Financial Guidance and Claims Bill [Lords]

Yvonne Fovargue Excerpts

2nd reading: House of Commons
Monday 22nd January 2018 Commons Chamber

[Ms McVey]

My hon. Friend makes a good point. Household debt rocketed under the previous Labour Government, and we are now ensuring that it comes down, because it is still too high. I particularly appreciate that the Bill has cross-party support, because we all know that we need to help people who are in debt.

As a result of a range of broader reforms and initiatives, such as automatic enrolment, which has increased the number of people saving into pension schemes and the pension freedoms that allow anyone aged 55 and over to take their whole pension as a lump sum without paying tax on the first 25%, the number of people looking for high-quality, impartial financial guidance continues to rise. We look forward to the new body meeting those challenges, building on the existing good work of the Money Advice Service, the Pensions Advisory Service and Pension Wise.

[Yvonne Fovargue (Makerfield) (Lab)]

Has the Minister considered whether the breathing space will apply to public as well as private sector debts, because many people find that they are pursued more vigorously by those creditors?

[Ms McVey]

While looking at this respite, we are having a call for evidence to determine how best to proceed, and no doubt the hon. Lady’s point will be raised.

--- Later in debate ---

[Yvonne Fovargue (Makerfield) (Lab)]

It is a pleasure to follow the hon. Member for Chippenham (Michelle Donelan). Unsurprisingly, I will talk about debt later.

I welcome the thrust of the Bill. Consolidating the three bodies into one makes sense, but the new one must be well run. It may be a little churlish, but I would point out that the Money Advice Service has rightly been criticised over the years, not least in this place, for its attempts to duplicate the work undertaken by more experienced agencies that are better known to the public. It has spent an inordinate amount on a fancy website and on television adverts—£26 million in one year—which did little to raise its profile. After all, who apart from me remembers, “What would MA say?” in its adverts? I remember that only because I used to swear at the television when they came on.

The new body has to be leaner. The thrust of its role must be to facilitate the work of others. That is where the money should go: not on promoting itself—not on fancy adverts—but on facilitating the work of others that already have brand recognition. Frontline delivery should be key, and it should not duplicate existing services, but focus on filling the gaps using existing high-quality not-for-profit providers.

I am a little alarmed that the recent contract round included for-profit providers. I worked at a debt advice charity when A4E got contracts, and I remember what a disaster it was during those contracts. Given the recent privatisation of Carillion and the problems it has had, perhaps we should focus on not-for-profit agencies that have existed for a very long time. In fact, the 80th anniversary of Citizens Advice is coming up shortly. It has existed for over 70 years with very little funding, so it—we—can manage money.

Clause 3(10) makes it clear that the new body needs to “work with others” in carrying out its strategic function. I interpret this as meaning that it should take a collaborative approach, and I hope that that will be the case. Any standards put in place should be designed in conjunction with the relevant providers and other bodies, and designed around people’s needs—those of the people who use the service and of the people who deliver it—and what works in practice. I must say that quantity does not always equal quality and good outcomes for people using the service.

There should be different channels with different funding. People may sometimes want to start on one channel and move to another. Face-to-face access can be more important, but people sometimes need an initial contact. As I always say, it used to be a black joke in the citizens advice bureau where I worked that if someone walked in with a carrier bag with unopened bills, we would say, “Aha! That’s a debt client.” If such people cannot even open their bills, they are not going to go online.

The object of the single financial guidance body is to ensure that the public have access to good-quality, free and impartial financial guidance, pension advice and debt advice. That aim is fine, but if the new body is to work well, we must ensure that its objectives and functions are clear and comprehensive; that the governance and oversight structure, under the Department to which it is responsible, is robust; and that it does not stray into trying to raise awareness of itself and conduct its own research. I want the body to have a laser-like focus on commissioning high-quality, independent services that will help more people to avoid financial difficulty and debt.

Improvements were made in the Lords to the Bill as originally drafted, and I welcome them. For example, the consumer protection function is really vital, and I hope that the Government will not to remove the provision when the Bill goes into Committee. The same goes for cold calling. That amendment gives the new body the power to advise the Secretary of State to ban cold calling for pensions.

We have heard enough on both sides of the House to be able to say that such a ban should apply across the board. There is a strength of feeling in favour of saying that cold calling is not helping consumers or anyone else. I get cold calls asking whether I have had an accident, but I have not had an accident in my car—touch wood—for 25 years. When I had such a call last week, I got the name of the company and its telephone number, and I reported it to the Telephone Preference Service, but the TPS still could not find the company—it was a shell company—and that is not good enough.

To be fair, the Minister in the other place did listen, and on Third Reading the Government introduced their own amendment to add the objective that the new body should bear in mind

“the needs of people in vulnerable circumstances”.

That is a real move forward, but it would be good to link this more explicitly with the promotion of financial inclusion, and it is a real shame that that was missed. It is a real boon to have Ministers with responsibility for financial inclusion—they are a bit like buses: we wait for one, and then two come along at once—but there is a worry that something may fall through the cracks. I believe that the Lords Financial Exclusion Committee, which looked at this issue, was right to say that there should be a financial inclusion Minister who works across the board. How many Departments have been mentioned already today? We have heard about BEIS, DCMS, the Treasury, the DWP and the Ministry of Justice. We need somebody who can look at this across all Departments and have a proper financial inclusion strategy.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

I merely make the point that my hon. Friend the Economic Secretary to the Treasury and I will be hosting the financial inclusion policy forum together. Surely the whole purpose of the response to the Financial Exclusion Committee’s report was to ensure joined-up Government by the two principal Departments holding other Departments’ feet to the fire, and I assure the hon. Lady that that is what we intend most fully to do.

[Yvonne Fovargue]

I am very pleased to hear that, but I think financial inclusion is so important on so many levels that it needs a Cabinet position, and having one Minister responsible for it would be really helpful.

I am pleased to hear about the breathing space, for which there is cross-party support. It is long overdue, and we need to ensure that it is up and running as soon as possible. We should not really wait for the creation of the financial guidance body as is proposed in the Bill, because that will be at an uncertain date and we need a timeframe now. After all, six in 10 people, while they are waiting for advice, take out more credit while they are not protected and are being chased by creditors, because it is very easy to promise something to the last person who rings them or knocks on the door.

We have to get the scheme details right, as has been said. It should not just act as a moratorium or a freeze. It should introduce a statutory repayment plan so that debtors are protected while they repay their debts, and the period needs to be long enough for the debt solution to be put in place after seeking advice. Six weeks is not long enough. Frankly, when somebody brings in all their debts, they often forget one. When people write to creditors, some reply immediately while others delay, thinking, “If we don’t bother, we can put a bit of pressure on.” Then the person finds another debt that they had forgotten about, so they have to write again and do another financial statement. Six months is the minimum amount of time to get everything back and to work out a proper financial statement that covers all creditors. Twelve months is probably reasonable, but there should be a minimum period and an option to extend. It should be a reward for those people who are doing the right thing and seeking debt advice.

The scheme needs to include all debt, including that owed to central and local government, which have the worst record on forbearance. In fact, the utility companies, which are often derided, are often better. On council tax arrears, bailiffs are called in far too early and far too often.

It is crucial that the Government get it right when replacing the Money Advice Service. Getting effective financial guidance to people early is key to improving household finances and economic security. We need a body that recognises that people often need help before they reach crisis point. Moreover, once they reach that crisis point, they need to be able to access debt advice quickly, and they need to go to the right body. It is after they have sought debt advice and have a financial statement that they will focus on budgeting for the future, so let us give them guidance after they have had debt advice, because that is when they will concentrate on household bills and what they will do in the future.

The scheme also has to recognise that it does not take a lot to push those on low income into financial difficulty and a spiral of debt. It only takes an income shock. It does not always have to be a big thing such as divorce, job loss or bereavement. It is often something simple such as the washing machine breaking down or expensive repairs to the car they need to get to work. A little resilience and savings would help to address such issues. I want a scheme that helps people save, and the new body could play its part in that. Yes, there is the savings gateway, but, frankly, that expects people to design their lives around the savings scheme, which will not work. People on a low income regularly have small income shocks and saving every month is not always feasible.

I am keen on the work of the Behavioural Insights Team and the interesting developments it has seen on how to save. For example, some supermarket bills say, “You have saved £2 by using this supermarket”, and that money could be put into a savings scheme. People have to be able to say, “This week I cannot or can afford to save.” A regular amount is not really possible in today’s climate.

The Bill has been improved in the Lords and I hope that it can be further improved in this place, to produce a Bill that makes a real difference to people—not just those on a low income, but anyone who receives an income shock, is having problems managing their finances or needs a bit of help budgeting. Financial education in schools is really important. It is important that we teach children how to deal with their finances, but when the washing machine breaks down, speed trumps any form of lessons, interest rates and so on, and that is why the companies say—we have seen the adverts—“I can get the money to you tomorrow.”