions based on co-operative principles help local people deal with everyday issues and make a positive impact on the local economy.
My second point involves the relatively new idea of co-operative councils and how they may be able to offer a new, innovative way of procuring local services to meet the needs of local communities in difficult financial circumstances. I read the Select Committee on Communities and Local Government report from 2012, “Mutual and Co-operative Approaches to Delivering Local Services”, particularly the evidence given by Lord Glasman, who said that giving users a stake in public services ensures that they feel that they are at the heart of local government, and that making people feel involved strengthens their relationship with their local economy.
Co-operative and mutual models help councils facilitate long-term jobs and investment and help ensure that long-term social benefit is prioritised over short-term gain. It is no coincidence that a majority of all the councils that have signed up to the co-operative council network already pay their staff a living wage, which is clearly of huge benefit to local economies.
The question that we should ask in debates such as this is how the Government can help organisations and local authorities deliver economic growth by building on best practice within the co-operative movement. One of the key conclusions of “Mutual and Co-operative Approaches to Delivering Local Services” is:
“The Government has a choice, if it wants more mutuals and co-operatives to develop: it must take action to provide support.”
Although a recent Co-ops UK report shows that the co-operative movement in this country is still growing, we would all say that the Government could do more to encourage that development. The Government talk a good game on mutuals, but in reality, many of their proposals for public services are joint venture spin-offs with private partners. Those may have merit, but they should not use the language and clothes of the co-operative movement unless that is truly what they are. The example often given is the behavioural unit in the Cabinet Office known as the nudge unit. It is often cited as a flagship Government mutual, but most of us, as well as most people in Co-ops UK and the Co-operative party, would barely consider it a mutual at all.
As we are in the middle of co-operatives fortnight, this debate is an excellent opportunity to promote the benefits of co-ops. I believe that they have a part to play in the economy of every society, from credit unions that lend to families to the running of core services and bigger ideas such as co-operative housing, which has been mentioned. The positive economic and social impact of co-ops should be celebrated, particularly after the financial crisis, when people are seeking to ensure that we never again get ourselves into the situation that we got into in 2008. I believe that all Members should do whatever they can to advance and promote the cause of co-operatives.
Andy Sawford
My hon. Friend is right to highlight the importance of Exchequer receipts from co-operatives, not only through business rates and other forms of taxation paid by those businesses, but also because co-operatives in the UK employ so many people who are economically active and who contribute to tax returns. That is one of the benefits of co-operatives, and I am pleased that my hon. Friend brought it up.
As for local co-operatives, the secretary-general of Co-operatives UK describes the effect of keeping so much money in the local economy, and generating additional value there, with the term “sticky money”. Co-operative money is sticky money: I think it is a good term. He says:
“It stays local, because co-operatives employ local people, are owned by local people and try to source from local firms that do the same. Every pound spent in a co-operative shop is a real boost to the local economy.”
Co-operatives are known as trusted local businesses. Indeed, my hon. Friend the Member for Islwyn has told the Chamber about his experience of that. I share that experience of growing up, and the values that can be seen in co-operatives. Today, the value that they offer to communities is incredibly important.
In my community, the main co-operative is the Midlands Co-operative. It is one of the largest independent retail co-operative societies in the UK. It employs 7,000 staff, is member-owned and has a board of directors, one of whom—I should declare an interest—is my father. It had gross sales of £670 million and a profit of £24.3 million in 2012-13. It operates across a wide range of sectors—food, funeral services, crematoriums, transport—and has more than 300 trading outlets in 12 counties. I want to highlight its achievements.
The Midlands Co-operative Society was recognised as co-operative of the year, which I am sure you welcome, Mr Hollobone, as you must shop, as I do, in a Midlands Co-op in your constituency. It has the highest trading profit of all independent co-operatives, and it rewarded its members with a £4.3 million payout; it created 300 additional jobs in its trading area; it invested more than £0.5 million to help its employees develop their skills; it funded local community projects to the tune of £1.5 million; and it has refurbished many of its outlets to make them energy-efficient, reducing energy consumption.
All the Midlands Co-op stores have a locally sourced range—I have already referred to the initiative to take primary school children to the co-operative’s working farms—and the supply chain benefit of sourcing locally from firms that are less than 50 miles away is incredibly important. In my area, and yours, Mr Hollobone, the supply chain benefit is known as a “Taste of Northamptonshire”. The Midlands Co-op helps vital community initiatives, so I was pleased to support the Corby women’s choir recently at a great local event, and I welcome the news that the co-operative is backing grass-roots football in Thrapston in east Northamptonshire. The benefits are enormous.
I want to say a few words in support of the comments made by my hon. Friends about co-operative housing. I was pleased to hear David Rodgers mentioned in his role in the International Co-operative Alliance, but I have known him for some years as the former chief executive of the Co-operative Development Society, which I think would lay claim to being the largest co-operative housing organisation in Britain—we can have that debate with my hon. Friend the Member for Rochdale (Simon Danczuk) another time—not only for owning many thousands of units of housing directly, but for supporting co-operative housing organisations throughout the UK. The CDS has been a pioneer in introducing new models of intermediate market housing—desperately needed in this country—by looking at examples in north America, especially Vermont, where co-operative housing makes a huge contribution to the housing supply and in particular to intermediate market housing, but also in northern Europe. In cities such as Oslo in Norway, more than half the housing in the city is co-operative housing.
We need to look at the real potential offered by co-operative housing models in this country. In particular, we could link co-operative and mutual models with community land trusts—for rural as well as urban areas—to engage communities in bringing forward significant new developments. Community land trusts offer real potential to capture land values—for example, exception sites can be made community land trusts—and that is something we ought to look at. Using the mutual models, benefits such as corporate mortgages and so on can reduce the cost to people of purchasing their own home. In particular, under flexible models of share ownership, people can buy equity shares in the overall housing trust, which they take on with an element of housing equity growth, if that happens over the time that they are in the housing. That is much better and more flexible for people than traditional ways of getting a foot on the housing ladder or a stake in the housing market.
The community mutual model, as developed in particular by organisations such as Mutuo, has been taken up in Wales. There are community mutuals in Rhondda, in Torfaen and elsewhere in Wales, but I want to see more in England. I also want to see more community gateway models in England, such as those developed by the Confederation of Co-operative Housing; community gateway housing mutuals exist in Preston, Watford, Lewisham and Braintree. On hybrid mutual schemes, Rochdale Boroughwide Housing, which has 14,000 units—I understand why my hon. Friend the Member for Rochdale says that it is an incredibly large and important co-operative—is using an innovative new membership-based model of housing provision.
Those are real opportunities, but I hope that the Government will look at some of the legislative opportunities that might be available in the next few years, including the important Bill to support co-operative housing introduced by my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds), to better support the development of co-operative models in the UK economy. Co-operatives can provide enormous benefit and could prove to be as strong in this century as they were in the last.
Mr Philip Hollobone (in the Chair)
A last-minute entry from Stella Creasy—I thought you would not be able to resist as soon as payday loans were mentioned.
Stella Creasy (Walthamstow) (Lab/Co-op)
Thank you, Mr Hollobone, for your kindness in letting me speak in the debate.
I pay tribute to my hon. Friend the Member for Islwyn (Chris Evans) for securing a debate that is incredibly important to us all in the co-op movement. I want to make a plea for the Minister to understand why it is so important for us in the co-op movement—those of us who have worked in co-operatives—to start from the mindset of co-operativism, rather than models.
It seems that the debate requires us to put on record the co-operative history of our constituencies. I am afraid that Walthamstow cannot—unusually—claim to be first in this matter. We can trace our co-op history back to 1840, and the former national offices of the co-operative movement are in Walthamstow—we have a beehive on Hoe street to prove it.
Walthamstow has a strong co-operative concern because we recognise what my hon. Friend the Member for Corby (Andy Sawford) was setting out: the powerful case, especially in recent economic times, for co-operative values and how they work. Why has the co-op economy grown by nearly 20% in the past five or six years compared with what we have seen in our national economy? In Walthamstow, we would argue that it is precisely because of the mindset that co-operativism brings with it—the idea that we work for a broader set of values, and that what we do together, through democratic participation, can reap rewards well beyond mere financial profits. I am disappointed that the hon. Member for Hereford and South Herefordshire (Jesse Norman), the founder of the Conservative co-op movement, is not present in the Chamber, because we are concerned that it has a preference for considering the technicalities of how people work together, rather than why they work together.
I liked the phrase “sticky money” that my hon. Friend the Member for Corby used. A fantastic study from Lincoln shows that co-operatives bring about a multiplier effect that is around six times that of ordinary organisations in a community, so they bring resources into an area. The co-op mindset brings unparalleled creativity to thinking, and I urge the Minister to look at the work of some of our co-op councils. On a recent visit to Oldham, I was particularly struck by the council’s work on debt and financial difficulties. The co-op council negotiated a 30% discount on bus passes for those who joined the credit union. The scheme has been a fantastic success: the number of people joining the credit union has increased massively, thus increasing the amount of money available to lend, while the scheme has been cost-neutral for the bus company and has helped to get the city moving, so it is win, win for everyone. Such creative thinking takes place when our bottom line is the people we serve, meaning that we see people as part of the co-op, rather than just customers. The danger of looking only at employee co-ops—the John Lewis model—is that we miss out on the vital impact of working with the users of our services.
I am also struck by the work that is being done in Lambeth. My community in Walthamstow has a big problem with gangs, and the work that Lambeth is doing on youth services and co-ops is fantastic, as is the response from the local community, so I encourage the Minister to look at that. I also encourage him to go to see the energy co-op in Brixton. I am sure that my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) was talking about such co-ops earlier, as well as about the work of Supporters Direct and especially the “Show Wonga the Red Card” campaign. Whether on housing, social care or energy, co-op solutions are bringing a new creativity to all our public services that is benefiting users and reducing costs.
We know that the market alone cannot provide, which is the problem that we have with payday lenders. As you suggested, Mr Hollobone, I cannot go through the debate without talking about that problem, because the market is failing consumers. Co-op solutions are providing the answers in communities such as Walthamstow, where we have 18 of those lenders on our high street alone. I encourage the Minister to think again about his opposition to a cap on the cost of credit, because only when the cost of credit is capped and we examine how to lend to people responsibly, as social finance models and credit unions do, will a difference be made.
We need co-operative thinking not only in the credit union movement and on payday lending—we need the cap and an expansion in affordable credit—but in our social care. The Minister should look at Nottingham Circle’s adult social care or at co-operative schools. When we work together as a society, and as the co-op movement is ingrained in us from the grass roots up, we deliver the kind of future in which everyone can prosper. When we do not work in such ways, we can learn a lesson from New Harmony, which was the fantastic co-op that was set up by Robert Owen in America, but that fell apart after 25 years because although it had the co-operative model, it did not have the co-op mindset.
The difference that co-op members and co-op thinking bring is an understanding of not just how people work together, but why they work together and in whose interest, so that is what I challenge the hon. Member for Hereford and South Herefordshire and the Government to learn from this debate. I thank everyone who has taken part in it, and I am grateful to my hon. Friend the Member for Islwyn for securing it. I look forward to many more co-operative debates in the House.
The Economic Secretary to the Treasury (Sajid Javid)
It is always a pleasure to serve under your chairmanship, Mr Hollobone, and I congratulate the hon. Member for Islwyn (Chris Evans) both on securing this very important debate and on putting forward his case so eloquently. He entered Parliament in May 2010 and he has already made an outstanding mark. I would like to respond to the issues raised by hon. Members, and I will try my best to capture them all, including some of the questions from the shadow Minister, the hon. Member for Newcastle upon Tyne North (Catherine McKinnell).
As many hon. Members will be aware, the Government’s approach to mutuals was set out in the coalition agreement, where we committed to “promote mutuals” and “foster diversity” in the UK economy. That commitment, made in the Government’s founding document, underscores the importance that we attach to the sector. I would like to talk this afternoon about the contribution that the co-operative and mutual sectors make to the economy, and, I hope, to reassure all hon. Members of our determination to support them in their efforts.
First, however, I turn to the Co-operative Group itself, as raised by the hon. Member for Islwyn and other hon. Members. As the hon. Gentleman will be aware, the Co-op is at the forefront of the mutuals sector, with more than 4,800 retail trading outlets and an annual turnover of more than £13 billion. Clearly, the Co-operative bank is an important part of the Co-operative Group. I was pleased to see last month that the group has committed to strengthening the bank’s position, including through a commitment to inject capital. It would not be appropriate for me to say more, other than that the group is rightly taking action and strengthening its banking arm through that recapitalisation.
I turn to the co-operative sector as a whole. The Government have made it clear that the co-operative sector is of great importance to the UK economy. That case was made especially well by the hon. Member for Corby (Andy Sawford). In fact, co-operatives are ingrained in our culture. As we have heard, the first recorded co-op in the world was set up in Scotland in 1761. Building on those foundations, the birth of the modern co-operative movement can be credited to the Rochdale pioneers, no less, in the mid-19th century, as we heard so well from the hon. Member for Rochdale (Simon Danczuk). He correctly said that I am a Rochdale boy, and it is something that fills me with great pride. There are people in this world who do not know where Rochdale is—however shocking that sounds—but when they are told that it is the home of the co-operative movement, they immediately recognise the town’s importance. I am sure that the hon. Gentleman would agree.
From those humble beginnings, a thriving co-operative sector has blossomed. The UK now has more than 6,000 independent co-ops, and there is a co-op in every single postcode area. Those organisations provide valuable services across a wide variety of industries, including agriculture, finance and energy production. However, we should also remember that although co-operatives focus on serving their members, they are also businesses. The co-op sector in the UK had an overall turnover of well over £36 billion in 2012, which is why, in line with the Government’s commitment to promote mutuals, we have taken steps to support the sector and to enable it to thrive further.
Last January, my right hon. Friend the Prime Minister announced the co-operatives consolidation Bill, which will be introduced to Parliament in December this year. Although the Bill will not contain any new legislation, it will put all co-op legislation in one place, reducing complexity and making it easier for new co-operatives to be set up. I know that that will be welcomed by the co-operative movement.
In addition, we will consult very shortly on a further package of measures to support the co-op sector, including making insolvency procedures available to co-ops, so that a troubled co-op has more chance of being rescued. The hon. Member for Rutherglen and Hamilton West (Tom Greatrex) rightly raised the issue of football supporters’ trusts. As he will know, the Football Association is concerned about the inability of those trusts to go into administration. The changes that we propose in the consultation will hopefully help to satisfy that requirement, and help that sector of mutuals—football supporters’ trusts and others—to thrive further. We will also consult on raising the amount of withdrawable share capital that an individual member can invest in one society, so that co-ops can more easily raise capital from their members.
A very important subsection of co-ops, as we heard, is the credit union sector, which provides a mutually owned option for customers looking to save, take out loans, or, in some cases, to get current accounts and even mortgages. We have heard many Members today speak about the sector eloquently, including the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), the hon. Member for Islwyn, and the hon. Member for Walthamstow (Stella Creasy).
We have taken a number of specific measures to support the sector. Most visibly, the Department for Work and Pensions co-ordinated a recent feasibility study to examine the future of credit unions. It was announced only last week that the Government will take forward the study’s findings. That includes the Department for Work and Pensions making a further investment of up to £38 million over the next three years in credit unions, with the aim of supporting the credit union sector to provide sustainable financial services for up to 1 million additional people.
The feasibility study also proposed raising the maximum interest rate that a credit union can charge to 3% a month. The Government have announced that we will take that proposal forward, and it will apply from April 2014. That will enable credit unions to break even on the low-value, short-term loans that are the most expensive to issue, and to become more stable over the long term. That will be an alternative, as we have heard from some hon. Members today, to other avenues for borrowing for short-term loans, such as payday loans.
Stella Creasy
It is fantastic to hear the Minister supporting credit unions doing short-term lending. If he recognises that credit unions can do short-term lending at capped rates, why does he not think that payday lenders could lend at capped rates and introduce a cap on the cost of credit?
Sajid Javid
The hon. Lady will know that we have rightly given the power to an independent regulator to set capped rates, if it thinks that is appropriate in future. That is the correct way to deal with the issue.
In the interests of time, I must plough on. If we are to consider the wider mutuals sector, we should also consider building societies, which remain another key focus for the Government. We set out our approach to applying the recommendations of the Independent Commission on Banking on building societies in “The future of building societies” consultation paper. The consultation closed last year, and we are now considering how best to treat building societies in line with our aims. We will set out our proposed approach in due course.
Several other questions were asked, and before I conclude, I will try to answer some of them as best I can. A number of hon. Members raised the issue of co-ops in the energy sector. The Department of Energy and Climate Change published a call for evidence on community energy in June 2013, and it will publish a community energy strategy for autumn 2013. That highlights the Government’s commitment to supporting community energy projects.
A number of hon. Members raised the issue of housing. I agree that the co-operative sector has an important role to play in housing, particularly because, between 1997 and 2010, we saw a decline in social housing in our country of more than 421,000 units. I think that the co-operative sector can make a contribution to turning that around, and it will benefit from Government funds that have already been made available, in particular, for affordable housing.
The hon. Member for Islwyn raised the issue of Northern Rock. We believe that the sale was in the best interests of the taxpayer, securing the long-term future of Northern Rock plc and increasing competition in the banking sector. The decision to proceed with the sale was based on the advice that the Government received from United Kingdom Financial Investments Ltd and independent advisers, having considered all bids and all other potential options.
Finally, in the interests of time, I will just address one more issue about the use of the name “co-op”, which was a good point made by the hon. Member for Rochdale. That is something, as he rightly identified, that is being looked at by the Department for Business, Innovation and Skills. I am aware that very strong representations have been made to the Secretary of State for Business, Innovation and Skills, not least by Ed Mayo of Co-operatives UK. The Business Secretary has committed to looking into the matter further and to making an announcement shortly.
In conclusion, I reiterate the Government’s support for the co-operative sector, and I thank all hon. Members who have taken part in today’s debate, especially the hon. Member for Islwyn for making his case so well.
Finance Bill
Stella Creasy Excerpts(11 years, 4 months ago)
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Mr Gauke
I would say—I think that this is the most tactful way of putting it—that the Government are determined to send the signal that the UK is open for business. That is how we can win the global race. Other Governments might wish to take other approaches, and that is for them to decide. For the UK, we believe in open markets and a competitive tax system—but a tax system, none the less, in which businesses pay the tax they should and in which economic activity is properly taxed.
We have made a commitment to act and have backed that up with extra resources for the OECD. The UK has been actively participating in the development of the OECD’s comprehensive action plan for tackling such issues, which will be presented to the G20 later this month. It might interest hon. Members to know that at the recent Lough Erne summit the G8 called on the OECD to draw up a common template for multinationals to report to tax authorities where they make their profits and pay taxes around the world. That will give tax authorities a new tool against tax avoidance to help them efficiently identify and assess risks, but requiring publication of that information would put the UK at a competitive disadvantage to other countries that did not require publication. It would also impose costly administrative burdens on business and Government.
The new clause proposed by the Opposition would require all multinational companies to report all their UK corporation tax payments—not just tax related to the GAAR, but the whole of their UK corporation tax. That goes way beyond the clear policy that we have set for the GAAR and would risk giving an impression that the GAAR has an impact on all corporation receipts, creating the sense of uncertainty about the impact of the GAAR that we have gone to some lengths to avoid.
Stella Creasy (Walthamstow) (Lab/Co-op)
I am interested by the Minister’s comments. The Minister has concerns about publishing such data, but in other cases the Prime Minister extols sunlight as the best disinfectant. Is it not important, if the public are to be confident in our tax system, for them to have such information? Why does he feel that tax receipts should be exempt from that disinfectant process?
Mr Gauke
There is a long-standing and widespread approach that tax is a matter of confidentiality between taxpayers and the tax authorities. I say that the approach is long standing; it is the approach we have had in the UK for time immemorial.
It is also the position that applies in pretty well all major economies, and if we were to change that approach, it would be sensible to do so multilaterally. If we introduced a requirement that multinationals based in the UK had to publish information in a way that would not apply if they were based elsewhere, that would raise questions about the attractiveness of the UK as a place in which to do business.
On how to move forward in this area, I would make the wider point that we work multilaterally. That approach was endorsed by Tony Blair, who, in a recent interview, said that if countries move unilaterally, others will eat your lunch, to put it bluntly. I think that was the phrase he used. It is right that we work with other countries to ensure that we have an effective tax system, but I would not favour measures that left the UK isolated in such a way.
Catherine McKinnell
It is a pleasure to speak here today on these important issues. I shall focus particularly on those covered by amendment 56 and by new clause 12. First, however, I shall touch on new clauses 4 and 5, and on new schedules 1 and 2, which relate to measures announced in Budget 2013. Together, they introduce three separate rules to combat what the Minister describes as loss buying. That activity goes against the accepted concept that losses brought forward on or after a change in company ownership should be allowable for corporation tax relief to the company and to the trade in which they occurred.
The Government’s new clauses seek to strengthen the loss-buying rules, first by expanding the application of chapter 16A of part 2 of the Capital Allowances Act 2001 so that it applies to “qualifying activities” and not just trades, as is currently the case. The other two rules introduced by the clauses are targeted anti-avoidance rules and will be included in a new part of the Corporation Tax Act 2010. As a consequence of the new clauses, companies will be prevented from entering into arrangements to access, as part of a business transfer, various forms of unrealised corporation tax losses from unconnected third parties. The Opposition support the introduction of these anti-avoidance measures, but it would be helpful if the Minister outlined, in response to this submission, what additional annual yield the Exchequer is expected to receive as a result of their introduction.
Before speaking specifically to the Opposition’s new clause 12, I would like to refer more generally to the Government’s general anti-abuse rule, which will be introduced by clauses 203 to 212, and take the opportunity to probe the Minister on its implementation, because it was last discussed in Committee of the whole House back in April. The Government have made much of the GAAR, their flagship policy for tackling tax avoidance, but, as the Minister knows, several serious concerns were raised about its likely impact, or lack thereof, during our debate in April.
We have been advised that the GAAR will target only “egregious”, “very aggressive” or “highly abusive” avoidance schemes, which the Bill defined as those that use “contrived or abnormal steps” to obtain a tax advantage. Yet the GAAR guidance’s definition of what those entirely subjective terms mean is inadequate. It states merely that they will be interpreted and applied in their “normal” sense. I do not know how Government Members would apply those terms in their normal sense, but I am interested to know whether Opposition Members would know how to apply those terms in their normal sense, given that we will be voting on that tomorrow when the Bill is considered on Third Reading.
Stella Creasy
I wonder whether my hon. Friend, like me, is concerned that the subjectivity and lack of clarity on this subject is a little like the concept of pornography; we all know it when we see it, but defining it is very difficult unless there is clarity. With tax avoidance schemes, clarity is absolutely crucial.
Catherine McKinnell
I fear that you, Madam Deputy Speaker, might accuse me of straying into rather unexplored territory if I were to compare tax avoidance to pornography, so I simply acknowledge the point my hon. Friend makes, which is that they are very subjective terms. That point has been made not only by me, but by many experts who are very concerned about the wording in the legislation. That is why it would be useful if the Minister responded to some of the concerns that have been raised during the Bill’s consideration.
The GAAR is projected by the Government to result in an additional yield of only £85 million a year by 2017-18. That is a notable sum of money, but it does not even come close to putting a serious dent in the £5 billion tax gap estimated to arise each year as a result of avoidance activity, and it is a mere drop in the ocean compared with the overall annual tax gap of £32 billion estimated by HMRC, which we know is a conservative projection. We also know that concerns remain about the so-called “double reasonableness” test and the GAAR advisory panel that will judge whether arrangements can
“reasonably be regarded as a reasonable course of action.”
As I have highlighted previously, what one person—let us say, a tax expert who has spent his or her entire career advising companies on how they might reduce their tax liability—regards as reasonable could be very different from what a member of the public or, indeed, a Member of this House might consider to be reasonable.
Stella Creasy
My hon. Friend is making a powerful case about the importance of the measures in question for developing countries. Does she agree that the Exchequer Secretary, having spoken about the importance of acting multilaterally and understanding how international companies operate, should be able to see the benefits of transparency to the UK tax system? Surely one thing that we are concerned about right now is UK companies using overseas territories to avoid paying tax in the UK. If we had the transparency that we suggest and HMRC worked with countries such as Tanzania, there would be benefits for both UK taxpayers and developing nations. It would be a win-win situation for all concerned.
Catherine McKinnell
My hon. Friend makes a good point. The Government have trumpeted their commitment to 0.7% of GDP being spent on international aid, but they stand by and say that they can do little to assist in ensuring that that is not swallowed up by the three times more that is lost in tax avoidance every year. If they could assist, that would be a win-win situation for developing countries and the UK.
In new clause 12, we call for additional transparency in what the Exchequer Secretary admitted are four fairly reasonable requests. Those requests are well considered and are made in all sincerity. We want to be able to bring in additional tax receipts for the UK Treasury, but we also want to use our powers and information, and the additional intelligence that we would gain from transparency, not only to benefit the lives of UK citizens, for whom public resources could be funded through the tax receipts, but to support developing countries.
My hon. Friend makes the point that it is a win-win situation, and we very much agree. That is why we urge hon. Members to support our new clause. As I have said, it is completely reasonable and I cannot see why Government Members would oppose it, particularly Liberal Democrat Members—I am pleased that the hon. Member for Burnley (Gordon Birtwistle) is in the Chamber to hear this debate on an issue that I know the Liberal Democrats feel strongly about. Indeed, at their recent party conference they held a debate in support of some of the measures we are proposing. I therefore see no reason why Liberal Democrat Members will not vote with the Opposition in the Lobby this evening.
Stella Creasy
I should start by saying that I have been remiss in respect of reading the Worksop Guardian, but I will wager that it is full of comments from people who are concerned about value for money in our taxation system and those who are desperately concerned about the impact of cuts on local services. Those cuts have been driven by the fact that we do not get the tax-take in this country that we seek. This new clause and new clause 12 seek to help the Government to be better at collecting tax. Does my hon. Friend think that that would go down well with the readers of the Worksop Guardian?
John Mann
I think the readers of the Worksop Guardian will hear my hon. Friend’s comments. Those such as your good self, Mr Speaker, who are expert at using the internet can read those pearls of wisdom without having to go all the way to Worksop or order a copy at this difficult time for the parliamentary budget. I recommend it to all.
Although I failed to be selected to serve on the Finance Bill Committee, I am prepared to volunteer for a new task, if it is not too late to do so. This relates directly to new clause 4 and the Minister’s speech, and I should make it abundantly clear that I am prepared to accept the task for no additional salary, directly or indirectly. It is to do with the advisory panel on the GAAR. If its members have not yet been selected, surely the Minister would love the opportunity to select an Opposition Member who is prepared to ask some questions that the public would perhaps want asked. I would be prepared to sit on this body without additional remuneration, should the Minister, the Government and the House wish that to happen. The Minister is not intervening, so perhaps I will have to put in a written application as well.
The question of the overseas territories is very important. Hansard will record precisely what the Minister said some minutes ago, but I shall paraphrase his comments as I did not have the opportunity to take down his exact words verbatim. In essence he said that we are the leaders in the world in dealing with tax avoiders, we are showing the way, and we are going to ensure that this all happens, yet we should not do more than anybody else. But the UK Crown dependencies and overseas territories are not German, French or American, and they rely on the British armed services to protect them in times of crisis or against the threat of invasion or assault. They rely on the British legal system and on the British royal family as part of their very essence, as democracies. Therefore, our relationship with these territories is a symbiotic one, in which we should expect absolute transparency in all matters relating to taxation and to companies and individuals from here.
The banks are the worst examples of complex structures that they themselves do not understand. They allow money laundering from Mexican gangsters—the worst kind—as proven by many successful US court proceedings. Big banks at the top are happy to tell us that they do not understand their own structures because they are so complex, but the structures are established in order to maximise profit—in other words, to minimise taxation—in territories that rely on our armed services, on our legal system and our democracy to underpin and oversee them. That is a cost to us that we rightly bear, yet corporates and individuals can hide things behind the opaqueness of structures there, so that these days my constituents cannot even discover who owns their football club and what moneys are there. This applies to even the most simple of examples, never mind the biggest and most complex of banks, financial institutions and other multinationals.
Stella Creasy
I am sorry to stop my hon. Friend mid-flow because he is making a powerful case not only for the readership of the Worksop Guardian, but for being on a Bill Committee with him, especially when it comes to finance measures. That would clearly be a unique experience. Does he agree that new clause 12 would be beneficial because it offers an opportunity to gather the evidence on the tax take that would show whether the Prime Minister’s warm words about tackling tax avoidance were being put into practice? I agree with the hon. Member for Daventry (Chris Heaton-Harris), who talked about Members on both sides of the House being interested in the matter, but one thing we all need is the information. The new clause offers precisely that opportunity.
John Mann
The new clause is so modest and so moderate. How could any reasonable and rational Member of the House possibly not vote for it? I would go much further and give more robustness, including a great wealth of powers to ensure that those overseas territories and Crown dependencies were forced to give economic efficiency, justice and morality in return for the defence and everything else that they get from this country, but I recognise that one needs a majority in the House to do such things. Therefore, I appeal to those decent, sensible, smiling Back Benchers to join us in an historic vote tonight—vote with the Opposition.
Alison Seabeck (Plymouth, Moor View) (Lab)
It is a real pleasure to follow the two previous speakers. The hon. Member for Amber Valley (Nigel Mills), who is just trying to escape the Chamber, gave a particularly thoughtful speech, understandably, given his background in taxation. My hon. Friend the Member for Bassetlaw (John Mann) gave a rabble-rousing speech. By the end of it, I was absolutely gutted that he did not make it on to the Bill Committee. I am sure that Government Members do not share my sorrow. I fully expect him at least to ask the readers of the Worksop Guardian whether he should be on the GAAR board—a proposition put forward by the hon. Member for Macclesfield (David Rutley).
Turning to new clause 12, I want to talk about my visit to Gala Bingo in Plymouth last week, at which I met the chief executive officer of the Bingo Association, Miles Baron. As hon. Members would expect, those present wanted to talk about tax—mainly VAT—and the lack of a level playing field, but we moved beyond the debate that we had on that in Committee, and they talked to me about the competition in gambling and bingo from offshore, tax-avoiding, multinational companies. Gala highlighted that it pays tax in the UK, but it feels that it loses out when it comes to VAT levels, and loses out significantly to offshore multinationals, which use innovative means to avoid paying tax in the UK. It feels that it is a smaller company trying to do the right thing.
Gala is not alone, as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) made clear. If new clause 12 is taken forward, there could be a win-win situation for a number of companies in Britain and internationally, including in many third-world countries. British taxpayers are gambling away not only their income but our country’s tax revenues by using online offshore companies. If the UK is losing out, so too are many other countries; gambling is an international pastime, whether we like it or not.
Customers made clear their anger at corporation tax avoidance by Starbucks; I hope that they will continue to be discerning in a range of other fields, including gambling. To do that, they need a little more information about exactly who is doing the avoiding, and where and how avoidance happens. That is why new clause 12 is so important. The plea from my Front-Bench team for greater transparency is really welcome, because it empowers consumers.
At a time when we hear Members of the House, charities such as Christian Aid, non-governmental organisations involved in the third world as well as the general public express clearly the need to trade ethically, the need for more transparency, the need not to disadvantage developing and third-world countries, and the need for tax to be paid in the UK, we must ask whether the general anti-abuse rule in the Bill goes far enough. Does it have teeth? The Minister made all sorts of excuses and gave all sorts of reasons for not going any further, but he really needs to address the very sensible series of questions put to him by my hon. Friend the Member for Newcastle upon Tyne North on the GAAR’s lack of scope, and its failure to tackle the tax avoidance activity of multinationals.
The point that my hon. Friend the Member for Bassetlaw made about clarity of company ownership is one that virtually every MP in this House will have some sympathy with, because on a constituency level, we will have tried to track down directors of companies, and to get background information on companies, to solve relatively minor problems. Here, we are trying to ascertain exactly where they pay their tax.
To come back to bingo, a lot of people disapprove of gambling, but it is just one small part of the tax avoidance picture. It is the part of the issue that I have highlighted, simply because it is fresh in my mind following my visit. People may disapprove of gambling, but they probably disapprove more of tax avoidance. We have heard many examples of the type of companies that have been using the rules to avoid paying tax in the UK. It is worth repeating that the estimate for the tax that could be recouped by the GAAR is about £85 million, and that the current tax gap between the money that HMRC estimates could be collected and the actual amount collected is £4.5 billion. That is a significant difference.
I note that the Minister said that the GAAR was not a panacea. In fact, it is barely a sticking plaster. Although first aid is always welcome, the problem probably needs more major surgery, in the form of a strong commitment from the UK Government and the wider international community. Developing countries lose an estimated £160 billion per annum through tax dodging by multinational companies. That is much more than they receive in aid. Poor countries struggle to access the information that they need to counteract tax avoidance by foreign nationals and multinational companies. Our own tax rules need to make it easier for developing countries to identify and share vital information in order to avoid those losses. If an expert on the tax regime in a particular country were required, for example, that would be an appropriate course of action to take.
Stella Creasy
Is my hon. Friend surprised, as I am, that there is not more support for this proposal from some of those Members on the Government Benches who are less committed to the aid budget. After all, if we could tackle this problem—
Mr Speaker
Order. I say to the hon. Member for Bridgwater and West Somerset (Mr Liddell-Grainger): be quiet, and if you cannot be quiet, get out. You are adding nothing, and you are subtracting a lot. It is rude, it is stupid, it is pompous and it needs to stop—whoever it was.
Stella Creasy
Thank you, Mr Speaker. I was merely reflecting that if we could tackle the way in which tax avoidance is affecting the developing nations, we might not need to have an aid budget in the future.
Alison Seabeck
Indeed, but that is a whole separate debate. My hon. Friend makes a serious, sensible point.
In this recession, we really cannot afford to allow those billions to disappear. Nor should we allow those developing countries to lose out so substantially. We need to work closely with other Governments to bring consistency into the process and, in doing so, ensure that doing the right thing in taxation terms is given value. We need transparency so that the public can take more informed decisions about the products they buy and from whom they buy them. I hope that those Members on the Government Benches who have been toying with the idea of supporting new clause 12 will see the sense in getting justice into the taxation system, and that they will support the new clause.
Financial Services Bill
Stella Creasy Excerpts(11 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Greg Clark
The hon. Gentleman knows that the term, “payday lender” is relatively informal and loose. It is important for the FCA to have the powers it needs to protect consumers. Its focus should be on the consumer, rather than on a current definition of a practice pursued by a supplier. That is the way it is cast and it is the right power. From the discussions in the House of Lords last week—as he might imagine, I paid close attention to them—it was apparent that everyone who has taken a close interest in the past weeks, months and, in some cases years, was content that the powers vested in the FCA, which are clarified in the amendment, address all the concerns shared by Members on both sides of the House.
Stella Creasy (Walthamstow) (Lab/Co-op)
I encourage the Minister to broaden his comments to encompass all our concerns about high-cost credit companies. Having seen the wonderful damascene conversion to the need to tackle these companies, many of us want to ensure that we do not inadvertently miss out on not just those payday or short-term lenders, but doorstep lenders, logbook loans and hire purchase agreements. High-cost credit encapsulates all those issues, and I think it would be welcome to the regulator to know that the intention of Parliament is precisely to tackle the whole industry.
Greg Clark
I am grateful to the hon. Lady for her point, which makes the point I was making to the hon. Member for Harrow West (Mr Thomas). To use the term “payday lenders” exclusively is to miss a broader range of potential practices that may cause detriment to consumers, and that is why this approach is about the powers vested in the regulator.
Stella Creasy
I shall speak to amendments 78, 137 and 148, which deal with the role of the Office of Fair Trading. Before I do, I want to place on record my gratitude to Members in the other place who, along with the hon. Member for Chatham and Aylesford (Tracey Crouch) have been so supportive of the sharkstoppers campaign. I mention Lord Mitchell, Lord Kennedy, the Right Reverend Welby—I think that is the appropriate term; apologies if it is not—Baroness Howe and Baroness Grey-Thompson. They have all been fantastic in championing a measure that I know has widespread support across the country.
I also put on record my gratitude to many organisations that have been helping make the case for action on high-cost credit, whether it be R3, the insolvency practitioners, the co-operative movement and co-operative party, Unite, Community and the thousands of concerned citizens who been involved in part of the campaign. I thank the hon. Member for Chatham and Aylesford for her kind words and for using the term “tirelessly” rather than “tiresome”, which is how some people might have interpreted the doggedness with which we have persisted in campaigning on this issue. In that sense, this amendment and the damascene conversion of the Government to the need to act on the cost of credit is very welcome. Throughout this campaign, we have all said that when the Government accepted that we were right all along, we would be grateful and would take it within the spirit of cross-party agreement that something needs to be done about these companies and about the impact of debt on our constituents.
With that in mind and in genuine appreciation of the fact that this moment has happened, I now want to press the Minister, as have many others, about the nature of the amendment and what will happen in the next year. Many of us are concerned that there is still a window of opportunity driven both by the delay in the implementation of these powers for the Financial Conduct Authority until April 2014 and by the continuing pressures that many in our constituencies will face, which might mean a bonzer Christmas for many of the legal loan sharks.
We started to campaign on this issue because we could see that toxic mix in Britain of a crisis in the cost of living, of families struggling, having lost jobs or facing wage freezes in Britain and, indeed, of the lax regulation in the UK of the cost of credit. We know that those pressures have got worse, not better, for British families over the last couple of years, so we know that one in three of those families in Britain have suffered a pay freeze over the last 12 months at the same time as they have seen the cost of basics rise and continue to rise. We know that many consumers have borrowed about £2,000 on top of their secured debts—their mortgages—to try to make ends meet in the last year, but only a quarter of them have managed to pay that money back.
The concern I bring to the House tonight is that when we look ahead to 2013, many of those pressures will not just increase, but explode over the course of the next year. The consequences for many, particularly those in the poorest communities, will be severe. We know that the pressures on the cost of living are not evenly distributed in British society. We know that the poorest 10% spend up to a quarter of their incomes on basics such as housing, fuel and energy, and we know that the prices of those commodities will become higher, not lower, in the coming year. Today we heard from E.ON—the last of the big six companies to announce it—about the increase in the cost of energy that consumers will face in the new year. The companies’ average increase of between 6% and 11% means that the average annual household energy bill will reach an all-time high of £1,300 next year.
I started to campaign on this issue because I could see the impact of debt on my community in Walthamstow, in north-east London. It gives me no pleasure to say that over the past 18 months many Members on both sides of the House, representing a range of communities, have approached me to discuss cost-of living issues, but I also know that London is a harbinger of the pressures that are to come. I know, because I have seen research-based predictions that London rents will increase by 26% over the next five years, that unless we do something about the cost of credit—unless we do something to help those who are struggling with the everyday cost of living—we shall face a society in which debt is just a way of life, with all the consequences that that will have for people.
However, this is not just about the cost of housing or, indeed, the cost of energy. It is also about the everyday cost of getting to work, which is having a great impact in my local community. I have talked to people in Walthamstow who have managed to secure apprenticeships but are forced to travel around London because there are so few apprenticeships in my area. A travelcard covering zones 1 to 3 costs £35 a week. Only people who are able to live at home can afford to take the opportunity to become an apprentice earning £100 a week, and we now learn that rail fares are to rise next year.
Those are pressures on the working poor in our community, but so are changes in the benefits system. Given that there is no spare supply of housing, it does not take a genius to recognise that the 1,000 families in my community who have been told that their housing benefit will be capped in April will have to borrow to make ends meet and keep a roof over their heads. The pressures that the legal loan sharks have decided to increase are the pressures that the amendment seeks to address.
It is clear that these companies are stubbornly resisting what are now widespread concerns about them and the profits they are making. Last year the industry was worth £1.7 billion in the UK; it is predicted that next year one company alone, Wonga, will be worth £1 billion, and it is just one of more than 200 companies that are now operating here. Moreover, the companies are clearly targeting young people, including students, and they have begun to change the terms of their loans. We became aware this week that Wonga is now offering what are supposed to be short-term loans on a 60-day basis. As the Office of Fair Trading has pointed out, the companies are abusing even the most basic consumer protections in the industry. That is why we need the amendment as a starting point, but it is also why we need to look at what else the OFT can do in the year ahead.
If we allow the pressures on consumers and their cost of living to continue and do nothing to curb the legal loan sharks now, we shall see another year in which millions of people are pushed into debt by them. We already know that a third of payday loan users take out loans that they know they cannot repay, and that 50% of people who have taken out loans have missed a payment. Given the additional pressure that those people will face next year, it will be a disaster for Britain if we do not act, and that means that we should think about what the OFT itself can do. I hope that the Minister will tell us tonight whether he will support measures enabling action to be taken now.
We know that the OFT will present new proposals in the new year, and that will present an opportunity for change that could set the tone for the new Financial Conduct Authority. I agree with my hon. Friend the Member for Nottingham East (Chris Leslie) and my hon. Friend the Member for Harrow West (Mr Thomas)—who is not in the Chamber now—that there should be regular meetings with the FCA to consider the industry now, but let us use the OFT to put down those markers.
First, as was pointed out by the hon. Member for Chatham and Aylesford (Tracey Crouch), we must pin down the question of irresponsibility in lending. What is an irresponsible rate at which to lend to people? The irresponsible lending guidance should be redrafted to make clear precisely what the cap should be and precisely what constitutes consumer detriment, in terms of both duration and the amount lent and including the total cost of a loan. Secondly, it should be made clear that it is irresponsible for lenders not to use a real-time credit register and ensure that every loan is recorded.
Justin Tomlinson (North Swindon) (Con)
The hon. Lady is delivering a categorical and passionate speech about a very important subject, and she has just made one of the most important points that can be made about that subject. Does she agree that the sharing of credit information in the UK car industry has, to an extent, transformed what was a very murky market, and that lessons can be learned from that?
Stella Creasy
I pay tribute to the work that the hon. Gentleman has done in raising issues about debt and credit, and about the way in which companies such as this operate. We know that many of them use a get-out clause, arguing that they could not possibly have known that someone had eight or nine loans at the same time. That is partly because there is no register specifying rates of interest and the number of loans that people are taking out. The OFT should make it clear that that constitutes irresponsible lending, and that loans should be made on a real-time basis. It is no good for supposedly short-term credit to be provided on a monthly basis. I also agree with all those who have expressed concern about continuous payment authorities. I hope that, in the new year, the OFT will make it clear that we must end both the fraud and the debt that they cause.
Yvonne Fovargue
Continuous payment authorities also militate against affordability checks. As was established by the OFT’s last review, once companies know that they can dip into someone’s bank ad infinitum, they simply do not bother to carry out the checks .
Stella Creasy
My hon. Friend is right. I pay tribute to the work that she has done in this regard, and also in regard to debt management plans.
Bad practice is widespread in this industry. The Financial Conduct Authority will have an opportunity to set the tone when it comes to the sort of consumer credit industry that we want in the future, but let us use the opportunity presented by the OFT to do something about the problems now, and to prevent 2013 from being boom time for the legal loan sharks.
The Minister must be aware that three quarters of consumers are looking towards Christmas with severe financial concerns, and that 10 million of us in Britain feel financially squeezed. Will he state explicitly whether he will support my proposals and take them to the OFT, so that we can be certain that 2013 will be a time for legal loan sharks rather than consumers to be worried? I urge him to read the Bristol research findings—which are already in the pocket of the Department for Business, Innovation and Skills—in order to understand how measures such as this, and total cost-capping, can work, so that we can finally say that Britain is a legal loan shark-free zone.
Damian Hinds (East Hampshire) (Con)
It is an honour to follow the hon. Member for Walthamstow (Stella Creasy), and to speak in favour of the spirit of Lords amendment 78.
The problems of high-cost sub-prime debt are widely acknowledged. Although they have come much more to the fore through opinion-formers of late because of payday lenders, they are not, of course, new, and by extension—this is somewhat at variance with what the hon. Lady said—it is not new that Government are not capping the cost of problem credit. It worries me slightly that we use the term “payday” as a catch-all shorthand for all these problems, and I hope that the Minister will reassure us that we are not just talking about payday lenders.
Dealing with problems of this kind requires an integrated approach involving financial capability and the provision of alternatives for people who need access to credit, but it also requires regulation. Disclosure is not enough in this market, especially as it often involves very vulnerable consumers and the ready, easy availability of credit. It could be said that supply sometimes creates its own demand. Some people tend to opt not for the solution that best suits their needs, but for the most recent that they have seen. In seeking to address these costs, however, we need to look at costs in the broadest sense. This is not just about interest rate charges.
Stella Creasy
It is wonderful to hear the hon. Gentleman talking about the positive aspects of capping. I suggest he look at total cost capping, because arrangement fees are not the only issue; there are also issues to do with late payment fees and the incentive they give lenders to push people to keep rolling loans over. Like the hon. Gentleman, I want this to be a future-proof—that is a dreadful term—proposal. We must also ensure lenders cannot get around it, however, which is why we need to cover all the costs involved.
Damian Hinds
The hon. Lady is entirely right, and I alluded to that point when I talked about behavioural charges. It is wrong to think we can legislate perfectly for all eventualities in advance, however. This market has an amazing ability to shapeshift and find its way around any regulation we might put in place, as has been seen in the United States.
I would like to hear an assurance from the Minister that under the new regime it will be possible to have a flexible capping regime that allows for all parts of the market to operate while also insisting that they do so in a responsible way. I also seek an assurance that we will not just address “payday” loans, which are a relatively new phenomenon in this country. Home credit is massive, and it has been with us since Victorian times, and has been a problem for quite a long time. There is also pawnbroking, which my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) mentioned. Logbook loans are a big market in the United States; they have not appeared in a major way here, but we can bet our bottom dollar that they would get a big boost if other parts of the market were capped. Rent-to-own is another area.
On the basis of the Minister’s conversations across Government, can he assure us that the Government will continue with an integrated approach that addresses not just regulation but boosting financial capability, starting with children’s capability with mathematics in school? Will they also continue to support operators that provide responsible credit, in particular credit unions? I pay tribute to the work the Government are doing in supporting that sector, and would like them to go further in modernising it and making credit union services more widely available, such as through the post office network.
Infrastructure (Financial Assistance) Bill
Stella Creasy Excerpts(12 years, 1 month ago)
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Danny Alexander
I am not sure I accept my hon. Friend’s characterisation of quantitative easing. One of the strengths of the tight fiscal policy that this Government have run and will continue to run is precisely that it allows the monetary activism that we have seen in this country and, indeed, in other parts of the world. However, he is right that the purpose of the Bill is to enable infrastructure projects to come forward quickly. That is why one of the key criteria by which we will decide whether to issue a guarantee to a particular project is that it can get under way within 12 months of the guarantee being issued, and that it has the necessary consents in place. This is about bringing forward projects now; it is not about offering guarantees now for projects where nothing will happen for many years to come.
Stella Creasy (Walthamstow) (Lab/Co-op)
Many Members will want to follow where the public money is spent, and we should consider the role of the Public Accounts Committee in understanding these measures. Will the Minister say a little more about when a liability will go on to the balance books, and the impact of the value for money assessment of the Public Accounts Committee of any of these projects? What will be the impact on those decisions and on any future liability that might be incurred?
Danny Alexander
Of course, the Public Accounts Committee will be able to undertake scrutiny in the normal way. Clause 3 sets out detailed reporting requirements to Parliament for the guarantees, and the PAC will want to scrutinise such matters. As I was explaining earlier, these contingent liabilities will be reported through the whole of Government accounts process, which is the appropriate way to report such things. They will manifest themselves as public spending only as and when the liabilities are called, or where an assumption has to be made about the likelihood of a guarantee being called; otherwise, they are contingent liabilities, as the hon. Lady will well understand.
The Bill contains measures that will support growth, jobs and families, all at minimal expected cost to the taxpayer. It will support the UK’s construction sector by providing access to finance for financially credible, high value for money projects. It will unlock the investment that the UK needs to make it one of the best places in the world to do business, and to support sustainable growth balanced across sectors and regions.
Stella Creasy (Walthamstow) (Lab/Co-op)
With every piece of legislation we are asked to consider in this House it is important to apply the test of why we are here. I believe that all Members across the House are here because they wish to improve the communities they represent and forward the causes they care about. The test for me tonight is whether this Bill will deal with the issues that my community and others across the country currently face.
The economic crisis across the nation cannot have passed anybody by. Given current levels of debt, disappointment and fear, many companies and families in our communities are struggling. When that happens, people look to their Governments as the first line of defence. Many of us in opposition fear that, in some of the ways the Government are approaching legislation, rather than being the home front, they seem to be saying, “Don’t panic, Mr Mainwaring.” I think that that is what we are seeing tonight. The Bill is designed to give the appearance that something is being done, but the critical question we must all ask is this: what is the something that needs to be done for the communities we represent?
Our communities are suffering from a toxic mix of several factors. First and foremost, there is a crippling lack of confidence in our country’s economic condition. The figure that should challenge the Government the most is the £750 billion-worth of assets that companies in this country are sitting on, which they have been stockpiling over the past four years. Frankly, companies in this country do not need credit; they need good reasons to spend. We have to give them those good reasons to spend credit and get demand going again.
When that demand is going, we know that that means jobs for communities such as mine, where there has been a stubborn 5,000 people out of work over the past year. It means tackling the long-term unemployment that is pock-marking too many of our young people. It means tackling the issues that my hon. Friend the Member for Glasgow North East (Mr Bain) mentioned, as people are having to work in different ways that do not suit their needs, setting up their own businesses and hoping against hope to make the money to keep a roof above their heads. It means tackling the low level of vacancies in our economy. It means tackling the third part of the trifecta of issues affecting the rising costs of living in our communities—families who are struggling with unemployment and wage freezes are also struggling with the increasing costs of transport, housing and food.
We have to ask ourselves whether the Bill will do more to advance the issues that people need to be advanced, and can be tackled, or will simply pass them by. We have to ask how it will help to restore our economy. We all understand the impact of choking off investment infrastructure, because we have seen it over the past two years. We have seen the fall in housing construction, which has resulted in 120,000 jobs disappearing from our economy. We have seen the dithering over our transport infrastructure, which has affected the discussions on aviation, high-speed rail, and, in my part of the world, London Transport, trains and electrification. We have seen the consequences for companies that are reliant on the internet and for communities who needed the broadband promise to have been implemented in 2012, not by 2015. We have seen decimated new industries that could offer great hope to our economy —in particular, the solar panel industry, decapitated by this Government through the choices they have made.
The Government have failed to understand the crucial link between the public and private sectors and the consequences of investment in one for benefits to the other. That is what the Bill must address. To give an example from my constituency—I am sorry that the hon. Member for Suffolk Coastal (Dr Coffey) is no longer here—Willowfield school was good to go under the Building Schools for the Future programme and is now finally being rehabilitated. Not only have the children in my constituency had to wait—and are still waiting—for the quality school environment that they need to achieve their potential, but young people who were out of work could have been put to work on building that school, which we all recognise we need.
It is a false economy not to see infrastructure investment as part of a growth strategy. I welcome the fact that the Government have now understood the potential that that has to make an impact on my community, let alone the other struggling communities across the country. It is also something that businesses would support. Two thirds of companies are worried about the standards of our local roads; 95% of them believe that congestion has impacted on their business; and a quarter feel that they have lost at least £1,000 in the past year alone because of problems with their internet connectivity. Most crucially, two thirds of businesses have no confidence that there will be improvements to address the problems, despite the Government’s proclamations.
The Bill must pass that test if it is to be part of the economic revival that our communities and our country need. Frankly, as many Labour Members have pointed out, it does not pass muster because of the restrictions that it places on spending. As the shadow Chief Secretary said, it is, in effect, deadweight funding for schemes that would get support in any case. I hope that Ministers will deal with that issue, because they have yet to identify the schemes that should receive funding—the so-called perfect schemes that have all the requirements in place and are good to go, but that for some mysterious reason are not moving forward. There is no clarity about when these projects might be chosen so that we know when and how they might make a difference. We might look to the national infrastructure plan, but we are already on version 2 and are promised version 3 shortly. One can understand why the businesses sitting on the £750 billion do not have confidence in the situation.
I encourage Treasury Ministers to think again about how they use the Public Accounts Committee. The Chief Secretary brushed off the argument that the PAC has an important role to play in value-for-money questions, especially in deciding what projects are invested in or what constitutes good value for money. As other Members have pointed out, there is lack of clarity about how the decisions on which schemes are invested in will be made, which Department will make those choices, and how the schemes will fit in with other spending priorities and, indeed, other priorities across Government.
I endorse the words of my right hon. Friend the Member for Salford and Eccles (Hazel Blears), who talked about the social value test and the importance of looking at investments in the round. We should not merely ask, “Can we get the road built?” We should also ask, “Can we get our young people back to work? Can we skill them up so that this money does not just pay back once but repeatedly?” That is the social return on investment that we should all look for.
Ministers also need to answer the question that occurs to many of us when we examine the current economic climate. One in four public sector organisations have reportedly said that they are planning to cancel investment projects in the next four months. If there is not clarity about which investment projects will be taken forward, when, and how that will be decided, what confidence can we have that the decision making process has not already corroded the possibility of those projects happening? Businesses that rely on work that they know is not going to come about will not get the comfort that the Bill should offer.
That is why the shadow Chief Secretary was right to talk about the Bill being a peashooter when we needed a bazooka. Frankly, it is a peashooter when we are facing a tank of a problem, because we know that there are worse things to come in our economy if the Government do not change course. We know that the cuts to benefits will kick in next year and that the cost of living will continue to rise as the cost of transport, energy and housing goes up. The impact of any investment that the Bill brings forward will not be felt for years to come, so it does nothing to address the challenges that my community and others around the country are facing now, about which I talked at the start of my speech.
I urge Ministers to consider what more they can do for the real wealth creators in our communities. We know that two thirds of jobs come from small businesses, so I make the same plea that I made in the Queen’s Speech debate for the Government to look again at what more they can do to help small businesses and unlock the money that is sitting in companies’ bank accounts, which could be invested in Britain’s future entrepreneurs. They should consider how we could use time-limited tax breaks to get our economy moving now, so that we can give real hope to families who are in debt.
We all want to get Britain back to work and reverse the current toxic cycle. I say that in a week when we have heard of one company doing fantastically successfully. It would not be a speech in the House by me were I not to point out that legal loan sharks are the one blooming industry in our country—we heard this week that Wonga’s profits are up 300%. We cannot have another year in which the only people doing well in this country are the legal loan sharks.
I ask Ministers not just to invest in infrastructure but to think again about what they can do for communities such as mine, Ealing North, Nottingham and Portsmouth. They should consider how they can bring jobs back to those communities, because the people we represent need and deserve nothing less.
Business and the Economy
Stella Creasy Excerpts(12 years, 5 months ago)
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Vince Cable
There were many candidates for the Queen’s Speech—a lot of productive legislation. The reforms in higher education are being pursued successfully. Many of the alarms sounded about the university reforms have not been realised. We can pursue questions about higher education in Business, Innovation and Skills questions next week. This is not about the higher education Bill.
Stella Creasy (Walthamstow) (Lab/Co-op)
On the point about what is not in the Queen’s Speech, I agree with what the Secretary of State said about concern about Governments who were intensely relaxed about excessive financial practices. In a week when we found out that Wonga intends to lend to small businesses failed by Project Merlin, does the Secretary of State regret that there is nothing in the Queen’s Speech to deal with legal loan sharking?
Stella Creasy (Walthamstow) (Lab/Co-op)
I was very challenged earlier when I heard the hon. Member for Blackpool North and Cleveleys (Paul Maynard)—I am sad that he is not here—demeaning the contributions of Labour Members by saying that we thought that this was a “state of the nation” debate rather than a debate on the Queen’s Speech. That struck me as a powerful example of the strong differences between Labour Members and Government Members when looking at our country. While Government Members believe that we are just bystanders to the crises that are unfolding across kitchen tables, in businesses and in our economies at local and national level, Labour Members believe in action. That is why we hear this Queen’s Speech and ask, “What is it doing to act on the central crisis that we now face in our economy?”
We are in a double-dip recession for the first time since 1975. Our economy, which was recovering, has slumped backwards—not by accident, but by design. What is more, there is no end in sight—no happiness to come for our constituents, who are struggling in these difficult economic times. The most optimistic pundits say that we might get growth of about 0.4 %, but the majority are gloomy, with some even saying that the economy will continue to contract. In 2010, this Government inherited an economy that was growing, thanks to an active Government who were seeking consciously and purposefully to intervene to make sure that this country pulled through the economic times we were living in—a Government who invested in our infrastructure and, yes, used temporary tax cuts and looked at how they could grow the economy. What a contrast!
That is the context in which we judge this Queen’s Speech, because two years on, things are getting worse, not better, for our constituents and for our country. A range of factors have been blamed for that situation, whether it be snow or the royal wedding; this afternoon I even heard that television was the problem. It is as though the Government cannot see what is staring them in the face—the fact that the impact of the decisions that they have made and the way in which they are dealing with the deficit has exacerbated the situation.
Whether it is about the future jobs fund, which they have had to reinstate because it is bad value for money to have nearly 1 million young people out of work, or the fact that only 30% of the cuts have taken place so far, which means that the problems are going to continue, they simply do not get “it”. “It” is a very simple issue—the crippling lack of confidence that consumers and businesses are now experiencing. I have spoken at length in this House about consumer confidence and my concerns about how consumers are behaving in the present economic situation. That is why tonight I want to talk about businesses, which cite the lack of consumer demand as the biggest barrier to growth.
Many hon. Members have talked tonight about the problems in our economy as a result of firms sitting on £750 billion worth of cash and deposits. They are not investing because they have no confidence in this Government and how they are managing the economy. All the prophecies about austerity have become real, because everybody is shutting up shop, such is the uncertainty. Businesses themselves say, “We will continue to be on the critical list until companies get their chequebooks out.” That is the problem that Britain faces and this Queen’s Speech should be addressing it.
As all hon. Members have mentioned, John Cridland, the director of the CBI, said that he wanted a Queen’s Speech to help businesses grow and create the jobs that we all want. Even the Secretary of State himself admitted that we needed a compelling vision, for our economy and for the future, that we could all fight for, but there has to be more to drive economic growth in this country than hope that the Olympics or the jubilee might do it. It is striking that the contrast between a bystander Government and an active Government is shown in the concept of growth. The previous Government had Ministers dedicated to a plan for growth, but it has taken this Government two years to get round to a growth plan, and what do we see? It is small beer and not the kind of thing that will challenge the £750 billion sitting there waiting, not being used. That is why businesses have been so disappointed.
Let me mention just one example. The hon. Member for South Down (Ms Ritchie) spoke passionately about our green economy—a massive growth industry that in 2009-10 was worth £116 billion. We were sixth in the global economy in this regard, but where are we now? What has happened to our green economy? What does the green investment bank really offer? It offers little to change the situation, let alone solve the problems caused by cutting off the solar panels tariff.
Yes, there are good things in the Queen’s Speech, including measures on parental leave and shareholders’ rights, but they are not the drivers of growth that we need. We need something stronger. Many hon. Members from all parties have made many serious points about things that we could do to drive growth, so let me offer some ideas that have not yet been talked about.
First, this Government need to learn from America and Germany and create a state investment bank that could lead to businesses having the cash they so desperately need. This would not be one of my speeches if I did not talk about credit and the problems caused by a lack of credit or by expensive credit. Those problems are now affecting businesses, too. There is no more damning indictment of this Government’s failure to manage our economy and support businesses than the fact that the legal loan sharks have stepped into the breach. Ministers should be ashamed that Wonga sees a business opportunity in the failure of Project Merlin. This Government could have used the Queen’s Speech to correct that. They could have intervened and set up a state investment bank—22% of small businesses say that access to finance is also causing them problems—but they did not do so.
Julian Smith
Does the hon. Lady welcome the Government’s national loan guarantee scheme, which will reduce the cost of loans to those small businesses that apply through it?
Stella Creasy
The hon. Gentleman does not understand the scale or the severity of the problems that businesses are facing in getting hold of credit, whether that is because the loan system is not working or because there has been a contraction in the amount of money in our economy in the past year. In part, that is because people are paying off loans and the banks are not lending to people—indeed, one of the banks in whose operations we have the most say, Royal Bank of Scotland, has failed substantially to do so. Whether for consumers or businesses, credit at an affordable rate just is not there to allow them to grow and give them the confidence to invest in the plant and materials that they need to help get our economy going again.
In addition, I want the Government to take seriously the role that small businesses could play in our economic revival. All hon. Members have mentioned that this evening. We know that two thirds of new jobs in economies such as ours come from small businesses—those employing fewer than 50 people. We needed a Queen’s Speech for small businesses, announcing an arsenal of measures to help them and a tough look at what could be done in the tax and regulatory regimes to help start-ups and small and medium-sized enterprises—perhaps even a start-up business Bill. Where was that? Where was the recognition of the different needs of small businesses, as opposed to big businesses?
We could even have gone further and used sunset clauses to give tax breaks in this financial year alone to help unlock that £750 billion—money we need to be out there, being invested in our companies and our communities. However, it is not going to be out there, because this Queen’s Speech will not deliver the kick-start that our economy so desperately needs, as shown in the picture painted by my hon. Friends the Members for Birmingham, Erdington (Jack Dromey) and for Edinburgh East (Sheila Gilmore) of the human cost of doing nothing and of being bystanders as our economy continues to deteriorate. There are consequences for our communities and our country.
This Queen’s Speech could have been a brilliant masterclass in thinking creatively and strategically about the role of Government in investing in our communities and in getting our economy to grow, but it was not. I believe the country will view the economy and the Queen’s Speech as people do when they see a toddler holding a hammer—with a deep sense of foreboding about the damage that it will do to anyone within its radius and no sense of how to stop it. I really hope that the Government will think again about both how they deal with people’s need to access credit in our communities and how they need to support small businesses. I fear that the Queen’s Speech does not meet the test that the country so desperately needs it to meet.
Financial Services Bill
Stella Creasy Excerpts(12 years, 6 months ago)
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Mr Hoban
I ask the hon. Lady just to hold her horses for a moment. This is about the third time we have discussed this matter and she may want to engage in the debate later, but we need to understand the function of the market. The previous Government—[Interruption.] The hon. Member for Nottingham East (Chris Leslie) says that we are still making the wrong decisions, but our predecessors in government examined this issue of the cost of credit and concluded that price caps worked against the interests of consumers. This Government have, following the parliamentary debates on the matter, commissioned research to examine the impact of a cap on the total cost of credit. We should look at the research, understand what remedies are being proposed and follow that through. One of the advantages of moving the cost of the regulation of consumer credit away from the OFT to the FCA is that the FCA has a greater range of tools and can make a wider range of interventions than the more narrowly focused solutions of the OFT.
Stella Creasy
Borrowing has always been a part of the British way of life and part of our debates in the House as long as I have been an MP, but as we argue how best to tackle the nation’s debt, we forget at our peril the need to help our constituents to manage their debts. As the Minister pointed out, amendment 40 is our third attempt to help our constituents to manage their debts and to give them the kind of protections from such toxic credit that others around the world take for granted.
I hope I can convince the Minister that this is not a political whim, but a matter of deep importance to many who are struggling with such companies, not just in my constituency, but in constituencies across the country. If he is not convinced, I urge him to come to one of my surgeries, or to come with me down my high street, which now has 16 such companies, to see the problem and understand the urgency of action. I am sure the hon. Members for Enfield North (Nick de Bois), for North Swindon (Justin Tomlinson) and for South Swindon (Mr Buckland) have the same problems in their constituencies. The amendment is about urgent action. Too many in our communities cannot afford to wait for the outcome of research in the summer, let alone for future legislation at some unknown point.
Let me start by finding common ground. I welcome the development of the Financial Conduct Authority and its role in managing consumer credit, and the statement that it will be more willing to intervene to address problems with financial products. The question we must address today—it is what the amendment speaks to—is whether the new authority will have the teeth to deal with the problems our constituents face and act in their interests. The amendment is designed to end any uncertainty on that by giving explicit authority to the FCA to act on one aspect of our consumer market that many hon. Members are concerned about. I want to put on record my thanks to those on both sides of the House who have co-signed the amendment. That speaks to the disquiet that many have that no alternatives have been put forward.
We know why there are problems, but it is worth repeating the reasons. As the costs of food, energy and transport soar and as unemployment continues to bite family households, and as wages freeze, British families are struggling and borrowing to manage their daily needs. Aviva’s work shows that UK families owe on average £10,500, which represents nearly half the average annual household income of £23,000. That level of debt will only increase, because there is no end in sight to the financial pressures people face. One in six of our nation is now a “zombie debtor”, which means a person who is able only to service the interest on their debt and not reduce it, and a third of us have no savings at all.
Since the start of the recession, mainstream lenders such as high street banks have been much less willing to lend money, but the truth is that for many, banks are making things worse, not better. Average overdraft fees in this country have simply been reduced from £25 to £12 a day, which is still a huge sum for people who have no money. Credit card rates have soared by 2% recently, taking the average interest rate to its highest level in 13 years, despite the Bank of England base rate remaining at 0.5% for 25 months. It is little wonder that many people are turning to the high-cost credit market to make ends meet.
Last year, the payday loan sector in this country was worth £1.7 billion, a fivefold increase in a year. Research by R3 tells us that nearly 4 million people will take out a payday loan in the coming months alone. The annual percentage rate—it is a misleading term, but it is still worth looking at—can begin at 444% and escalate to 16,500% or more. Home credit lenders, about which the hon. Member for North Swindon has warned us, can charge £82 in interest and collection charges for every £100 loaned.
It is little wonder that Payplan, a debt charity, is seeing a deluge of people in financial difficulty as a result of the payday loan market. It says that nearly half its clients had six or more payday loans in the last year alone. More than half owe more than £500 to those companies and, crucially, 61% had more than one loan at a time. Eighty-six per cent. of Payplan’s clients used their loans for basics such as food, transport and the everyday costs of living, not luxuries.
Such lenders are exploding across our towns and cities. Dollar Financial underpins Money Shop. Money Shop had just one store in 1992; it now has 450 shops across the UK. There are two in my high street in Walthamstow. Meanwhile, our friends at Wonga have secured £73 million from the Wellcome Trust to expand their operations; the Provident Financial share price has risen by 16% since the comprehensive spending review; and BrightHouse, which provides hire purchase agreements at hugely extortionate rates, has announced plans to nearly treble the number of stores it operates in our country.
The FCA has many toxic practices in the market to address. As the high-cost credit industry admits, a quarter of home credit users and a quarter of payday users have no other form of credit. As consumers, therefore, they do not have the power to shop around for more affordable forms of credit. That many of those firms do not do credit checks means that customers who borrow regularly from them cannot build up a track record to show to other lenders to prove that they are credit worthy so that they can borrow at more acceptable prices.
High-cost credit companies have high fixed costs, so they make their money by repeat lending, meaning that their entire business strategy is geared towards repeat borrowing and the “rolling over” of loans, about which many hon. Members are concerned. Thirty-two per cent. of payday loans are refinanced—the average is twice—and 15% of doorstep loans are refinanced before the end of their term. All hon. Members know what “rolling over” means: it means that interest can be charged on interest accrued as well as the initial amount loaned.
Such companies also engage in aggressive marketing campaigns to encourage that repeat borrowing, persistently offering customers the opportunity to extend their loans and take out new ones. There is strong anecdotal evidence that many of those companies lend consumers more money than they can afford to pay back in a month to ensure that they have to roll over their loan.
Above all, the rates charged by high-cost credit companies often do not reflect any economic rate, meaning one that reflects competition in the market or the cost of lending. That is why rates vary so substantially, from 4,500% with Wonga to a mere 2,500% with Uncle Buck, 1,700% with Kwik Cash or 1,200% with PaydayUK. There is simply a lack of competition in the market to drive the price down in the way Ministers expect.
Justin Tomlinson
There is a lot of competition, but because people cannot understand APRs, it is irrelevant. If repayments were displayed in cash terms, competition would kick in and help consumers.
Stella Creasy
The hon. Gentleman slightly pre-empts me. I was about to say that the doorstep market, 67% of which is owned by Provident Financial, is not competitive. Nevertheless, his point about APRs being difficult to understand is well understood.
The amendment is not a panacea. We need total cost caps on credit charges so that consumers have an explicit amount beyond which the cost of any loan will never go—interest rates, administration charges and late repayment fees included. I also agree strongly with the hon. Member for North Swindon about financial education and investment in debt advocacy services to give consumers help to negotiate with creditors and the support needed to make good decisions.
We also need an expansion in alternative sources of affordable credit through credit unions and social finance. The idea that the market will somehow reduce prices where there is disparity between the consumer and supplier belongs in the textbooks, not real life. We also need a proactive regulator to ensure effective competition and protection against consumer detriments. The amendment would address those problems and provide the opportunity, presented by the FCA, to take action as quickly as possible and to prevent the problems in our communities created by these loans from becoming worse.
I agree with the Chair of the Treasury Committee, who said about replacing the FSA:
“The creation of the FCA is an opportunity to create something much better. If we are not careful, the FCA will become the poor relation among the new institutions. But it is the one that will matter most to millions of consumers.”
However, for the FCA to be that better institution, its power to act on toxic financial products needs to be made clear. The financial services practitioner panel stated:
“We acknowledge that it will be useful for the FCA to have tighter powers to control any product that can and does do harm.”
The amendment is in that spirit. It would give explicit powers to the FCA to cap, where it sees appropriate, the charges firms can apply.
I understand that the Government have been briefing people that those powers are not needed because the FCA already has product intervention powers. The Minister seems to think that that could happen, but he must address two questions: first, can it intervene; and, secondly, are its powers of deterrence or sanction appropriate to the toxicity we all want to prevent? Clearly, there are good grounds to fear that the first is not the case. In his speech today and in the document setting out the FCA’s powers, there are somersaults and loops worthy of the Olympics gymnastics team. The document states:
“The government has said that the FCA will not be an economic regulator in the sense of prescribing returns for financial products or services. The FCA will, however, be interested in prices because prices and margins can be key indicators of whether a market is competitive. Where its powers allow, the FCA will take into consideration more positively the cost of products or services in making judgements about whether consumers are being fairly treated. Where competition is impaired, price intervention by the FCA may be one of a number of tools necessary to protect consumers.”
I am sorry to disappoint the hon. Member for Vale of Glamorgan (Alun Cairns), who is not in his place, but that is part of the Government’s thinking.
The problem, however, is that the Government’s thinking is fuzzy. Lawyers in this area have highlighted the lack of clarity about whether the FCA is intended to be a price regulator and about whether the legislation proposes such a thing. John Odgers, the lawyer for Which?, highlighted that point in his written evidence to the Treasury Committee:
“It seems to me to be desirable that a power of price intervention should be spelled out, if it is intended. Financial services regulators have not in this jurisdiction previously exercised that type of power, and might in future be loth to do so without a specific statutory authority, as the use of such a power would be particularly likely to attract a challenge.”
The Minister should talk to the OFT. It is particularly well placed to tell the FCA about the problems that the fear of legal scrutiny places on consumer credit regulation. As it admitted, that fear has defined its work in this field and its lack of action against these firms. It has feared the cost to the public purse of unsuccessful legal actions. In his evidence to the Public Accounts Committee on 5 September last year, the chair of the OFT stated that
“there are companies now pursuing particular practices that 10 or 15 years ago perhaps would not have employed the most expensive lawyers and taken every point under the sun. Now, however, that is happening with an increasing number of cases where you might have otherwise expected the party to throw in the towel after the first round. They do not do that, and therefore we have to take very careful assessments. We have a particular case at the moment that I have in mind where, much to my surprise, the parties have involved the most expensive City lawyers, and we know perfectly well that we are at substantial risks on costs if we lose.”
It is little wonder that Google has a stronger track record on taking action against such adverts and firms than the OFT, which, in the past eight years, has managed to take action against one brokerage firm only.
Susan Elan Jones (Clwyd South) (Lab)
Are the Government extremely weak on this issue compared with other Governments around the world?
Stella Creasy
We should listen to the companies themselves. They state explicitly that they are coming to the UK and expanding their operations here at an alarming rate precisely because of the lack of regulation of our payday industry in comparison with other countries. They are clear that, because we do not have that regulation, we are fertile territory for their practices.
Stella Creasy
Does the hon. Gentleman agree that, although limiting the number of roll-overs is certainly a step in the right direction, there is a risk that it could result in what has happened in America, where such a limit has led to firms paying off someone’s loan and starting a new one in order to circumvent the regulation? We need a regulation with clear, explicit powers to act in relation to these companies in a way that they cannot shrink away from.
Neil Parish
That is absolutely right. Many of the people taking out these loans earn less than £15,500 a year and therefore cannot afford the loan in the first place. I have sympathy for their position, but are we really helping them by allowing them to get into the hands of loan sharks, which results in their having to pay back huge amounts of money that they simply do not have?
I have made the point before that if financial companies and loan sharks are arguing that they need to charge huge amounts of interest because people are such a high security risk, they should not be lending them the money in the first place. Let us remember the old adage about finance: these companies will lend us an umbrella when the sun is shining, but they will take it away again as soon as it starts to rain. In the circumstances that we are describing, they should never have made the loans in the first place. Citizens Advice and financial advisers often tell us about people who have got themselves into huge amounts of debt, perhaps through no fault of their own.
It needs to be made absolutely clear to people what to expect. I am not a great believer in huge amounts of regulation, but I do believe that the consumer should be able to see exactly what they are signing up to at the outset, and be made fully aware of the consequences of their actions. They often do not understand the terms if they are hidden in the small print or expressed as complicated percentages, but if they were told, “You can borrow £100, but if you don’t pay it back on time, you could end up paying £2,000 back”, it might make them sit up and think about exactly what they were borrowing. They might then choose not to do it, or to go to someone who could lend them the money at a better rate.
The Government are doing a great deal to increase the use of credit unions, and we need to do much more work on that. Perhaps we should look into ways of financing them. I have a very successful one in my constituency, and we need to build on that. Only a small percentage of people here borrow money from credit unions, unlike in Ireland, where almost 50% of people have access to such loans.
Sheila Gilmore
That is indeed the case. I am not suggesting that we should not have financial education. What I am suggesting is that we also need regulation. My hon. Friend the Member for Walthamstow eloquently outlined the various forms that high-cost credit takes, so control over it is also important.
Stella Creasy
I thank my hon. Friend for giving way. Much as I support a good deal of what the hon. Member for North Swindon (Justin Tomlinson) said, I think he misunderstands the situation. Many of my constituents have tried to negotiate, but these companies will not respond to constituents individually as they do not recognise individuals in the negotiation of credit plans, so it is often organisations that have a status—a citizens advice bureau or Christians Against Poverty, for example—who are able to make the breakthrough. That is why these debt management companies are so invidious. They claim the same status as Christians Against Poverty and the citizens advice bureaux, so it is not just a case of being financially savvy; it is also about the having the muscle of a respected organisation behind people. That can cause some of the problems.
Sheila Gilmore
I thank my hon. Friend for that important point of view.
If we do not take steps to deal with high-cost credit, we will do many people a disservice. I urge the Minister, even at this stage, to support amendment 40. It does not lay down a set of rules, but merely asks the FCA to make the rules an important priority. In order to protect people who will often feel that they have little choice but to use this sort of lending, we need to have controls in place.
Alun Cairns
I entirely agree. That is one of my reasons for opposing amendment 40. In my view, it will not achieve what it sets out to achieve, but will have far-reaching consequences for not only the FCA but consumers and providers.
Alun Cairns
I will give way to the hon. Lady, and I trust that I shall then have a chance to respond to her question.
Stella Creasy
Will the hon. Gentleman enlighten the House on his concern about the expertise of the FCA and its ability to exercise the powers granted by the amendment? The amendment simply gives the FCA those powers; it does not direct it to use them automatically. I should also like to know why he was concerned by what the Minister said earlier about his support for the use of price regulation.
Alun Cairns
There are clauses that allow for product intervention and refer to terms and conditions, but that only underlines the fact that amendment 40 is not necessary. I do not understand the inconsistency. I am also worried about the reference to maximum pricing in the amendment. If it were passed, price regulation would be introduced to the financial services sector for the first time, because banking services are currently based on variable cost. Many products are intended to remove the risk from the consumer, and the risk is priced accordingly. Price controls could not accommodate changes and fluctuations in the marketplace. The amendment poses a major threat to the supply of valuable products to many consumers, to the free market, and to competition principles.
Direct pricing also poses the threat of practical consequences. How would the FCA determine the price of a product? One of my hon. Friends said that he considered 50% to be appropriate, but some Members are now shaking their heads, suggesting that that might be too high. How would the FCA decide whether the basis of pricing should be fixed or variable? What about the cross-subsidies that are arranged within financial institutions with the aim of securing the financial certainty that many consumers demand? What about the long-run incremental costs? It would be impossible to price products accordingly; but even if that were a solution, it would require a large-scale, sophisticated infrastructure body to provide continual oversight of the hundreds of products provided by hundreds of organisations.
For those reasons, I oppose amendment 40. In the same breath, however, I pay tribute to the campaigning that has highlighted the scandal of payday loans, and to the Treasury, which has responded accordingly. We have already heard that there will be a report by the end of the summer, and that it will be acted on. I hope that those who share the concern expressed by the hon. Member for Walthamstow about payday loans will be reassured by what has been said not only by Ministers but by Back Benchers, who will maintain the pressure for action.
Stella Creasy
There is genuine concern about the view of lawyers that unless the power is explicit, it will be open to challenge. Will the Minister publish the legal advice that he has had to the contrary, supporting his assessment that the power in amendment 40 could enable prices to be capped as part of action on consumer detriment?
Mr Hoban
I am certain that the FCA’s broad range of powers will enable it to do that. It can use its powers in pursuit of its consumer protection objectives. However, those are not the only powers that are available.
The hon. Member for Makerfield (Yvonne Fovargue) asked whether the FCA would be able to suspend permission with immediate effect. Under new section 55Y, it will be able to vary the permission of a firm, or to impose a requirement on a firm with immediate effect if it considers that to be necessary. We will consider whether the OFT should be given the same powers in the interim.
A helpful question was asked about the asymmetry between the information given to lenders and that given to borrowers, and about whether a cash illustration could be provided alongside information about the annual percentage rate. The consumer credit directive requires the costs of credit to be specified in terms of the APR. The Commission will review the directive in 2013. We have ensured that there is a new “with regard to” provision for the FCA—something else that it must consider when it seeks to secure an appropriate degree of protection for consumers. Consumers must have timely provision of information, and that advice must be accurate and be fit for purpose in the eyes of the consumer, not those of the provider of the service. We will consider whether a provider of consumer credit should quote an indicative cash cost alongside the APR.
Financial Services Bill
Stella Creasy Excerpts(12 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Osborne
As I have said, when the Bill is passed, the statutory responsibility will be on the Bank of England to inform the Government if there is a material risk that public funds might be used. We are trying to get away from a system in which it is the Treasury’s responsibility to try to regulate the financial system on a day-to-day basis in peacetime. We are giving the responsibility and clear accountability to the Bank of England so that it will trigger the arrangement by informing us of a material risk. As is set out in the legislation, twice-yearly meetings between the Chancellor and the Governor to discuss these things are required, although there could also be further meetings. Once the Bank has informed the Treasury of a material risk, which it will have a statutory responsibility to do, there will be a power of direction. I should just say, for the sake of completeness, that if we wish to keep the details of the use of this power confidential, I or my successors would have to inform, on a confidential basis, the Chairs of the Treasury Committee and the Public Accounts Committee, so that representatives of Parliament were informed.
The fourth and final flaw in the system that we are trying to address is that customers and consumers too often get a raw deal from the regulation of financial services. The disappearance from the high street of names such as HBOS and Bradford & Bingley has inevitably reduced competition in an industry that was becoming more and more consolidated even before the crash. The existing regulator’s dual prudential and consumer remit means that it cannot give consumer interests its undivided attention. In response to the Vickers commission and the Joint Committee, the new authority will have an explicit responsibility to promote competition. We have listened to the Joint Committee and announced that we will also bring the regulation of consumer credit into the authority’s remit so that, for the first time, the regulation of all retail financial services will be under one roof, and things like payday loans will be subject to tougher regulation.
Stella Creasy (Walthamstow) (Lab/Co-op)
The banks that have gone from my high street have been replaced by high-cost credit companies that offer exorbitant rates of interest. I know that the Financial Conduct Authority will have powers over competition. Does the Chancellor accept the argument, made by many Opposition Members, that price inevitably reflects competition, so it is absolutely right that the FCA should look to regulate the price of those products and finally tackle the legal loan sharks?
Mr Osborne
The Department for Business, Innovation and Skills has commissioned a review of the cost of credit, but I think that the Bill takes a significant step on that, partly because of the Joint Committee’s recommendations, because the regulation of all retail financial services will now come under the remit of the FCA. It will have the power to ban specific products, to name and shame particular firms and to publish details of misleading promotions, so there will be considerable new powers that were not previously available. On the hon. Lady’s specific concern about the price of credit, that is something the Government are looking at. Of course we are also looking at the recommendations of the FSA’s recent report on RBS—I do not wish to reopen that issue—in relation to legislation on the sanctions available for bank directors who fail in their role.
The Bill is an important piece of legislation. I believe that it replaces the confused and dysfunctional system that presided over the biggest banking crisis in our modern history. It creates clear lines of accountability by putting the Bank of England in charge of monitoring and dealing with debt levels in our economy. However, no amount of new clauses, powers or institutions can substitute for something for which Parliament cannot legislate: judgment. There were thousands of pages of financial regulation in existence in 2007, but that did not stop the queues forming outside Northern Rock or prevent RBS from making its final, fatal, bid for ABN AMRO. I hope that we have learned that financial stability depends not simply on a checklist of regulation, but on individuals within our regulators feeling empowered to trust their judgment, and our giving them the power to act on it. By putting our central bank in charge of monitoring overall levels of risk and the soundness of individual firms, we are trusting in its judgment. By giving the elected Government of the day the power of direction in a crisis, we are trusting in their judgment, and that of Parliament, to which they are accountable.
Britain has paid a higher price than most for what went so badly wrong in our banking system. The errors of the economic policy that led to such a boom have cost every taxpayer dear. Today we show that we are learning the lessons and passing on to our successors a better system than the one we inherited. I commend the Bill to the House.
Stella Creasy (Walthamstow) (Lab/Co-op)
This is the third time that we on this side of the House have proposed legislative action on the high-cost credit market in the UK. As Mae West said:
“I’ll try anything once, twice if I like it, three times to make sure.”
I can tell the House that we are absolutely committed to the argument that something needs to change drastically in our consumer credit markets. This Bill offers the potential to address some of those concerns. We have had a positive debate today about some of the large-scale problems in our financial markets, but I want to set out the other picture. I shall talk about those people at the other end of our financial markets, the people who are called the “under-banked”. There is now irrefutable evidence that millions of people in this country are unable to access credit in a manner that is positive and constructive to their financial health. We should consider that one in six of us is now what are called “zombie debtors”—paying off the interest on our debts, not the capital.
A perfect storm has hit UK consumers in the last couple of years as pay freezes, rises in unemployment, rises in the cost of living and a lack of regulation of the consumer credit market has made us a fertile territory for the high-cost credit industry. It is not by coincidence that these companies have flourished in Britain in the last couple of years, as there has been a 200% increase in the numbers of people borrowing from payday loan companies and a similar increase in the amount of money they are making from British consumers in the last 18 months alone.
With a mind to what we could do to the Financial Services Bill, let me set out what the prices are and what they mean to British consumers. Many Members will be familiar with my own personal travails with a company called Wonga whose rates are 4,214% representative APR in a year. Some may be familiar with QuickQuid whose rates are 1,734% representative APR, while some may have come across the Money Shop in their constituencies, with a mere 219% representative APR. Some may be familiar with some of the newer players in the market—for example, Ferratum, a major European payday loan company, which has a mere 3,113% APR. Then there is Peachy Loans, which will lend people £100 at a time, with £15 interest every 10 days. That works out at a representative APR of 16,381% every year. This is not to mention companies like Borrow, recently advertising themselves on the radio and TV, which encourages people to borrow £10,000 a year at an APR of 68%.
Before we discuss any legislation, it is worth thinking about this industry and how it operates. It wants to paint itself as the new industry, the new form of financial credit that Britons are crying out for, that the Facebook generation wants, that is online, quick, easy and consumable. There is another side to this story, however, as many will have seen the people who are struggling because of the toxicities in this market. When we know that 30% of payday loans are taken out to pay off other payday loans, that should tell us that something is going drastically wrong that needs addressing.
Payplan, a debt charity company, says that 46% of its clients had six or more payday loans in the last year alone. This is not a short-term temporary measure; this is a way of life for millions of people in our country nowadays. More than half the people going to Payplan for debt advice owed more than £500 to these companies, and 61% had more than one at a time. Most crucially, 86% of its clients were using the loans for basics—food, transport and the basic costs of everyday living, not luxuries. This is not a market that is working for British consumers; it is not an industry that wants to lend people money and have them pay it off within a reasonable length of time. It is an industry that wants to lend to people, to keep lending to them and to keep taking money from them, drips at a time, raising the interest rate as it goes along, and adding money to the bill every single month.
The rates in themselves mean that debt is more likely. That is the challenge we have to address with our consumer credit regulations. We are talking about people who are short of cash now. They are not using it as a temporary stop-gap; they are struggling in Britain today. We need to be aware that 7 million Britons last year put their mortgages on their credit cards and 1 million people used payday loans to pay their mortgages. That is the sort of challenge we have to address. It is also the opportunity we have with the new Financial Conduct Authority.
I welcome the fact that Ministers have listened to the advice I gave them on 16 June last year when I suggested that the FCA could indeed take over this role and look at this industry. I welcome that, as I say, but I know there are issues over how the FCA should deal with the promotion of competition and over the real powers that the FCA needs to address these companies and to regulate this market. Indeed, I note that other consumer organisations such as Consumer Focus, Citizens Advice and the Financial Services Consumer Panel have written to the Minister asking for the FCA to have specific powers for product intervention. This must go beyond the point, which I recognise the hon. Member for St Austell and Newquay (Stephen Gilbert) mentioned, about the paucity of the response that the Office of Fair Trading has been able to make to these companies. I know all too well myself from when I tried to get the OFT to act on companies that did not display their APR how difficult it is to make progress. This goes beyond advertising and people knowing what the price is. It is about the fact that the prices reflected in the APRs I mentioned show that this is not a free market and that competition in itself is unable in this market to ensure that consumers are not put in detriment.
I know that many Members agree that things could be done, so let us give the FCA the power to intervene to make sure that there is competition and to use price as an indicator of competition. Let us give the FCA the real power it needs finally to address this country’s legal loan sharking. I agree with the hon. Member for Eastbourne (Stephen Lloyd) that there is a challenge with unauthorised overdrafts and credit cards, so let us use the FCA finally to make good on this Government’s broken promise to tackle the exorbitant rates on credit cards and unauthorised overdraft charges and cap those prices.
John Hemming (Birmingham, Yardley) (LD)
I share the hon. Lady’s concern about the very high levels of interest rates charged on certain debts. Does she share my concern about the effect of continual late payment fees, which have exactly the same effect?
Stella Creasy
Yes, I agree, and I hope that Government Members will join me in condemning those banks and credit card companies that, at the very time when millions of British consumers are struggling, are ratcheting up their interest rates, following the lack of regulation on excessive interest rates on our credit cards.
Stella Creasy
I hope the hon. Gentleman is on his feet to agree with me that this must be stopped.
John Hemming
I wanted to make reference to my entry in the register, as I have certain banking shares.
Stella Creasy
I hope that the hon. Gentleman will use the fact that he has shares to make representations to his bank about the consumer credit market in the UK.
The consequence of doing nothing about this industry and doing nothing about how British families are being made to struggle because of the cost of credit are far too great to see. Frankly, it is not good enough for the Chancellor and the Minister to say, “Well, we have to wait until we see the research from BIS.” We have been waiting years—yes, years—for action on this issue since it was first put to Ministers.
David Mowat (Warrington South) (Con)
I am following the hon. Lady’s argument closely, and many Government Members are equally concerned about these practices, but will she clarify what rate of APR she thinks should be the maximum for a loan of, say, one week?
Stella Creasy
I have answered this question in previous debates. I do not think that we should set a single rate of APR and I do not think we should have an interest rate cap: I believe we should have a total cost cap. In the absence of the Government making progress on such a cap, however, I view the FCA as offering an opportunity to start the more effective regulation of this industry. I hope that the hon. Gentleman would agree that the opportunity to have the industry and consumers setting rates and clarifying what is excessive and what counts as consumer detriment in the listing of these products represents a way forward. That is the argument of Labour Members, and we shall seek to table amendments on that basis. It is no wonder that the number of complaints about these companies and these loans is sky-rocketing in the UK.
Stella Creasy
I am sorry, but I will not, as I do not have much time left and I have already taken some interventions.
Between October and December last year, there was a 25% increase in the number of people complaining about these companies, and three quarters of those complaints were upheld by the financial services ombudsman. Demand for these products will only get stronger. Two in five people are expecting a pay freeze this year, and one in five expect to lose their job. Inflation rates might slow, but that will only slow the pace of the cost of living, especially in the capital city. Six million people are already considered financially fragile; if one more bill goes up—their mortgage, transport costs or even their food bills—they will be pushed further and further into debt. With banks not lending to these people, it is these legal loan sharks who will pick up the pieces.
We should reflect on the fact that the one industry growing in this country is these legal loan sharks. Cash Converters proudly says it is going to open another 40 new shops—at 1,413% APR; while Albemarle is opening 300 new shops, charging 853% APR. This is also a serious issue for our economy. If millions of families have thousands of pounds worth of debt that they cannot escape, it is clearly going to impact on consumer confidence. This will be the new economic crisis that will come to Britain in the years to come if we do not deal with this problem, as we have concentrations of communities with thousands of pounds of debt hanging around their necks, limiting the choices they can make for their futures and limiting the kind of lives they can lead. The failure to tackle these issues will leave millions of people with unmanageable debt, yet we have an opportunity to make progress through this Bill.
This problem is not going to go away. It is right to look at the industry and for consumers to be involved in setting the rates and determining what is consumer detriment. Let me tell the Minister that the public clearly want action on legal loan sharks. His own Back Benchers want action on them. I welcome the conversion of Government Members to this cause. I just hope that it is a conversion that will continue all the way through to voting in favour of our amendments. Even the industry wants action. It does not want the current uncertainty.
My simple question to Ministers, if they will not accept our amendments, will not send out the message and will not finally tackle legal loan sharking is this: how much worse does it have to get for the people affected in our communities? We know that 4 million people in Britain are already borrowing from these companies, and there could be as many as 10 million if we do not deal with these problems within the next year. That will be 10 million people stuck in a cycle of toxic debt that will damage them and their families for years to come.
I therefore ask the Minister to take on board the suggested amendments and to take account of the desire of Members on both sides of the House for action on legal loan sharking. Let us finally make the third time a charm.
Autumn Statement
Stella Creasy Excerpts(12 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Stella Creasy (Walthamstow) (Lab/Co-op)
The Government have today announced plans that take three times as much from families as from banks. Given that, as we now see, half of all households cannot make ends meet at the end of the month, does the Chancellor think that, under his plans, more or fewer people will be forced to borrow from legal and illegal loan sharks?
Mr Osborne
That is a pretty ludicrous question. We have tried to help families through the freeze in fuel duty in January and with rail fares, and we are uprating working and non-working-age benefits in the way that I set out. We were unable to pay the additional £110 on the child tax credit child element, as I explained. That is because of the substantial increase that the uprating will provide.