Financial Guidance and Claims Bill [Lords]

Debate between Stella Creasy and Luciana Berger

3rd reading: House of Commons & Report: 3rd sitting: House of Commons
Tuesday 24th April 2018 Commons Chamber

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

I am delighted that we have finally got our time to debate the Bill; some people in Parliament might not be, but I believe that consumer protection is one of the most important things we can do in this place, because it speaks to the incremental unfairness that people face in life that individuals cannot face on their own but which together as a society we can tackle. In that sense, I rise to support amendments very much in that vein, and one of their common themes is that they come from Co-operative as well as Labour MPs. The co-op movement was founded on the values of consumer activism so I want to put on the record my support for amendments 31, 1 and 2, which my hon. Friend the Member for Harrow West (Gareth Thomas) will be speaking to later. I also want to get onto the next group, which are in the name of my other Co-op colleague, my hon. Friend the Member for Liverpool, Wavertree (Luciana Berger), amendments 5, 6 and 7 on mental health and debt.

In particular, however, in speaking to my new clause 1 and amendment 4, on the FCA’s potential role in tackling the impact of high-cost credit on our society, I want to repeat my Cassandra impression on debt. The Bill is about the fair treatment of consumers. I urge the Minister and the Government, in my Cassandra-like way, to learn the lessons of the payday lending industry. I do not need to tell any Member that the nation is drowning in debt, as we all have seen in our constituency surgeries. We owe more as individuals than do the Government: total household debt in June 2016 was £1.23 trillion, which is more than the Government’s national debt.

Average UK unsecured debt is now £14,000 and will be £19,000 by the end of the Parliament. The number of people who have gone bankrupt in the last year has soared to its highest level since the financial crisis. The reasons are not rocket science: there is simply too much month at the end of their money. Research now shows that economic insecurity has become the new normal for at least 70% of the UK’s working population, who the RSA has described as “chronically broke” and that 32% of the UK’s workers—people who are earning a wage—have less than 500 quid in savings and 41% have less than a grand. It is little wonder that a third are desperately concerned about debt.

Unemployment rates might still be dropping, but we all know that the cost of living has not dropped, and personal debt has filled the vacuum. So, too, has that insecurity, with 1 million on zero-hours contracts and nearly 2 million people in temporary work—and that is even before we get on to those in self-employment. In my constituency, 15% of people are self-employed. These are people who cannot predict their incomes. It is little wonder that the high-cost credit industry has been preying on these people.

One in 10 UK adults say their incomes change significantly from month to month, and almost half say they have experienced at least one monthly drop in income, with the average monthly drop being £385. Who of us could afford to lose that much from our monthly budget without there being consequences? Nearly half those people were self-employed or in that insecure work, which makes budgeting, on which much of the Bill depends, so difficult, and more than half said that one reason they experienced problems was an unexpected expense—a quarter had had two unexpected expenses.

The costs that people face when the washing machine breaks down or the landlord puts the rent up cannot be planned for, but they are all too frequently an everyday part of life. It is little wonder that nearly 6 million households now spend more than 60% of their income on essential outgoings. They have little flexibility in their budgets to begin with, so when those unexpected costs come, of course they turn to borrowing.

We know that that is not the case for everyone. We know that there are very wealthy people whose incomes are about five times as much as those of the people in the bottom half of our income stratosphere. That is what the new clause and the amendment are about. There are people who can manage borrowing well within their budgets, but the reality of modern-day Britain is that there are many more people for whom borrowing in itself becomes the problem. We know that 25% of the UK’s lowest-income households are struggling with debt and experiencing that “chronically broke” feeling. It is little wonder that it causes so many mental health challenges.

It is not the traditional demons to which people who are struggling are now turning. We did make progress on payday lending—the so-called legal loan sharks—but that industry does not go away; it simply mutates. It simply finds new ways in which to prey on those people. The new clause and the amendment are about credit cards. I would wager that most Members have one credit card, if not two, in their pockets. Many of us may also have had that conversation with constituents who have come to us when they are about to be evicted because they cannot pay their rent and are behind with their costs. When we ask them, “Do you have any debt?” they say, “No.” When we ask, “Have you a credit card?” they say, “Of course.” Because credit cards are so ubiquitous in our society, we do not think of the danger that they can be.

That is why I tabled the new clause and the amendment. As the Minister knows, I am frustrated with the Financial Conduct Authority, which has been looking into credit cards but does not see the risk. This is where I become Cassandra, because the risk is all too obvious. Of course there are people for whom credit cards work well, but we know that a significant chunk of the British population are in persistent debt and that their credit cards are an integral part of that debt. They are paying about £2.50 in interest and charges for each £1 of their borrowing that they repay. That matters, because we stopped it happening in the payday lending industry by introducing a cap.

My simple question to the Minister is this. Why do we want to protect one group of consumers from that kind of persistent debt, but fail to learn the lessons when it comes to other types of product? The issue is not whether the credit involves a payday loan or a credit card; it is the credit itself, and the cost of the credit. I hope to convince the Minister of that.

When we look into consumer debt, we can already see just how damaging credit cards have been. At the end of 2016, consumer credit debt amounted to £236 billion, which is about 15% of total household debt, but it accounts for half the interest payments that are made each year. When the FCA conducted a survey of credit card debt, it found that 19% of consumers—one in five—paid just the interest rather than the repayment charges. What could be called “zombie debtors” had 5.1 million accounts. On average, it would take them more than 10 years to pay off their debt. They are stuck in debt because of their credit cards. Little wonder that 40% of adults say they sometimes struggle to make it to payday, and a third of them say that it is because they are making credit card repayments. Debt is breeding difficulty, and difficulty is breeding more debt for them and their communities.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

I thank my hon. Friend for making such an impassioned speech about such a serious issue. I am sure that there are Members in all parts of the House who meet constituents in their surgeries and hear about their credit card debts, involving not just one card but, in some cases, two, three, four, five, six, seven or eight. It is the people with the most debt who are preyed on by those who give them access to additional cards, which only add to their burden.

[Stella Creasy]

My hon. Friend is absolutely right. It is no surprise that she has done so much work on the link between debt and mental health issues.

We are already seeing in the credit card industry the same patterns that we saw in the payday lending industry. If we are honest, we must admit that it took us too long, as a House, to act in respect of that industry. So many of us saw people in our constituency surgeries who were losing their homes and people who were massively in debt because they had become stuck in payday loans that they were using to pay for basics such as rent and food. But when we did act, what a difference it made. Bringing in a cap on the cost of credit has led to an 86% reduction in the number of people going to citizens advice bureaux with problems caused by payday lending. So one question for us is what the consequences will be if we do not act on credit card lenders. The Minister may say to me that the credit card industry is completely different from the payday loan industry—that is what he said when we had an Adjournment debate about this—so let me try to convince him that the two are intertwined.

I see in my local community, as other Members may have seen, companies such as Vanquis, Aqua and Capital One—indeed, Vanquis is owned by Provident, which is a doorstep lending company—offering credit to people who have bad credit histories and driving them into the same level of debt as payday loans did. Indeed, the FCA’s data shows exactly that, which is why it is such a mystery to me that it does not choose to learn the lessons from the payday lending industry and act accordingly.

Someone who has an Aqua credit card with a monthly interest rate of 3.992%, has borrowed £1,000 and is only paying the minimum monthly payment will pay £480 in interest by the end of the first year. By the end of the second year, the figure will be nearly £1,000—as much as they borrowed, which is the cap that we have put on payday lending. By the end of the third year, bearing in mind that a big group of consumers get stuck in this way for 10 years, they will have paid back double what they owed. Such companies are targeting our communities in much the same way as the payday lending industry did. They are targeting people with insecure incomes, because they have seen a new market. As I said, this industry does not go away; it just mutates.

Citizens Advice’s recent research about insecure income shows us just how much of a problem there is. People with high levels of income volatility are also five times as likely as others to have accessed this form of high-cost credit to meet the essentials—to put food on their table, to put petrol in their car to get to work and to pay their rent. Those are not costs that they can cut back on but the costs of everyday living. People with volatile incomes are also more likely to be paying fees and charges on cards, as well as overdraft fees.

That is why it is frustrating that, from the get-go, the FCA ruled out capping the cost of credit on credit cards and so learning the lesson from payday lending. It thinks the answer is to ask people to pay back money earlier, as if they have the spare cash to do that. It is not a fair fight for individual consumers against credit card companies, just as it was not a fair fight against payday loan companies. That is why we should intervene to set a fair market and learn the lessons about capping.

My new clause 1 does something simple: it asks the new financial guidance and claims body to step in, because the FCA is not doing its job and looking after the interests of consumers. It is not recognising, as Cassandra does, the risk that is coming and acting to avoid it. It says that persistent debt is when somebody pays 100% in interest and charges on top of the amount to be repaid, but it is not applying its own rule to credit cards even though we have seen how effective it has been in the case of payday lending.

I ask the Economic Secretary to show the leadership that this issue needs and that I believe the House would support. If he says today that he will take a strong hand with the FCA and not let it wait years and years, watching our constituents get into consistent debt with credit cards, logbook loans or any other form of high-cost credit, he will have my backing. I have tabled my amendment and new clause to give him the opportunity to tell us that he gets it. The House does not want to wait another five or six years watching our constituents get into debt, as we did with payday lending. I am sure the Government would not want to be forced to cap the cost of credit, as we had to force them in that case, and I am sure that he is proud of the difference that capping the cost of credit for payday lending has made to millions of consumers in this country.

FCA data shows us that millions of credit card owners need our help and protection now, which is why I have tabled the new clause and amendment. I believe that there will be support for them, but I want to give the Economic Secretary the opportunity to do what I know he wants to do, which is to ensure that we do not leave it so long this time. I look forward to hearing what he says, and I hope that other Members will support my call, because frankly, there are too many people in our constituencies who need and deserve nothing less.

Unpaid Internships

Debate between Stella Creasy and Luciana Berger

Tuesday 18th June 2013 Westminster Hall

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

Thank you, Mr Caton. I promise you that I shall be brief—uncharacteristically, perhaps.

We have already spoken at length about the fantastic work that my right hon. Friend the Member for Salford and Eccles (Hazel Blears) has done on the subject of internships. I feel equally passionately about it, as a former youth worker and as a former intern. I had an internship at the Fabian Society in 1995—if anyone present, perhaps my right hon. Friend, was getting the society’s mailings at the time, that was me, with my blood from the paper cuts. I clearly learned a lot in the year I was there, but it was different, and we need to understand how the culture has now changed. That was back in history—the shadow Minister is looking at me, so I shall say back in 1995—but things have changed substantially since then. As a youth worker, I was horrified by the stories that young people told me about the requirement to work full time for six or seven months or more without pay, perhaps with occasional expenses. They did not see anything wrong with the system, because everyone had to do it. That is what we have to change.

My internship was pre-national minimum wage. The widespread abuse of young people who want to get a step on the ladder is bad not only for them, but for employers, because the badge of having done an internship is being devalued as a result of the changes. It is no longer as clear to employers as it should be that people who have done an internship have had a training opportunity to learn and develop their skill set, so that they are worth talking to—an internship used to be a badge of quality.

The question is how to get the best and to avoid the worst in such a scenario. I have worked in the voluntary sector, so I see some simple rules that we can learn from; it is not rocket science to fix the problems. I made an intervention about the difference between business-critical and value-added experiences; the issue is not only about whether people are being paid, but whether, when they do an internship, they are learning skills and developing themselves as an individual, so that they are someone who a future employer will look at and think, “Actually, that is someone who I want to have in my work force.” The voluntary sector is clear about what a volunteer can do and, frankly, businesses should learn from that. For a key, business-critical role in their industry, they should not be relying on someone who has not had the requisite training and who might not be able to take the pressures or deal with the possible demands. Offering people opportunities through value-added experiences, however —to learn about what we do, complement what we do and see what else is happening in the industry—is a very positive thing to do.

Today, therefore, I want to add to the debate how we get our own house in order. Having had experience in the voluntary sector and the community, as well as my personal experience, I am extremely concerned. Seeing how things operate in Parliament, I am frightened that some of the progress made in recent years is being put at risk by some of the decisions of our mutual friend, the Independent Parliamentary Standards Authority. Hon. Members have already discussed our concern that some MPs are advertising unpaid internships—as many as 260 MPs, according to some suggestions—but 183 MPs are definitely using the voluntary internship agreement. I looked into the issue and talked to IPSA about it, but I have real concerns, because a number of Members of Parliament and I have applied for additional support; there has been an increase in casework, the business-critical work that I need to do as an MP for a community facing a lot of pressures, because of the changes in policy in recent months.

IPSA accepts the case for me and other Members of Parliament to have an extra member of staff, but it refuses the funding, arguing that its job is not to deal with the shortfall in funding for MPs or with the increased pressures faced by them. A member of staff at IPSA even suggested that I might make up the shortfall by using unpaid internships. If we acknowledge the increasing pressure on MPs’ offices, we must recognise the resulting temptation for Members to deal with the consequences. I myself had to make some difficult decisions about what correspondence and activities I cannot undertake, because I do not have the staffing complement to deal with them. Having been an intern and feeling so strongly on the matter, I will not use unpaid interns, and I have been clear with my community about that.

[Luciana Berger]

Does my hon. Friend share my concern that, under the IPSA arrangements, we can have an unpaid volunteer or whatever—essentially, an unpaid intern—whom, from a limitless budget, we can pay expenses? If, however, we want to pay a member of staff—I want to pay interns a London living wage—we cannot use that limitless budget to support the intern with travel and lunch expenses. Such a situation helps those people who do not want to pay their interns.

[Stella Creasy]

I agree. That is exactly the point that I am coming on to. If we look at the voluntary arrangements, I am concerned that MPs might inadvertently be getting on the wrong side of the national minimum wage legislation owing to such pressures. There needs to be recognition that MPs who want to do the right thing and to offer those skills and training opportunities must be able to support that.

I have looked at IPSA’s finances, and it consistently over-budgets for MPs’ staffing costs—there is a £7 million underspend in the system every single year. IPSA tells me that the money is not carried forward, but simply returned to the Treasury. I encourage the Minister to have some serious conversations about whether, given the commitment to fund the positions and that MPs are saying, “We need that support, we want to offer those training opportunities”, IPSA could look at the possibility of feeding the money into schemes such as the one put in place by my right hon. Friend the Member for Salford and Eccles. I also encourage the Minister to seek urgently the legal advice given to IPSA about MPs’ voluntary arrangements, to ensure that no MP is inadvertently breaking the national minimum wage legislation and that there is clarity about what we can ask someone to do. MPs should be advised about internships and about value-added versus business-critical work.

We also need to look at university placements. I have been offered young people who want to do nine months in my office, unpaid, for a university placement. We must be clear that we can tackle the problems and get our house in order in a number of different ways. They are not difficult or impossible to do; it would be good for Parliament to do them. We should open ourselves up to get quality staff, who will then have a badge of pride—the young people will have had an internship in an MP’s office and been paid, so their ability to live in our capital city would not have been at risk, and they will learnt the requisite skills. Anyone who has had to deal with and train young people knows that someone who does not have a good skill set and who has not had good training is twice as much work for an employer as someone who does come with experience.

It is therefore in our interest to get things right and to challenge IPSA to understand the pressure on MPs’ offices, to ensure that we really can get our house in order. If the Minister wants to see some of my evidence on the problems, I will be more than happy to share it with her. I hope that she will look favourably on my pleas for her help in this matter, so that we can be the beacon that we want to be.