Cost of Living

Yvonne Fovargue Excerpts

Wednesday 16th May 2012 Commons Chamber

[Yvonne Fovargue (Makerfield) (Lab)]

I am pleased to follow the hon. Member for South Thanet (Laura Sandys) talking about consumers being ripped off, because that is an area I want to explore. Thousands of hard-working people in my constituency and across the country looked to this Tory-led Government to provide some support to ease the pressure on their squeezed living standards and help them cope with ever-rising bills, but they looked in vain. They got an energy Bill that will do nothing for the consumer, no legislation to reduce water bills and nothing on soaring train fares. There is no help for those people who saw their mortgages rise by 0.5% last month, pushing them off the step of “just about coping” and into the pit of “not managing”. There was no help for the people in my constituency who lost their tax credits because they cannot get extra hours from their employers. Where are those people to go? Far too often they go to payday lenders. If we are talking about people who rip consumers off, let us talk about payday lending.

Debt Advice research has shown that one in four people who take out a payday loan needed the money to buy food or essentials for their household and 44% used them to pay off other debts, but that does not help the situation. Indeed, if there is too much month left at the end of the money one month and a payday loan is taken out, the pressure is exacerbated the next month, and so on until the individual either rolls over the loan, using it as a long-term credit facility—an extremely expensive one—or takes out more and more loans from different companies.

I have met a constituent who took out a £300 loan. Unfortunately, she lost her job within two weeks when the company she worked for closed down, and 18 months on she owes £2,700 to the payday loan company, Toothfairy, which still refuses to negotiate a payment plan with the citizens advice bureau. I hate to disillusion thousands of children, but in this case Toothfairy is really the wicked witch. Over a three-month period I have collected 29 cases locally from the local citizens advice bureau and the local credit unions; it is a short time to amass the evidence that I am presenting to the Office of Fair Trading.

At the Credit Today conference on alternative lending last week, research was submitted showing that the average borrower from a payday lender also has overdrafts and credit card debts and is often paying only the interest on those. A payday loan is not a way of managing a deficit budget, and I worry that the lack of credit and affordability checks by these companies is pushing individuals into a worse situation, because by providing expensive loans they are delaying those individuals facing the issue and seeking help with their debts, which they need to do earlier. Nobody wants to push people into the arms of loan sharks or into offshore lending, but there has to be a point when the realities of the situation are pointed out and people are encouraged to seek free debt advice. Loans cannot keep being provided to people who cannot afford to pay for them time after time, but companies do not stop.

There were many excellent suggestions in the Business, Innovation and Skills Committee’s report, which came out on 7 March, but did any protection for such consumers make it into the Queen’s Speech? Not one recommendation made it into the legislative programme; in fact, the Government have chosen to ignore the recommendation that, given all the research that is available in the USA and Canada, further research, with all the associated costs, is unnecessary.

The implementation of any measures has been delayed by commissioning the university of Bristol to carry out a study. In the meantime, people such as the constituent to whom I referred can continue to obtain 14 payday loans in one day because of the lack of a real-time database owned by the regulator. My unemployed young constituent, who took out a loan with repayments that were higher than his benefit payments, with no affordability or credit check, will continue to be unprotected.

What of the people who realise their problems and look for debt advice to help them? They are still at risk from the fee-charging debt management sector. In December 2011 I highlighted the fact that if someone types any combination of “debt”, “advice” or “citizen” into Google, they find that the first three companies shown are fee-charging. I typed them in again yesterday, and yes, the first three that came up were adverts for charging companies.

The first site titles itself:

“Government Debt Help—Write off up to 70% of your debts.”

The second one states:

“Write off Your Debts—Debts over £3,000? Government help available to clear your debts”—

I was not aware that that was in the Queen’s Speech. And the third one titles itself:

“Citizens Debt Help Bureau—Help for debts over £2000.”

I have said many times that such loans are a distress purchase, and these sites are where people who are awake at 3 o’clock in the morning go to look for help to clear their debts. If I was up at 3 o’clock in the morning after being worried by the bailiffs or by bills, I am not sure that I would see that those sites were adverts and scroll down to the first search ranking, Citizens Advice.

To provide the advice that is needed, not just advice at the point when someone loses their home, the agencies need to be given hope—the hope that money is available to help their clients. In the UK last year, one home was repossessed every 15 minutes: somebody lost their home every 15 minutes. To stop the misery and the costs of that, early advice is essential, not advice at the point when someone loses their home.

So where was the help for the big society, the organisations that use volunteers, supported by paid staff, to deliver advice? It was certainly not in the Queen’s Speech, and with the advice review once more kicked into the long grass—I believe that it might report in the autumn—there will be more uncertainty and more unplanned closures of law centres, citizens advice bureaux and other invaluable local advice agencies. There is no hope in this Queen’s Speech for the agencies, and that means no hope for their clients. The cost of living is going up, debts are going out of control, payday lending is proliferating and there are no measures to deal with it.

This Government are out of touch with the real lives of the people I represent in Abram, Ashton, Hindley and throughout Makerfield. They do not want Lords reform. They want practical help to keep their heads above water and to pay their bills, not a Government who allow an industry to flourish unchecked. This industry appears to throw a lifebelt to people, but it is all too often lead-lined, and it ends up finally drowning them in debt.