Mr Osborne: I talked about loyal Labour Back Benchers and would never apply such an outrageous slur to the hon. Gentleman, whereas it is certainly applicable to the hon. Member for Birmingham, Selly Oak (Steve McCabe). The distinction is not sophistry, because an IMF contribution, were there ever to be one, to a

23 Apr 2012 : Column 677

eurozone bail-out fund, would basically put that money into a eurozone pot and then the eurozone would decide how it was spent. If there is a country programme for a specific country in the eurozone, the IMF team would turn up, wherever it happens to be, impose its own conditions and do its own analysis, and that is fundamentally different. The logic of the hon. Gentleman’s question is that the IMF would never help a eurozone country, which would lead to the eurozone countries leaving the IMF, and we would then be fundamentally undermining one of the most important institutions the world has seen in the past 60 years.

Mr David Nuttall (Bury North) (Con): Is it not the case that every time the IMF provides any assistance to a eurozone country, it simply demonstrates the complete failure of the European Central Bank to do its job properly?

Mr Osborne: The European Central Bank is of course a very important part of the equation, but one of the problems facing Ireland, Portugal and, indeed, Greece was that they were also shut out of international debt markets, and when countries are shut out of international debt markets they usually—almost always—turn to the IMF for assistance, so it would be very odd if the IMF were not there to help them.

Mr Jim Cunningham (Coventry South) (Lab): I am glad that the Chancellor has realised—it has taken him four years to do so—that there was a world economic crisis which started outside this country. Yes, Labour in government in the past has supported the IMF, and we still do, as we know that we have to do something to help Europe, but, following what my hon. Friend the Member for Bolsover (Mr Skinner) said, I must ask why are the British people paying for it through one of the most punitive Budgets ever levied? On the one hand they understand that we have to help Europe, but on the other we have one of the most punitive Budgets that has ever been levied on the British people.

Mr Osborne: I have never denied that there was an international economic crisis; what I said was that those problems were not visited upon Britain from abroad. Britain was at the epicentre of the crisis, with the biggest bank bail-outs, the most indebted households, the most over-leveraged banks and one of the largest deficits going into the crisis. That is what I complain about, and I complain in particular about the man who was responsible for most of those economic policies giving us lectures on them afterwards. I welcome the fact that the hon. Member for Coventry South (Mr Cunningham) supports the IMF and an increase in its resources, but the money does not come out of the public spending cuts that we have had to make in order to deal with that mess; it comes out of our foreign exchange reserves. We are exchanging one asset for another, and as I have said, every country that has lent money to the IMF has got its money back.

Jason McCartney (Colne Valley) (Con): Happy St George’s day, Mr Speaker.

I very much welcome the fact that the loan will be returned with interest, but does my right hon. Friend

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hope, as I do, that those interest payments are not returned at the expense of countries such as Greece racking up yet more debt?

Mr Osborne: IMF loans are made with conditions, and one condition is interest, although there is a specific programme to help very low-income countries to cope with the interest costs. It is very important, as part of any IMF analysis, that we undertake proper debt analysis, and the IMF has been pretty instrumental in driving through the private sector creditor write-offs that have happened in Greece in order to improve debt sustainability, something which—I do not think it is any secret—many eurozone countries were not particularly in favour of. The IMF can therefore take action to improve debt sustainability.

Fiona O’Donnell (East Lothian) (Lab): The Chancellor has told the House that this is not about a eurozone bail-out, but back in September he also told us that we would not contribute again to the IMF bailing out the eurozone. If that is the case, why are eurozone countries contributing proportionately more?

Mr Osborne: I said very clearly in my statement that the principal reason the world economy is unstable is the problems in the eurozone, and, as all the questions have demonstrated, there is of course a connection between those problems and the need to have a well resourced IMF, but, as I said last autumn, we are not prepared to see IMF resource going into eurozone bail-out funds. It needs to be for individual countries and for individual country programmes, and that is a view which not just I or Britain happens to have, but which Japan, South Korea, Australia and European countries that are not in the European Union, such as Norway and Switzerland, share. Ask yourself the question, Mr Speaker, and the House can ask itself, too: why have all those other countries thought it is in their interests to help to deal with a problem that is actually on Britain’s doorstep as well?

Matthew Hancock (West Suffolk) (Con): What would the Chancellor say to the exporters of west Suffolk about the purpose of the loan, when they need expanding markets in Europe and across the world?

Mr Osborne: The exporters of west Suffolk, like people in every other part of the country, have an enormous interest in there being greater stability in the eurozone and in the world economy. What has been so damaging in the past six months has been the flight of confidence from those countries, and its impact on exporters in Britain and elsewhere in the world. We want confidence to return. As I said in the statement, there was a sense in the spring meetings that things were a little better than before Christmas. However, the risks are real and they remain.

Grahame M. Morris (Easington) (Lab): In his statement, the Chancellor told the House that the £10 billion contribution to the IMF would not affect spending by UK Departments. Why, therefore, is the Chief Secretary reported to be asking Departments to identify £16 billion more in savings to pay for “unforeseen” events? Is that for a eurozone bail-out contingency fund?

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Mr Osborne: No it is not, and there is no connection between the two matters. An IMF loan comes out of our foreign exchange reserves. That has been the case under Labour Governments, Conservative Governments and this coalition Government. It is a contingent loan that will be drawn upon if the IMF needs resources. We swap our foreign exchange asset for the IMF loan. The Chief Secretary said what he did today because we are trying to get a grip on the public finances. To do that, we have to ensure that Departments can deal with their own contingencies, as and when they arrive.

Mr Stewart Jackson (Peterborough) (Con): We all know that what we are discussing is state-sponsored money laundering to prop up the failed and doomed European project called the euro. The deal does not come without a heavy human cost. In southern Europe, it means the imposition of a net tightening of 3% per year, yet there is no monetary stimulus to offset that, no demand for growth in the rest of Europe and no demand for structural reforms. Why is the Chancellor throwing the good money of UK taxpayers after bad for this economic madness?

Mr Osborne: This money comes out of Britain’s foreign exchange reserves and is swapped for an IMF loan. It is therefore not money that we would otherwise spend on public services or use to cut taxes. My hon. Friend is being a little unfair to the countries that are having to undertake difficult structural reforms. For example, Spain has recently passed significant reforms to its labour laws to make its employment market more flexible and Italy has made difficult pension reforms. People will remember the scenes in Italy when those reforms were announced a few months ago. Britain is also having to make difficult reforms and take difficult decisions to make our economy more competitive and to deal with the problems in our public finances.

Nadhim Zahawi (Stratford-on-Avon) (Con): The Australian Government made their decision with the backing of the Opposition. Will the Chancellor confirm that his decision will not be affected by the shadow Chancellor’s flip-flopping?

Mr Osborne: There is not much danger of my being influenced by the shadow Chancellor’s flip-flopping. My hon. Friend draws to our attention the interesting point that the Australian Liberal party, which is hardly the most Europhile party in the world, understands that Australia has obligations to the international community and to the IMF. Given that Australia is prepared to make a contribution, it would be quite odd if Britain was not.

Chris Heaton-Harris (Daventry) (Con): May I congratulate the shadow Chancellor on his epic exploits yesterday? I note that he kept on message by going neither too far, nor too fast.

I voted for the loan and believe that it would have been bizarre had the Chancellor not offered a loan of the level agreed to by Parliament. Will my right hon. Friend guarantee that he will come back to this place and ask for Parliament’s assent should more funds be asked for?

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Mr Osborne: I can do that on the simple grounds that I would not be able to make a loan beyond the agreed headroom without a vote in Parliament. Perhaps by then the shadow Chancellor will have flip-flopped again and will support it. [ Interruption. ] I shall be very generous and congratulate the shadow Chancellor on completing the marathon and raising all that money. I advise him not to wear flip-flops when he runs.

Mrs Anne Main (St Albans) (Con): May I ask for clarification of the terms of the loan? The Chancellor referred in his statement to $15 billion and under £10 million, but the currency being utilised is special drawing rights at £1 to the special drawing right. Should the currency fluctuate and push the loan over £10 billion, will the Chancellor come back to Parliament and give us a vote on it?

Mr Osborne: The parliamentary authorisation is expressed in special drawing rights, and on the exchange rate at the moment the loan is just less than £9 billion.

Richard Harrington (Watford) (Con): I realise that mind reading is not among my right hon. Friend the Chancellor’s talents, but does he think that as the shadow Chancellor did his gallant marathon yesterday, he suddenly had a Saul-on-the-road-to-Damascus moment and thought, “Ah, the organisation that I have supported for so long, the IMF, now has enough money, so I don’t agree with increasing its resources”, or does my right hon. Friend think, as I do, that the shadow Chancellor’s act is one of blatant, naked political opportunism that should be condemned?

Mr Osborne: I do think it is an act of political opportunism. As I have said, there was complete astonishment at the IMF when I said that the Opposition would probably oppose what I was doing. The people there all know the shadow Chancellor, because he negotiated on behalf of the Treasury as Britain’s representative at the IMF, so they find his decision very difficult to understand.

Mr Mark Spencer (Sherwood) (Con): Although I support the funding of the IMF, will the Chancellor confirm that it simply emphasises the importance of maintaining UK financial credibility for UK interest rates and jobs in small businesses?

Mr Osborne: I thank my hon. Friend for his support. He is absolutely right, and while I was sitting in the IMF meeting on Friday and on Saturday morning, my mind wandered to thinking about what would have happened if I had turned up and said that we were abandoning our fiscal consolidation plan. I came to the conclusion that we would have been the subject of the meeting’s discussion rather than the problems in the eurozone.

Dr Thérèse Coffey (Suffolk Coastal) (Con): Will my right hon. Friend confirm that not a single penny is being added to either our national debt or our deficit as a result of this action?

Mr Osborne: Yes, I can confirm for my hon. Friend’s constituents in Suffolk and for people around the country that an IMF loan does not add to the debt or the deficit.

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We have to ask ourselves why, when people analyse the British economy, they do not add an IMF loan to the debt or deficit. It is because they understand that it is a loan that is paid back with interest and an asset that is exchanged for some of our foreign exchange reserves, not a call on public spending.

George Eustice (Camborne and Redruth) (Con): I support the Chancellor’s decision, because Britain should play its part in supporting the IMF and helping to stabilise the world economy. I particularly welcome what he said about supporting countries rather than currencies, but what advice should the IMF give to a country that applies for support but whose problems are largely caused by an unsustainably high exchange rate?

Mr Osborne: I thank my hon. Friend for his support, which is very welcome. The problems of the countries that we are talking about lie in their lack of competitiveness, or in the case of Ireland in its banking system. The problems that they are trying to deal with have been exacerbated by the fact that they are part of a currency union and cannot devalue, although without getting into a lengthy debate I have to say that exit from the single currency would also bring them a whole set of problems. We are very clear that an IMF programme would come with robust conditions, real analysis of debt sustainability and real recommendations on structural reforms to make those economies more competitive.

Conor Burns (Bournemouth West) (Con): Does my hon. Friend remember the warnings that many gave prior to the creation of the euro that without large regional subventions, the project would fail? Although he is correct in asserting that “I told you so” is not a policy, it is, sadly, increasingly a fact. He has acknowledged that Germany is doing more, but does he agree that it needs to do still more before eurozone countries have recourse to the IMF?

Mr Osborne: I certainly agree that Germany and other countries need to live with the consequences of the euro, and the German taxpayer is now having to provide many hundreds of billions of euros to various funds.

My hon. Friend is right that many Conservative Members warned of the consequences of Britain joining the euro. I remember helping the then Leader of the Opposition write a speech that he delivered at Fontainebleau, which was immediately parodied by the then Government, led by Tony Blair, and the then Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), as deeply irresponsible. The then Conservative leader spelled out in that speech a lot of the consequences that have come to pass.

Christopher Pincher (Tamworth) (Con): Harold Wilson famously said that a week is a long time in politics, so does my right hon. Friend agree, having seen the shadow Chancellor’s performance—he first supported decent funding for the IMF and then quickly appeared to criticise it—that it now appears that Labour’s Treasury team’s dictum is that a minute is a long time in politics?

Mr George Osborne: Unfortunately, the shadow Chancellor has not, in the 18 months that he has been doing that job, set out any kind of consistent and

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principle-based opposition to the Government. It is all over the place, and has ended up with the Labour party voting against an increase in IMF resources. If we asked people for one of the achievements of the three-year Brown Government, they would probably say, “The London G20 summit was about the only one,” and that was all about increasing IMF resources. The position that the shadow Chancellor has led the Labour into is a remarkable one.

James Morris (Halesowen and Rowley Regis) (Con): My constituents have legitimate concerns whenever large amounts of money are placed in international institutions. Will the Chancellor therefore confirm that the money Britain has loaned to the IMF can be used globally and not necessarily in the eurozone, and that the IMF will use its normal, stringent mechanisms for ensuring that the money is spent wisely?

Mr Osborne: I can tell my hon. Friend that his west midlands constituents will not have to pay any more taxes for the loan and will see no cuts in public services as a result of it. The money comes out of the foreign exchange reserves—the foreign currencies that Britain holds and always has held. I would also say to the people of the west midlands and elsewhere that the money is available for all countries in the world that get themselves into difficulties. They have to meet certain conditions—very tough conditions—before they get access to the money, but if the world did not have a global institution such as the IMF, we would be in a much worse place. All the manufacturers and exporters in the west midlands understand that problems in the world economy and our export markets come back to bite us very quickly indeed.

Guy Opperman (Hexham) (Con): Businesses in the north-east want a secure, worldwide support system for the global economy and welcome this decision on the IMF, but the man in the street in Newcastle and Hexham wants to know whether we have ever failed to get our money back from the IMF.

Mr Osborne: No we have not failed to get our money back from the IMF. Britain was one of the creators of the IMF, because we understood after the 1930s that if countries just walk away from problems in the world economy, the problem is very much worse. In the north-east, we have manufacturers such as Nissan in Sunderland. Nissan is making a big new investment in the UK. It is doing so, in the end, because it has faith that the world economy will be a more stable place, one of the reasons being that we have strong institutions such as the IMF.

Charlie Elphicke (Dover) (Con): Had other IMF quota members followed the advice of the shadow Chancellor and effectively walked on by, leaving European countries to fend for themselves, what would have been the effect on the UK economy in terms of jobs and money, and what would have been the effect on the economies of developing countries?

Mr Osborne: If the world were unable to provide the IMF with the resources it needed, people would see that the world was not able to act as a whole to deal with world problems. By the way, I happen to believe that there is no prospect that the shadow Chancellor would

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have taken a different decision from the one I have taken if he were doing my job. He takes the position he does simply because he is sitting on the Opposition Benches.

Bob Stewart (Beckenham) (Con): I will repeat almost exactly what my right hon. Friend just said. Can he envisage any Chancellor of any party not making a decision such as the one he made this weekend for contingency funding to help out the IMF?

Mr Osborne: I do not think that any Chancellor since the creation of the IMF would have taken a different decision. In the end, all parties—at least, until today—have recognised that the IMF is an incredibly important institution for the stability of the global economy. If was created under a Labour Government, and it would be pretty remarkable if a Labour Chancellor were to try to pull the plug on Britain’s participation in it.

Robert Halfon (Harlow) (Con): Will my right hon. Friend assure my constituents that there will be no impact on the increased spending on our schools and hospitals that the coalition Government are providing, and no impact on cutting taxes for more than 40,000 Harlow residents through raising the income tax threshold?

Mr Osborne: I can absolutely assure the people of Harlow that we will deliver a big increase in their personal tax-free allowance, continue with real increases in the health service, support their schools and, above all, get their economy moving after the disastrous mess that the previous Labour Government put us in.

Madam Deputy Speaker (Dawn Primarolo): I thank the Chancellor and the 58 Members who were able to participate in this important statement.

23 Apr 2012 : Column 684

Points of Order

4.55 pm

Kerry McCarthy (Bristol East) (Lab): On a point of order, Madam Deputy Speaker. Last week I tabled a question to the Minister for Women and Equalities asking what representations she had made to the Chancellor of the Exchequer about an equality impact assessment for the Budget. That question appeared fleetingly at No. 2 on the Order Paper for Thursday’s oral questions and then disappeared. Although I had asked her what she had said to him, she obviously thought it more in keeping with the ethos of her Department that she let him answer on her behalf. May we have some guidance on which questions are likely to be transferred so that we do not waste our opportunity at oral questions by asking things that the Minister does not feel capable of responding to?

Madam Deputy Speaker (Dawn Primarolo): As the hon. Lady will know, the transfer of questions is dealt with by the Departments and is not a matter for the Chair. I would suggest, however, that she has a conversation with the Table Office to ensure that, next time she tables a question, it is to be answered by the Department she intended.

Clive Efford (Eltham) (Lab): On a point of order, Madam Deputy Speaker. At the beginning of last month, new evidence came forward calling into question the conclusion of the Macpherson inquiry about whether police corruption interfered with the investigation into the murder of Stephen Lawrence. I tabled questions on that basis to the Home Office, and on 19 March I received a holding answer saying that it would answer as soon as possible. I subsequently retabled those questions asking when they would be answered and today received another holding answer saying that the Department would answer as soon as possible. This morning, in The Guardian and The Daily Telegraph, there is front-page speculation about the Home Office’s position on an inquiry into these matters. I have not received any decent response to questions I have tabled in the House. Is it not an affront to the House that speculation clearly fostered by the Home Office should appear in the media after a Member has raised the issue in the House? Furthermore, Madam Deputy Speaker, have you had any indication from Home Office Ministers that they are likely to come here and explain this completely unsatisfactory situation?

Madam Deputy Speaker: The hon. Gentleman has closely followed these important issues for some time because of their relevance to his constituency. He asked two specific questions. The first question was about adequate answers from Departments to Members. If he is dissatisfied, it is open to him to pursue it through the Procedure Committee; it is not a matter for the Chair. His second question was about notification of a statement from the Home Office on this important issue. I have received no notification and have no knowledge of such a statement, but the Deputy Leader of the House is in his place and knows that this is an important issue, and I am sure that he is prepared to assist the hon. Gentleman in any way he can to ensure that this matter is dealt with properly and urgently.

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I understand that owing to an error in the notice given on the Order Paper, Mr Graham Jones will not be presenting his Bill today.

23 Apr 2012 : Column 686

Financial Services Bill (Programme) (No. 3)

Motion made, and Question proposed,

That the Order of 6 February 2012 (Financial Services Bill (Programme)), as varied by the Order of 21 February 2012 (Financial Services Bill (Programme) (No. 2)) be further varied as follows:

1. Paragraphs 4 and 5 of the Order shall be omitted.

2. Proceedings on Consideration and Third Reading shall be completed in two days.

3. Proceedings on Consideration shall be taken on the days shown in the first column of the following Table and in the order so shown.

4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.



Time for conclusion of proceedings

First day

New Clauses and New Schedules; amendments to Clauses 1 to 3; amendments to Schedule 1; amendments to Clause 4; amendments to Schedule 2; amendments to Clause 5; amendments to Schedule 3

10.00 pm

Second day

Remaining proceedings on Consideration

Three hours after commencement of proceedings on Consideration on the second day.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion four hours after the commencement of proceedings on consideration on the second day.—(Mr Hoban .)

5 pm

Chris Leslie (Nottingham East) (Lab/Co-op): I am surprised that the Minister has moved the programme motion formally, given that today—day one of what is supposedly two days for Report and the remaining stages of this Bill—we have five hours of debate in which to cover 59 amendments. Even if there are no Divisions in the House, that leaves barely five minutes for each item.

This Bill is an extremely important piece of legislation. It reforms some of the most important financial institutions in this country, including the Bank of England, creating new financial regulators and dealing with consumer finance, business finance and all those key issues. It has 103 clauses and 21 schedules, yet this programme motion gives us a derisory amount of time. We supposedly have two days, but we will in fact have one and a half days on Report. The second day is not a full day, but a half day, with three hours for the remaining proceedings. Do not let us forget that today we have five clauses to cover in the space of five hours, and we will have 97 clauses to consider in three hours on day two, whenever that is scheduled. That is barely even paying lip service to proper scrutiny. When the Bill gets to the other place, their noble Lordships will have to look seriously at whether there has been proper accountability for the provisions that are before us.

23 Apr 2012 : Column 687

We also had insufficient time upstairs in Committee, where 20 clauses went undebated. That is because the Government have consistently allocated insufficient time for this legislation. When the previous Administration took the Financial Services and Markets Act 2000 through the House in 1999-2000, 35 sittings were given in Committee. However, less than half that number were given to scrutinise this Bill in Committee upstairs—we had only 16 sittings in total—so it is no wonder that clauses went undebated.

This is a parody of a programme motion. It leaves massively insufficient time. I do not wish to waste any more of it, but this motion has to be opposed. I hope that my hon. Friends will join me in protesting against this lack of accountability, call on their noble Lords to spend more time scrutinising the Bill properly and vote against this programme motion.

5.3 pm

The Financial Secretary to the Treasury (Mr Mark Hoban): The hon. Member for Nottingham East (Chris Leslie) protests too much about this matter. Those of us who are veterans of the Bill and those who occasionally came to watch our proceedings will know why 20 clauses went undebated, as is clear from the Committee Hansard. The Opposition agreed on the programme motion and the number of sittings—there was no Division on the programme motion after Second Reading—and ample time was given. However, on one occasion the hon. Gentleman spent an hour debating a set of minor and technical amendments, during which he discussed the correct terminology for people from Gibraltar and whether any Committee members had ever had the pleasure of visiting Gibraltar, questioned the drafting conventions relating to the insertion of amendments into a lettered list, and speculated as to the bedtime of my officials. He did not strike me as a man who was keen to press forward with scrutiny of the Bill.

This Bill has received proper scrutiny. It has been discussed by the Treasury Committee—we have a number of its reports before us today, which will enable us to discuss the issue—and has received pre-legislative scrutiny by a Joint Committee chaired by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley). We listened carefully to the arguments made by both Committees, which have been reflected in the Bill that we have debated. I believe that there was adequate time in Committee to deal with the matter. The fact that we ran out of time was not down to the way in which the Bill was debated by the Government; it was down to the way in which the Opposition handled it.

It is also the case, as my hon. Friend the Deputy Leader of the House has said, that in the last Session of the previous Government, no Bill was given more than one day on Report. Having a two-day Report Stage is important, as this Bill requires scrutiny, and I believe that a great deal of scrutiny is taking place. It is now time for us to get on with the debate, and I am sorry that the hon. Gentleman is seeking to divide the House on the motion, because the time spent on the Division could be spent discussing the Bill and getting our points across.

Question put .

The House divided:

Ayes 277, Noes 183.

Division No. 530]

[5.5 pm


Adams, Nigel

Aldous, Peter

Amess, Mr David

Andrew, Stuart

Baker, Norman

Baker, Steve

Baldwin, Harriett

Barclay, Stephen

Barker, Gregory

Baron, Mr John

Barwell, Gavin

Bebb, Guto

Beresford, Sir Paul

Berry, Jake

Bingham, Andrew

Birtwistle, Gordon

Blackman, Bob

Blackwood, Nicola

Blunt, Mr Crispin

Boles, Nick

Bone, Mr Peter

Bradley, Karen

Brady, Mr Graham

Brake, rh Tom

Bray, Angie

Brazier, Mr Julian

Bridgen, Andrew

Brokenshire, James

Browne, Mr Jeremy

Bruce, Fiona

Buckland, Mr Robert

Burley, Mr Aidan

Burns, Conor

Burns, rh Mr Simon

Burrowes, Mr David

Burstow, Paul

Burt, Lorely

Byles, Dan

Cable, rh Vince

Cairns, Alun

Campbell, rh Sir Menzies

Carmichael, rh Mr Alistair

Carswell, Mr Douglas

Chishti, Rehman

Clegg, rh Mr Nick

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Cox, Mr Geoffrey

Crabb, Stephen

Crockart, Mike

Crouch, Tracey

Davey, rh Mr Edward

Davies, Glyn

Davies, Philip

Davis, rh Mr David

de Bois, Nick

Djanogly, Mr Jonathan

Dorries, Nadine

Doyle-Price, Jackie

Duddridge, James

Duncan, rh Mr Alan

Duncan Smith, rh Mr Iain

Ellis, Michael

Ellison, Jane

Ellwood, Mr Tobias

Elphicke, Charlie

Eustice, George

Evans, Graham

Evans, Jonathan

Evennett, Mr David

Fabricant, Michael

Farron, Tim

Field, Mark

Foster, rh Mr Don

Fox, rh Dr Liam

Francois, rh Mr Mark

Freeman, George

Freer, Mike

Fullbrook, Lorraine

Fuller, Richard

Garnier, Mr Edward

Garnier, Mark

Gauke, Mr David

George, Andrew

Gibb, Mr Nick

Gilbert, Stephen

Gillan, rh Mrs Cheryl

Glen, John

Goldsmith, Zac

Goodwill, Mr Robert

Gove, rh Michael

Grant, Mrs Helen

Gray, Mr James

Grayling, rh Chris

Greening, rh Justine

Grieve, rh Mr Dominic

Griffiths, Andrew

Gyimah, Mr Sam

Halfon, Robert

Hames, Duncan

Hammond, Stephen

Hancock, Matthew

Hands, Greg

Harper, Mr Mark

Harrington, Richard

Harris, Rebecca

Hart, Simon

Harvey, Nick

Haselhurst, rh Sir Alan

Heath, Mr David

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hinds, Damian

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Holloway, Mr Adam

Howell, John

Hughes, rh Simon

Huhne, rh Chris

Hunter, Mark

Huppert, Dr Julian

Hurd, Mr Nick

Jackson, Mr Stewart

James, Margot

Javid, Sajid

Jenkin, Mr Bernard

Johnson, Gareth

Johnson, Joseph

Jones, Andrew

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Kirby, Simon

Knight, rh Mr Greg

Kwarteng, Kwasi

Laing, Mrs Eleanor

Lamb, Norman

Lancaster, Mark

Lansley, rh Mr Andrew

Latham, Pauline

Laws, rh Mr David

Leadsom, Andrea

Lee, Jessica

Lee, Dr Phillip

Leech, Mr John

Lefroy, Jeremy

Letwin, rh Mr Oliver

Lewis, Brandon

Lewis, Dr Julian

Lilley, rh Mr Peter

Lloyd, Stephen

Loughton, Tim

Lumley, Karen

Macleod, Mary

Main, Mrs Anne

Maude, rh Mr Francis

Maynard, Paul

McCartney, Jason

McCartney, Karl

McIntosh, Miss Anne

McLoughlin, rh Mr Patrick

McPartland, Stephen

McVey, Esther

Mensch, Louise

Menzies, Mark

Mercer, Patrick

Metcalfe, Stephen

Miller, Maria

Moore, rh Michael

Mordaunt, Penny

Morgan, Nicky

Morris, James

Mosley, Stephen

Mowat, David

Mundell, rh David

Munt, Tessa

Murray, Sheryll

Murrison, Dr Andrew

Neill, Robert

Newton, Sarah

Nokes, Caroline

Norman, Jesse

Nuttall, Mr David

Offord, Mr Matthew

Ollerenshaw, Eric

Opperman, Guy

Osborne, rh Mr George

Ottaway, Richard

Patel, Priti

Pawsey, Mark

Penning, Mike

Penrose, John

Perry, Claire

Phillips, Stephen

Pickles, rh Mr Eric

Pincher, Christopher

Poulter, Dr Daniel

Pritchard, Mark

Pugh, John

Raab, Mr Dominic

Randall, rh Mr John

Reckless, Mark

Redwood, rh Mr John

Rees-Mogg, Jacob

Reid, Mr Alan

Rifkind, rh Sir Malcolm

Rogerson, Dan

Rosindell, Andrew

Rudd, Amber

Ruffley, Mr David

Russell, Sir Bob

Rutley, David

Sanders, Mr Adrian

Sandys, Laura

Scott, Mr Lee

Selous, Andrew

Shapps, rh Grant

Sharma, Alok

Shelbrooke, Alec

Shepherd, Mr Richard

Simmonds, Mark

Simpson, Mr Keith

Skidmore, Chris

Smith, Miss Chloe

Smith, Julian

Smith, Sir Robert

Soubry, Anna

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stanley, rh Sir John

Stewart, Bob

Stewart, Iain

Stewart, Rory

Stride, Mel

Stunell, Andrew

Sturdy, Julian

Swales, Ian

Swayne, rh Mr Desmond

Swinson, Jo

Syms, Mr Robert

Tapsell, rh Sir Peter

Teather, Sarah

Tomlinson, Justin

Tredinnick, David

Truss, Elizabeth

Tyrie, Mr Andrew

Uppal, Paul

Vara, Mr Shailesh

Vickers, Martin

Villiers, rh Mrs Theresa

Walker, Mr Charles

Walker, Mr Robin

Wallace, Mr Ben

Ward, Mr David

Webb, Steve

Wharton, James

Wheeler, Heather

White, Chris

Whittaker, Craig

Whittingdale, Mr John

Wiggin, Bill

Willetts, rh Mr David

Williams, Mr Mark

Williams, Roger

Williams, Stephen

Williamson, Gavin

Willott, Jenny

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Jeremy

Yeo, Mr Tim

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Ayes:

Mr Philip Dunne and

Mr Brooks Newmark


Abbott, Ms Diane

Ainsworth, rh Mr Bob

Alexander, Heidi

Ali, Rushanara

Allen, Mr Graham

Ashworth, Jonathan

Austin, Ian

Bailey, Mr Adrian

Bain, Mr William

Balls, rh Ed

Barron, rh Mr Kevin

Berger, Luciana

Betts, Mr Clive

Blackman-Woods, Roberta

Blears, rh Hazel

Blenkinsop, Tom

Blunkett, rh Mr David

Bradshaw, rh Mr Ben

Brown, Lyn

Brown, rh Mr Nicholas

Bryant, Chris

Buck, Ms Karen

Burden, Richard

Campbell, Mr Alan

Campbell, Mr Ronnie

Caton, Martin

Clark, Katy

Clarke, rh Mr Tom

Clwyd, rh Ann

Coffey, Ann

Creasy, Stella

Cruddas, Jon

Cryer, John

Cunningham, Alex

Cunningham, Mr Jim

Cunningham, Tony

Dakin, Nic

Danczuk, Simon

Darling, rh Mr Alistair

David, Mr Wayne

Davidson, Mr Ian

Davies, Geraint

De Piero, Gloria

Denham, rh Mr John

Dobson, rh Frank

Docherty, Thomas

Donohoe, Mr Brian H.

Dowd, Jim

Doyle, Gemma

Durkan, Mark

Edwards, Jonathan

Efford, Clive

Elliott, Julie

Ellman, Mrs Louise

Engel, Natascha

Evans, Chris

Farrelly, Paul

Field, rh Mr Frank

Fitzpatrick, Jim

Flello, Robert

Flynn, Paul

Francis, Dr Hywel

Gapes, Mike

Gardiner, Barry

Gilmore, Sheila

Glindon, Mrs Mary

Godsiff, Mr Roger

Goggins, rh Paul

Goodman, Helen

Greatrex, Tom

Green, Kate

Greenwood, Lilian

Gwynne, Andrew

Hamilton, Mr David

Hamilton, Fabian

Hanson, rh Mr David

Harris, Mr Tom

Havard, Mr Dai

Healey, rh John

Hendrick, Mark

Hepburn, Mr Stephen

Heyes, David

Hilling, Julie

Hodge, rh Margaret

Hodgson, Mrs Sharon

Hopkins, Kelvin

Hosie, Stewart

Hunt, Tristram

Irranca-Davies, Huw

Jackson, Glenda

James, Mrs Siân C.

Jamieson, Cathy

Johnson, rh Alan

Johnson, Diana

Jones, Susan Elan

Kaufman, rh Sir Gerald

Keeley, Barbara

Lammy, rh Mr David

Lavery, Ian

Lazarowicz, Mark

Leslie, Chris

Lucas, Caroline

Lucas, Ian

Mactaggart, Fiona

Mahmood, Shabana

Malhotra, Seema

Mann, John

Marsden, Mr Gordon

McCabe, Steve

McCann, Mr Michael

McCarthy, Kerry

McClymont, Gregg

McCrea, Dr William

McDonagh, Siobhain

McDonnell, John

McFadden, rh Mr Pat

McGuire, rh Mrs Anne

McKechin, Ann

McKenzie, Mr Iain

McKinnell, Catherine

Meacher, rh Mr Michael

Mearns, Ian

Miliband, rh David

Miller, Andrew

Mitchell, Austin

Moon, Mrs Madeleine

Morden, Jessica

Morrice, Graeme


Morris, Grahame M.


Mudie, Mr George

Munn, Meg

Murphy, rh Paul

Murray, Ian

Nandy, Lisa

Nash, Pamela

O'Donnell, Fiona

Owen, Albert

Paisley, Ian

Pearce, Teresa

Perkins, Toby

Phillipson, Bridget

Pound, Stephen

Qureshi, Yasmin

Raynsford, rh Mr Nick

Reed, Mr Jamie

Reynolds, Emma

Riordan, Mrs Linda

Robinson, Mr Geoffrey

Rotheram, Steve

Roy, Mr Frank

Roy, Lindsay

Ruddock, rh Dame Joan

Sarwar, Anas

Seabeck, Alison

Sheerman, Mr Barry

Shuker, Gavin

Skinner, Mr Dennis

Slaughter, Mr Andy

Smith, rh Mr Andrew

Smith, Angela

Smith, Nick

Smith, Owen

Spellar, rh Mr John

Straw, rh Mr Jack

Stuart, Ms Gisela

Sutcliffe, Mr Gerry

Tami, Mark

Thomas, Mr Gareth

Turner, Karl

Twigg, Derek

Walley, Joan

Whitehead, Dr Alan

Wicks, rh Malcolm

Williams, Hywel

Williamson, Chris

Wilson, Phil

Winnick, Mr David

Wishart, Pete

Wood, Mike

Woodcock, John

Woodward, rh Mr Shaun

Wright, David

Wright, Mr Iain

Tellers for the Noes:

Graham Jones and

Yvonne Fovargue

Question accordingly agreed to.

23 Apr 2012 : Column 688

23 Apr 2012 : Column 689

23 Apr 2012 : Column 690

23 Apr 2012 : Column 691

23 Apr 2012 : Column 692

Financial Services Bill

[1st Allocated Day]

Consideration of Bill, as amended in the Public Bill Committee

New Clause 4

Power to make further provision about regulation of consumer credit

‘(1) Subsection (2) applies on or at any time after the making after the passing of this Act of an order under section 22 of FSMA 2000 which has the effect that an activity (a “transferred activity”)—

(a) ceases to be an activity in respect of which a licence under section 21 of CCA 1974 is required or would be required but for the exemption conferred by subsection (2), (3) or (4) of that section or paragraph 15(3) of Schedule 3 to FSMA 2000, and

(b) becomes a regulated activity for the purposes of FSMA 2000.

(2) The Treasury may by order do any one or more of the following—

(a) transfer to the FCA functions of the OFT under any provision of CCA 1974 that remains in force;

(b) provide that any specified provision of FSMA 2000 which relates to the powers or duties of the FCA in connection with the failure of any person to comply with a requirement imposed by or under FSMA 2000 is to apply, subject to any specified modifications, in connection with the failure of any person to comply with a requirement imposed by or under a specified provision of CCA 1974;

(c) require the FCA to issue a statement of policy in relation to the exercise of powers conferred on it by virtue of paragraph (b);

(d) in connection with provision made by virtue of paragraph (b), provide that failure to comply with a specified provision of CCA 1974 no longer constitutes an offence or that a person may not be convicted of an offence under a specified provision of CCA 1974 in respect of an act or omission in a case where the FCA has exercised specified powers in relation to that person in respect of that act or omission;

(e) provide for the transfer to the Treasury of any functions under CCA 1974 previously exercisable by the Secretary of State;

(f) provide that functions of the Secretary of State under CCA 1974 are exercisable concurrently with the Treasury;

(g) enable local weights and measures authorities to institute proceedings in England and Wales for a relevant offence;

(h) provide that references in a specified enactment to the FCA’s functions under FSMA 2000 include references to its functions resulting from any order under this section.

(3) In subsection (2)(g) “relevant offence” means an offence under FSMA 2000 committed in relation to an activity that is a regulated activity for the purposes of that Act by virtue of—

(a) an order made under section 22(1) of that Act in relation to an investment of a kind falling within paragraph 23 or 23B of Schedule 2 to that Act, or

(b) an order made under section 22(1A) of that Act.

(4) On or at any time after the making of an order under section 22 of FSMA 2000 of the kind mentioned in subsection (1), the Treasury may, if in their opinion it is desirable to do so having regard to the FCA’s operational objectives (as defined in section 1B(3) of FSMA 2000) by order—

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(a) exclude the application of any provision of CCA 1974 in relation to a transferred activity, or

(b) repeal any provision of CCA 1974 which relates to a transferred activity.

(5) The additional powers conferred by section 95(2) on a person making an order under this Act include power for the Treasury, when making an order under this section—

(a) to make such consequential provision as the Treasury consider appropriate,

(b) to amend any enactment, including any provision of, or made under, this Act.

(6) The provisions of this section do not limit—

(a) the powers conferred by section98 or by section 22 of FSMA 2000, or

(b) the powers exercisable under Schedule21 in connection with the transfer of functions from the OFT.

(7) In this section—

“CCA 1974” means the Consumer Credit Act 1974;

“the OFT” means the Office of Fair Trading.’.— (Mr Hoban.)

Brought up, and read the First time.

5.17 pm

The Financial Secretary to the Treasury (Mr Mark Hoban): I beg to move, That the clause be read a Second time.

Madam Deputy Speaker (Dawn Primarolo): With this it will be convenient to discuss the following:

New clause 5—Amendments to Tribunals, Courts and Enforcement Act 2007

‘(1) Section 124 of the Tribunals, Courts and Enforcement Act 2007 (charges by operator of approved scheme) is amended as follows.

(2) In subsection (1) for “costs’ substitute “charges”.

(3) In subsection (2)—

(a) for “costs”, in the first instance, substitute “charges”,

(b) after “scheme”, insert “along with any charges made by the operator”, and

(c) after “those costs” insert “and charges”.’.

New clause 9—Debt management plan regulation

‘The FCA shall bring forward recommendations within a year of the commencement of this Act to phase out the practice of directly charging consumers fees or charges for the provision of debt management plans.’.

New clause 10—Mortgage rate forewarning

‘The Treasury shall bring forward recommendations within six months of Royal Assent of this Act requiring mortgage lenders to forewarn existing customers about potential interest rate changes and their impact on the affordability of mortgage repayments.’.

New clause 12—Prepayment schemes

‘(1) The FPC must carry out and publish a review of the operation of consumer prepayment schemes to consider whether existing protection for consumers is sufficient.

(2) The FPC must make recommendations under subsection (1) within one year of this section coming into force;

(3) Any report produced by the FPC under subsection (1) shall include an analysis of whether consumers of prepayment schemes should be made preferential creditors for the purposes of the distribution of the realised assets of the company operating such schemes in the event of insolvency.’.

Government amendments 2 and 3.

Amendment 37, page 37, line 42, in clause 5, at end insert ‘and targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.’.

23 Apr 2012 : Column 694

Amendment 55, page 38, line 6, at end add—

‘(h) supporting the provision of legal advice on all areas of law related to personal debt, including but not limited to—

(i) issues covered under Schedule 1 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012,

(ii) remedies under the Insolvency Act 1986 and Tribunals, Courts and Enforcement Act 2007,

(iii) protections under the Consumer Credit Act 1974 and Consumer Credit Act 2006,

(iv) consumer redress schemes under the Financial Services and Markets Act 2000,

(v) debt limitation under the Limitation Act 1980, and

(vi) enforcement action for specified debts pursuant to a county court judgement, a High Court writ or warrant issued by a Magistrates’ Court.

(4A) For the purposes of subparagraphs (h)(i) to (vi) above the consumer financial education body may enter into arrangements with the Ministry of Justice to direct appropriate levels of funding for these purposes.’.

Government amendment 4.

Amendment 40, page 80, line 2, in clause 22, at end insert—

‘(2A) The FCA may make rules or apply a sanction to authorised persons who offer credit on terms that the FCA judge to cause consumer detriment. This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.’.

Government amendments 11 and 18 to 21.

Mr Hoban: New clause 4, which is the most significant of the Government new clauses and amendments in the group, provides a framework for implementation of the Government’s proposal to retain the important rights and protections of the Consumer Credit Act 1974 to ensure that consumers do not lose out as a result of the transfer. For example, we are likely to retain section 75 of the Act, which provides for the joint liability of creditors for misrepresentation or breaches by suppliers.

The Government’s preferred approach to the implementation of the transfer of responsibility for consumer credit from the Office of Fair Trading to the Financial Conduct Authority is to ensure that the Consumer Credit Act protections are replicated in the FCA’s consumer credit rule book, and that the relevant sections of the Act are repealed. That approach is in line with the intention to move to a more responsive, rules-based regime than the current statutory framework.

However, there are limitations to the type of rules that the FCA can make, which means that it will not be able to replicate in its rules all the CCA protections that we want to retain, including protections that impose rights directly on consumers and those that affect unauthorised third parties. That means that some CCA protections will need to be kept in the CCA itself, and that certain provisions of the CCA will therefore need to remain in force following the transfer. As a result, a number of changes will need to be made to both the CCA and the FSMA as part of the transition, to reflect the fact that the FCA will be responsible for regulating consumer credit and to ensure that the FCA, as well as local trading standards, can effectively enforce the retained CCA provisions. For example, it will be necessary to replace references in the Consumer Credit Act to the Office of Fair Trading with references to the FCA. We

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will also need to apply certain features of the FSMA, such as references to the FCA’s objectives, statutory immunity and fee-raising powers, to the FCA’s new functions under the Consumer Credit Act, and enable the FCA to use FSMA supervision and enforcement powers that would normally be used in relation to breaches of FCA rules for breaches of CCA requirements. New clause 4 enables the Treasury to make those changes and other necessary amendments to the CCA and the FSMA by order.

I should also draw attention to the addendum to the delegated powers memorandum, which the Department has prepared and provided to the delegated powers Committee. The memorandum sets out in more detail how this power is intended to operate and why it is necessary. Copies are available in both the Printed Paper Office and the Vote Office. The order to be made under this provision will be subject to further consultation following Royal Assent to the Bill. Government amendment 11 provides that any order under new clause 4 will be subject to the affirmative procedure and so can be made only with prior approval of both this House and the other place.

Government amendment 2 supports effective collaboration between the FCA and local trading standards following the transfer, enabling the FCA to contract trading standards for the provision of services in the same way that the OFT does now—for example, to undertake local inspections and follow up on enforcement action, including by local illegal money-lending teams. Government amendment 21, and related amendments 18, 19 and 20, insert into the Bill provision for the transfer of the OFT property, rights and liabilities, including staff, to the FCA.

I hope Members will agree that the Government amendments in relation to consumer credit are sensible and practical provisions to support an effective transfer of regulation to the FCA. The new clause and related amendments sit within a process of regulatory reform that seeks to tackle some of the issues raised by Members on both sides of the House about the functioning of the credit market. We believe the FCA will have much stronger powers and greater resources than the OFT has had in order to tackle detrimental practices in the consumer credit market. Unlike the OFT, the FCA will be able to make binding rules on firms to ban specific products or product features that cause harm, to issue unlimited fines, and to require firms to pay redress when things go wrong. It will also be able to apply greater scrutiny to applications for credit licences and make it more difficult for rogue firms to enter the market.

As a consequence of the transfer we have introduced into the Bill, there will be a fundamental change in the regulation of firms such as payday lenders and debt management companies. I am pleased that the provisions enabling that transfer were welcomed in Committee.

There are a number of Opposition amendments relating to consumer credit and debt management plans, and I want to say a few words about them now. On new clauses 5 and 9, I made it clear in Committee that I sympathise with concerns about some of the practices in the fee-charging debt management sector. That is why clause 6 enables the regulation of debt management

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companies to be transferred to the FCA. That is also why we have chosen to leave on the statute book the enabling powers of the Tribunals, Courts and Enforcement Act 2007.

More immediately, we are working with the industry to develop a protocol of best practice for debt management plans, which should cover, among other things, the nature and timing of fees. Indeed, on 14 June the Minister with responsibility for consumer affairs, my hon. Friend the Member for North Norfolk (Norman Lamb), will chair the first industry-wide meeting to discuss and take forward the protocol. That will follow several months of meetings with a smaller, representative group of stakeholders, which has talked through processes, commercial terms and advice, to reach an agreed position.

I also wish to refer the House to new guidance for the debt management sector recently published by the Office of Fair Trading, which sets out in substantial detail the standards expected of firms. I believe that it is appropriate that we give time and focus to current efforts to improve standards in the debt management sector, and take account of the significant changes to the wider regulatory regime enabled by the Bill, before we start talking about changes to a potential statutory scheme under new clause 5.

As I said in Committee, I do not think that we should throw the baby out with the bath water and shut down the market for fee-charging debt management services, as proposed by new clause 9, before fully exploring better regulation. Where suppliers of credit are aware of people who are suffering financial distress in repaying their debt, I encourage them to signpost their customers to fee-free debt advice services so that they can get the best possible advice to meet their needs.

On amendment 40 and new clause 10, I wish to reassure hon. Members that the Bill already enables the FCA to make the kind of rules proposed in those two provisions. Indeed, in relation to new clause 10, the Financial Services Authority already places a number of requirements on firms to ensure that borrowers are informed if their mortgage repayments are subject to change. I know that some hon. Members may wish to challenge the approach, saying, “But if the FCA can already make the proposed rules, what is the harm in accepting these proposals?” The point is that there are significant risks to specifying in great detail in the Bill the precise type of rules that the FCA may make. First, in doing so, we risk distracting the regulator from using its expertise and judgment to identify and address the risks that it considers pose the greatest risks to its objectives. As parliamentarians, we should be creating a framework within which technical experts can exercise their discretion, in a suitably constrained way. We should leave them to get on with the job, not provide a long laundry list of everything that we want them to do.

By specifying in detail what rules should or should not cover, we also risk creating the opportunity for challenge to the regulator’s ability to make rules that are not specified in the Bill. The lack of specific provision in the Bill does not, in any way, reflect on how seriously the Government take these issues. For example, in relation to high-cost credit, a number of initiatives are under way to improve standards in the sector. Those include work to improve industry codes on payday lending; research commissioned by the Department for Business, Innovation and Skills into the impact of a cap on total

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cost of credit; and a review by the OFT of payday lenders’ compliance with its irresponsible lending guidance. As well as raising standards now, the findings of those pieces of work will feed into the FCA’s approach to regulating the sector following the transfer, including on the type of rules it may make regarding these charges.

Alun Cairns (Vale of Glamorgan) (Con): I appreciate the comments that have been made about the Bill and, specifically, about amendment 40. Does my hon. Friend agree that there is a risk of amendment 40 moving into price regulation, which is very different from product intervention? Price regulation would be a very dangerous line to follow.

Mr Hoban: My hon. Friend makes an important point, as we face a challenge in that respect. First, we believe that the FCA has the powers it needs to tackle payday lending. That could include some form of price intervention—

Stella Creasy (Walthamstow) (Lab/Co-op) rose

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.

Nick de Bois (Enfield North) (Con): Does the Minister understand that the sense of concern is heightened by the fact that although the research is welcome, as yet there is no sense of urgency or indication of when it might become available? I would be grateful if he could suggest when we might see the fruits of that research.

5.30 pm

Mr Hoban: I do not have that information on me, but I will endeavour to have it by the time I wind up the debate. It is important that there is evidence, that we do not respond on a knee-jerk basis and that we ensure that we protect vulnerable consumers. That includes ensuring that the right protection is in place for those who wish to borrow money to meet their needs and we should also ensure that we do not push them into the arms of illegal money lenders. One change we are making in this group of amendments includes ensuring that the work of the illegal money lending teams out in the regions can continue when we shift the regulation of consumer credit to the FCA.

23 Apr 2012 : Column 698

I am aware of these issues and it is important to the constituents of my hon. Friend the Member for Enfield North (Nick de Bois) and to mine that we get the right answer. A lot of work has gone on in the past to consider the cost of credit, and we need to proceed on the basis of evidence rather than closing our minds to what solutions there might be. Let us have some evidence to inform the debates so that we can give our constituents the right answer, rather than something that happens to be convenient to some political whim or desire. I believe that we should have evidence-based policy making and that that is the right approach. All the stakeholders would also agree that we need to support this work with some evidence, rather than proceeding without a firm evidential base.

New clause 12 concerns the important issue of how consumers who take part in prepayment schemes are protected and how they are treated if the provider of such a scheme becomes insolvent. I suspect that many members of the House will have dealt with this matter over recent years, given how many people were affected by the collapse of Farepak just before Christmas 2006. The Government have great sympathy for those who have lost money in such schemes and are aware of the frustration they feel. One problem with the Farepak insolvency has been the fact that it has taken so long for the customers to get their money back. Work with the liquidators is continuing.

The challenge is whether the Bill is the appropriate place for regulating such a function. Prepayment schemes are advance payments by a consumer for goods and services that are not supplied immediately; they are not financial services. It is not clear whether they are an issue for any of the bodies provided for in the Bill to consider and I do not think they will be a matter for the Financial Policy Committee, with its remit of considering threats to financial stability.

Since the collapse of Farepak, a considerable amount of work has been done to consider how best to protect consumers who enter into prepayment schemes and how best to deal with situations where companies collapse. Following the collapse of Farepak, the then Department of Trade and Industry worked with the remaining hamper companies to put in place effective protection for customers’ prepayments, including oversight by a new body, the Christmas Prepayment Association. The Government also supported the OFT to deliver a consumer awareness and education campaign to empower consumers to make decisions that are right for their circumstances. The Money Advice Service also provides advice on its website about what protection is offered for various ways of saving money, including prepayment schemes. I would encourage hon. Members who are aware of constituents who continue to engage with such schemes to point them in the direction of the Money Advice Service.

Katy Clark (North Ayrshire and Arran) (Lab): If the Minister does not feel that this Bill is the appropriate vehicle for dealing with that matter through regulation, when he sums up could he outline where it should be dealt with? There is a strong view that the current legislative framework is not sufficient.

Mr Hoban: Part of the challenge is that such schemes are part of a subset of advance payment schemes that are not necessarily covered by the Bill. These issues are

23 Apr 2012 : Column 699

consumer issues and I shall certainly raise with my hon. Friend the Minister with responsibility for consumer affairs where he feels that the best opportunity might be to do that and whether there are some non-statutory alternatives to regulation that will help protect the customers of such schemes.

Before I speak to Government amendment 3, I can let my hon. Friend the Member for Enfield North know when the research will be published. The research project will conclude this summer, and given that the transfer of consumer credit to the FCA will not take place until 2014, that gives us time to act. That is not to say that nothing is happening in the meantime in the regulation of consumer credit: the OFT is doing a great deal of work in that area. I am as keen as he and others are to ensure that the matter is brought to a head as soon as possible, so that the right protections are put in place for our constituents.

Government amendment 3 aims to improve the drafting, following the close and valuable scrutiny in the Public Bill Committee. In Committee, questions were raised about the appropriateness of “supply”, and the amendment clarifies the Money Advice Service financial education function so that it should include the promotion of awareness of the financial advantages and disadvantages relating to issues that may arise over the lifetime of the product, not just to the initial purchase or supply of a particular good and service. The function might include, for example, promoting awareness of the financial advantages and disadvantages of a person exercising the right to receive part of their pension savings as a lump sum, or the financial advantages or disadvantages of the various options open to a person who is having difficulty paying their mortgage.

I am confident that the Bill as it stands already provides for such matters to be covered by the Money Advice Service financial education function, but the amendment helpfully clarifies the scope of the MAS’s specific duty to promote awareness of the advantages and disadvantages of particular goods and services. I am grateful to the Members who raised the matter in the Committee, and I hope that the amendment addresses their concerns.

Amendments 37 and 55 would affect the functions of the MAS. Amendment 55 would require the MAS to support the provision of legal advice in relation to personal debt, with funding received from the Ministry of Justice to support that work. The amendment would reinstate changes to legal aid in the Legal Aid, Sentencing and Punishment of Offenders Bill. For the reasons clearly set out by my right hon. and learned Friend the Justice Secretary, we cannot use the Financial Services Bill to compensate for reforms to legal aid in the other Bill as a roundabout way of maintaining funding for not-for-profit bodies; moreover, effectively reinstating those categories in the scope of legal aid means reinstating legal aid for all legal advice, not just for those in not-for-profit organisations.

Amendment 55 is not required because the Money Advice Service already has sufficient responsibility and funding to assist members of the public with debt management. The MAS and other organisations provide debt advice directly, including by advising people who are facing difficulties with debt on the options available

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to them and the possible legal ramifications. For example, they provide advice to people who are at risk of losing their home and advice on options to resolve their financial difficulties. Any debt adviser trained to intermediate level can give advice on such matters as a matter of course. In contentious areas of law, such as the impact of insolvency or immigration status, an adviser could seek external advice. Similarly, if a non-debt issue arose, or substantive legal advice was required, an adviser could refer the client to a specialist solicitor. I therefore do not think the amendment is necessary, as the MAS and other organisations, through their debt advice services, already advise people facing difficulties with debt on the impact of the law on their situation.

Amendment 37 would require the MAS to provide

“targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.”

I am sympathetic to the intention behind the amendment: clearly, the service provided by the MAS should encompass such groups of people. However, as I said in Committee, one of the key features of the Money Advice Service is the breadth of consumers it is there to serve. Millions of people can be vulnerable to poor money management at any point in their lives, especially as they experience key life events. Similarly, many people, regardless of their financial circumstances, may not know where to turn for impartial financial advice, or may not know that they need information and advice in the first place. I therefore do not think it appropriate for the legislation to prescribe which groups are in most need of the service. By focusing the Money Advice Service on particular groups, we risk neglecting others who may be equally in need.

It is clear to me, from discussions I have had with the management of the Money Advice Service, that they recognise the need to provide support across a wide range of people. They also recognise the importance of face-to-face debt and money advice and the importance of ensuring the right channels of support are there to help those in need of financial advice—for example, those who need guidance on how to get out of debt or how to protect their families in the long term. I believe the MAS is acutely aware of its broader social obligation.

The group of amendments before us raises important issues that impact on many in our constituencies. The action that we have taken to tighten the consumer credit regime by moving consumer credit from the OFT to the FCA is the right way to proceed. This is a dynamic and changing market, and one of the great advantages that the FCA brings is the opportunity to keep issues such as the cost of credit under review and to make sure that it responds in a timely manner to help protect our constituents in these difficult areas.

Chris Leslie (Nottingham East) (Lab/Co-op): I suppose the Minister is right in one respect. This long group of amendments under the catch-all heading “Consumer protection” raises many issues about which our constituents care deeply. It is just a shame that the Minister is resisting and rebutting almost all of them, except the Government amendments. But I do not want to sound too churlish. He has conceded—we have managed to extract—one minor concession from the Government in Government amendment 3. I therefore feel that all those hours and weeks in Committee were productively spent, and for that small measure I am grateful to the hon. Gentleman.

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Time is short so I will comment on the series of amendments tabled by the Minister, and then on those in my name and that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson). Government new clause 4 sets out a series of order-making powers for the Treasury in respect of the transfer of regulation of consumer credit matters from the Office of Fair Trading to the Financial Conduct Authority. I am grateful for the clarification of the Government’s intentions. My comments on this and the consequential amendments in the group relate to the time scale for these arrangements. The new clause sets out the paving changes rather than the regulations, saying that the Treasury may well make these orders in due course. It gives a sense of the architecture of those and the fact that most of the powers available to the OFT under the Financial Services and Markets Act 2000 will be available to the FCA and so on, but we do not yet have the time scale for those orders to be made and to take effect.

Many loose ends remain, even after the amendments. How will the local weights and measures authorities dovetail with the new arrangements, the FCA and so forth? What is holding the Government up in making those changes, publishing the new arrangements and making it clear to those who may be slightly concerned that the transition period could create a sense of limbo in which a number of issues fall between the gaps? We do not want consumer credit arrangements to be put on the back burner during the transfer—quite the opposite. We need this time more than ever to help consumers who are under strain on various fronts, as is pointed out in the amendments tabled by my hon. Friend the Member for North Ayrshire and Arran (Katy Clark), the hon. Member for Eastbourne (Stephen Lloyd) and others.

New clause 9 in my name seeks, as the Minister mentioned, to require the Financial Conduct Authority to produce recommendations within a year of the commencement of the Act to phase out the practice of directly charging consumers fees or charges for the provision of debt management plans.

5.45 pm

For the sake of clarity, I should declare an old interest in this. For five years I was a trustee of the Consumer Credit Counselling Service, a not-for-profit provider of creditor charging debt management plans. It got lenders to pay for the process of helping to consolidate some of the debts of the most heavily indebted individuals in society, not charging them for the process but asking the banks and the lenders to chip in with a share of any proceeds that were recovered in order to pay for that process. That is the virtuous process that we should be looking for in the debt management plan industry. Unfortunately, there are a number of private for-profit providers who, instead of taking the charge for the administration of that consolidation process from the lender, go to the customer, the consumer, some of whom may be in fear for their houses and well-being because they have become so heavily indebted for whatever reason. Those are companies that I believe are preying on the desperation of customers who are heavily indebted.

Worse, the charges on the consumers can often be made up front, so those customers who make payments to a debt management consolidator that is renegotiating their loans and credit often find that those payments can first go to pay the company’s charges before even a penny goes towards paying down some of the individuals’

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debts. There have been numerous stories over a number of years of many consumers who, while thinking that they are doing the right thing by consolidating their debt and getting the situation sorted out, find many months later that all they have done is feed the profits of those companies who were taking advantage at that time. That is why the Opposition say that enough if enough. The time has come to bring forward proposals to phase out the practice of fee-charging for the provision of debt management plans to customers. We have framed the new clause in such a way that it is in no way unreasonable. We have not insisted on a particular way in which this is done or a particular date. We have asked the FCA simply to bring forward recommendations about how this could be facilitated.

Lorely Burt (Solihull) (LD): I have a huge amount of sympathy with the hon. Gentleman’s points about some companies that prey on some of the most vulnerable in our society who are in fear of the debt collector knocking on the door. However, would he tar every debt management company with the same brush? I have experience of companies that behave responsibly and extend a great deal of help to people to manage their financial affairs.

Chris Leslie: That is a fair intervention. No, I would not say that they are all the same. There are companies, even those that may for some reason be using this fee charging process, that want to do the right thing, but my point is that that business model has had its time and needs to go. There is a better way, whether it is a for-profit or a non-profit avenue, for debt management consolidation to take place, and that is to tell the creditor that this is a way for them to get some money back, albeit not necessarily the full amount, from those heavily indebted customers who may owe them something, and in exchange for getting something back they have a duty as a creditor to stump up some of the cost for the administration of that consolidation. It is time to end the business model that has a propensity to cause hardship, not in every single case, but in too many cases, and that is why the Opposition believe that this is a perfectly reasonable new clause to bring forward.

New clause 10 concerns mortgages. People may well ask where the problem is at the time being when mortgage rates are at a low level, partly because the Bank of England is printing so much money that we end up with a low base rate. But the Governor of the Bank of England has been warning in a number of reports that this is an unsustainable situation and that over the medium term he expects interest rates to normalise. From the Bank of England’s point of view, whether the normalised interest rate is 4% or 5% is moot, but it is certainly much higher than the current rate.

My anxiety is that many consumers up and down the country might be under the false impression that this is a normal period, but it is not. If the mark-ups that the retail banks charge on the wholesale cost of borrowing are maintained as base rates or LIBOR rise to a more normal level, the mortgage rates that our constituents pay could end up being significantly higher, at 6%, 7% or 8%. I suspect that the difference between the price the banks pay wholesale for their money and the amount they charge customers upfront has been growing and is too wide. As soon as LIBOR creeps up, if that mark-up is maintained, we could be in serious difficulties, which is why the new clause is essential at this time.

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This is a stitch-in-time new clause. We have tabled the proposal because we believe that now is a good time to require all the banks to forewarn their customers about a number of possible scenarios so that home owners with mortgages have the information necessary to prepare for them. Often when those of us with mortgages get information from lenders it is a set of retrospective information, for example on how much we have paid to defray the cost of our mortgage. We believe that it is now essential to forewarn customers about what could come in future, because we have to find a way of ending shocks to consumers, especially when changes to standard variable rates can sometimes be made with as little as two weeks’ notice.

Alun Cairns: I am trying to follow the hon. Gentleman’s argument, but how on earth could any individual or organisation predict with certainty what will happen in future?

Chris Leslie: The hon. Gentleman is right that it is impossible to predict with certainty, but this is about scenario planning and preparedness. He will know that the Governor of the Bank of England has been saying what he regards normalised base rates to be, broadly speaking. Does the hon. Gentleman not think that our constituents, especially those on variable interest rates—this might not apply to all customers with mortgages, some of whom might have fixed rates—ought to be able to see when their rates fluctuate because of the fortunes of the base rate or, as is often the case, the standard variable rate determined by their bank, and does he not think that those banks ought to help their customers plan for the future? If we end up yet again with a cycle in which people find that they cannot make their payments and their homes are repossessed, we will all have those constituents in our surgeries.

Let me give the hon. Gentleman an example. A couple of weeks ago Halifax announced that it would increase its standard variable rate by 0.5% from 1 May. RBS NatWest has done similarly, as have Clydesdale bank, Yorkshire bank and Bank of Ireland. In my view, all those increases are the result not of base rate changes, but of the fact that those banks are looking to repair their balance sheets not by squeezing remuneration and bearing down on the senior executive management costs that we all know they have, but by trying gradually to take a little more money from consumers. That is why we need a warning for customers in these circumstances.

Alun Cairns: I fail to understand the logic of the hon. Gentleman’s argument. If someone’s financial position at the time they take out a mortgage is relatively precarious, they probably should not have the mortgage. Furthermore, to take the logic to the next step, surely a fixed rate product would be better for those people and they should not have been on the variable rate product in the first place, so why on earth are we asking banks through additional regulation to make such predictions when it is meaningless in the reality of life?

Chris Leslie: We are doing this because the hon. Gentleman and I are here to represent our constituents, some of whom will be on variable rate mortgages in these circumstances. All we are saying is that we want

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all the banks to warn of the potential impact of rate changes across a range of scenarios. It is about helping customers anticipate what might be around the corner. It is as simple as that. The banks will give all sorts of reasons for increasing their standard variable rates. For example, they claim that costs make it difficult and often cite the special liquidity scheme, which is now beginning to taper off so the taxpayer safety net is beginning to come away, but taking more and more from consumers is in many ways unfair. I think that Lloyds bank recently borrowed many billions from the European Central Bank as part of its long-term refinancing option, so there is cheap money available wholesale for the banks. We have to keep an eye out for the way they sometimes seek to make an excessive profit off the backs of ordinary mortgage customers.

David Rutley (Macclesfield) (Con): I appreciate the rationale that the hon. Gentleman is putting forward and that he is trying to protect customers, but I have to agree with my hon. Friend the Member for Vale of Glamorgan (Alun Cairns) on the impracticality of the proposal. There now seems to be a tendency to make proposals on single products, but the Bill is about financial stability in the round, which we are trying to achieve, so is he seeking to introduce a similar forewarning system for savers on fixed incomes, who find interest rate changes equally worrying?

Chris Leslie: There might well be a case for that, but we are talking about people’s homes and the roofs over their heads. Repossessions can seriously hurt people, especially if they were unable to anticipate the situation because of a shock or unpredicted changes to their interest rates. As I have said, this point in the cycle is the right time to make this sort of change. It is about preparedness and information for home owners, and I feel strongly that we ought to have that in statute. If the Minister does not agree, this is certainly one of the issues on which we want to test the will of the House.

Mark Garnier (Wyre Forest) (Con): Will the hon. Gentleman give way?

Chris Leslie: I will give way, but there are a number of other amendments I have to talk about.

Mark Garnier: I am incredibly grateful to the hon. Gentleman. He talks about an incredibly significant problem in this country: the £1.2 trillion-worth of mortgage debt for all the people of this land. What he is describing is a steepening in the yield curve, but that could also be the result of an increase in deposit rates, so what could be taken away with one hand could be a result of giving with the other hand. What I am really struggling with in the new clause is how he envisages mortgage lenders being able to deliver the warning, given the fact that he defines a shock in interest rates as something that cannot be predicted. Moreover, how does he envisage this working in practice?

Chris Leslie: The hon. Gentleman might know that in annual pension statements, for example, in the key facts documents a number of scenarios are put forward for what the pension might be worth under a range of growth options, such as annual growth of 3%, 5% or 9%. All I am seeking to do is ask the Financial Conduct

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Authority to consider a way of giving a range of scenarios and helping to provide information for customers, which would not be impossible. That is why I think that that is necessary for mortgages. I hope that hon. Members on both sides of the House will support what is a pretty modest change. It is something that I know we are all concerned about. The Government definitely need to go away and look at the issue again.

Amendment 37, which also stands in my name, relates to the Consumer Financial Education Body, which we now call the Money Advice Service. We are seeking to amend the Bill so that it specifically targets

“proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.”

In our view, it is vital that the Money Advice Service focuses as much effort as possible on the vulnerable and those susceptible to problems, whether as a result of misinformation or choices made in financial investments. We know already, from examples in our surgeries, that those on the lowest incomes—the most vulnerable in society—need to be better protected in legislation, and that is why the new clause has been tabled.

6 pm

The Money Advice Service has started off its work by focusing on providing information to people from all corners of society, whether very rich, middle-class or on low incomes, but if it is to ramp up its work it needs to start by helping, as a priority, those on the lowest incomes and building from there, because they are the ones whose lives are most affected when investments, saving and borrowing go wrong.

There has been some criticism of the Money Advice Service, given the way in which much face-to-face advice has been outsourced while it concentrates on a web-based approach. There have been significant job reductions at the service, it has de-prioritised face-to-face services, and there has been a reliance on citizens advice bureaux and on debt advice agencies, such as those in my constituency. I visited St Ann’s welfare advice centre in Nottingham this week, and the level of cuts that it is experiencing is appalling. Whether because of legal aid reductions or local authority grant cuts, the ability of organisations to give face-to-face debt and welfare advice is shrinking day by day as the number of appointments that are available declines and the time that can be committed to support people disappears.

That is why the new clause would explicitly encourage the Money Advice Service to help those who are financially excluded or in financial distress. I am sorry that the Minister said we should not prescribe “particular groups” in the Bill. We are not talking about a particular group; we are talking about some of the most needy in society. That is why the new clause is very important indeed.

Finally, I turn to amendment 40, which I know my hon. Friend the Member for Walthamstow (Stella Creasy) will speak to. We discussed its provisions in Committee, and although we will not have a chance to vote on it today, because—for various arcane parliamentary reasons—if there is a Division it will be on day two of our proceedings, we will certainly debate it today. It is right that we ask the Financial Conduct Authority to make rules or apply a sanction to authorised persons if they offer credit on terms that are judged to cause consumer detriment, and those rules should include the

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maximum total cost for consumers of a product and should determine the maximum duration of the supply of a product or service to an individual.

The Minister’s rebuttal of the proposal was very disappointing. He said that we should not be “distracting the regulator” by including, explicitly in the Bill, that particular power, but sometimes writing and enshrining such provisions explicitly in a Bill does matter. The Minister also said that the provision might get us into a “long laundry list” of circumstances and be a “knee-jerk” response. He even said that it was a “political whim”, but that really is not the right approach to take when trying to find a consensus on tackling high-cost lending, particularly when so many of our constituents get sucked into that world and are often ripped off in the process.

The Minister did not even know when the research, which has been around for heaven knows—[ Interruption ] —for 18 months, my hon. Friend the Member for North Ayrshire and Arransays—will come to fruition. If ever there were a definition of political long grass, that would seem to be it. He should get his mower out, cut the grass, get on with the process and tell us when the research is going to come to fruition. We want to see in the Bill a specific commitment to make these powers available for the Financial Conduct Authority. Heavily indebted individuals are burdened in any number of ways, and if things get worse and they are sucked into high-cost credit arrangements, that can be difficult.

There are some circumstances—emergencies, or bridging-loan arrangements—when some individuals might need to tide themselves over for a short time, but sometimes the administrative costs of such very short-term loans can result in a charge that, when looked at through the prism of the APR, look especially high. We do not want rules that completely freeze out people’s ability to secure bridging loans in such exceptional circumstances, but the point is that they should be exceptional circumstances; people should not be sucked into dependency on high-cost credit arrangements. The duration of their dependency needs to be regulated, and we should look at the total cost involved, and perhaps prevent the roll-over of some arrangements.

I commend my hon. Friend the Member for Walthamstow (Stella Creasy) and the hon. Members for Kettering (Mr Hollobone) and for Worthing West (Sir Peter Bottomley) and others who have signed up to the amendment. It is a cross-party issue that has come up on several occasions, and I wish my hon. Friend well with it.

There are, as the Minister said, important issues in this group of amendments—absolutely, there are. For me, new clause 10 is one of the most important, but I commend them all to hon. Members.

Justin Tomlinson (North Swindon) (Con): I shall speak briefly to a number of amendments that are inter-linked, because the protection of vulnerable consumers cannot be taken in isolation. A series of measures needs to be taken to protect those who need the most help.

Members on both sides of the House will support the principle of amendment 40, on the total cost of loans, but it is important that through the review we find a way of making it work. We do not want to push people into the hands of illegal loan sharks, and the review, which has been going on for 18 months now, needs to

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conclude so that we can start to make progress, but we need to look at all the variables, including the need to limit the amount of roll-overs.

The shadow Minister described how people might use such loans in exceptional circumstances, but there are two aspects to that. First, there are some people who, through consumer choice, might wish to take out such loans, so to my mind we should have compulsory credit checks. If people who can afford to service such debts make a consumer decision to be relatively inefficient with their money, that is up to them, as long as they can afford to do so, but if vulnerable consumers get trapped in a cycle of debt and need protection, a limit on the amount of roll-overs will be absolutely essential.

I talk to a number of high-street lenders—including The Money Shop—which look at people’s bank statements, but it is not unusual for people to have more than one bank account, and the reason I am so keen on credit checks is that although people often look after one bank account in an orderly manner, that is the one they present when applying for a loan, not the one that is in financial chaos.

Nick de Bois: My hon. Friend refers to the review, but alongside other points he has made, would it be worth considering lending techniques such as doorstep lending and similar?

Justin Tomlinson: My hon. Friend makes an important point. In previous debates, I focused my anger on the techniques of doorstep lenders, who build up a relationship with the consumer, pop by once a month and, over a cup of tea, suggest items for which they might want to borrow money, trapping them in a lifetime of expensive, high-cost debt. For example, they might pop round at Christmas to ask, “Have you organised your Christmas presents for your children?” The householder says, “No, I’m not sure I can afford it,” to which the lender replies, “No problem. We’re here. We can lend you that. It’s only £3 a week. I’m sure you’re going to be having relatives to visit, so why don’t you get your carpet sorted at the same time.” Those nudge-nudge techniques, which encourage people to take on high-cost debt, need to be looked at.

Amendments 37 and 55 seek to empower consumers, and there are important factors, such as the need to access impartial advice, that need to be looked at. I found through my work as chair of the all-party group on financial education that 91% of people who got into financial difficulty would have made a different decision had they known otherwise. Hindsight is a wonderful thing, but through our casework as MPs we see that some people make the wrong decisions and get themselves into difficulty. Of the three ways I would like to see that tackled, one is by the provision of easy access to advice through organisations such as the Consumer Credit Counselling Service, Citizens Advice and the Money Advice Service. To my mind, if a debt management service offers a high-cost loan, it should provide links to those organisations, just as when somebody buys a packet of cigarettes, there is a health warning on it. There is then no excuse. It relies on consumer choice, but if somebody chooses to, they can take up the advice.

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It will also help if all consumers have financial education in the first place so that they understand the advice. In the case of the Money Advice Service, one needs to know something about the products in the first place. Obviously, face-to-face advice would be ideal. I would also like all loans to be displayed in pure and simple cash terms, so that every consumer can make an informed decision. I am sure that even Treasury Ministers would struggle to work out what is meant by an APR. I will not embarrass individual MPs by carrying out a test, as I have in previous debates.

Finally, I deal with clause 10. I was interested in the Minister’s comments about advice being given to consumers six months in advance. As we all recognise, that presents a challenge, because if somebody could predict what will happen in six months’ time, they would be very wealthy. The principle is right: we need to protect consumers from sudden changes. The evidence shows that the majority of people who fall into financial difficulties do so because of a change of circumstances such as the loss of a job, a family bereavement or a divorce. One could extend that to a sudden change in the cost of a loan because of the interest rates.

Although this is often derided, I think that we need to encourage a savings culture. If one has money in reserve, one is better equipped to deal with a sudden shock to one’s circumstances. I welcome the moves of the Nationwide building society for first-time buyers, because they are among those most at risk from a change in circumstances owing to a change in their job or in their interest rates, because they extend their borrowing to the absolute limit to get themselves on the housing ladder. Nationwide has introduced a linked savings account into which people have to put regular savings for the six months to a year that they are trying to get their first mortgage. It encourages them to carry on doing so, so that if interest rates and the cost of their loan go up suddenly, they have a financial buffer. More could be done to encourage the industry to promote such products.

Katy Clark: It is a pleasure to speak to new clause 12, which I tabled along with many other hon. Members. It would require the Financial Policy Committee to

“carry out and publish a review of the operation of consumer prepayment schemes to consider whether existing protection for consumers is sufficient.”

It would require the report to include

“an analysis of whether consumers of prepayment schemes should be made preferential creditors for the purposes of the distribution of the realised assets…in the event of insolvency.”

I come to this issue as a result of the experiences of my constituents when the Farepak Christmas savings club collapsed on 13 October 2006. Many hon. Members will be well aware of the background to the Farepak issue, which has been raised in this Chamber on a number of occasions. More than five years after the collapse of the company, almost none of the 120,000 people who lost out have received a penny of their money back. Those 120,000 savers lost about £38 million. Some money was distributed as a result of a response fund, which was set up in the lead-up to Christmas 2006, but the people who lost out have not received any money from those who are dealing with Farepak’s assets.

In my constituency, hundreds of families were affected. I pay tribute to my constituents Louise McDaid and Jean McLardy, who, along with many others, set up the

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Farepak victims committee, which continues to campaign for justice for those who lost out as a result of Farepak’s collapse.

Jessica Morden (Newport East) (Lab): Will my hon. Friend add to that list my constituent Deborah Harvey, who was a Farepak agent and who has campaigned tirelessly with the Farepak victims committee? The committee recently contacted a raft of companies that run prepayment schemes to seek assurances about the future protection of people’s money, but it has not had a welcoming response. Does my hon. Friend agree that we owe it to Farepak’s victims to ensure that this sort of thing never happens again and that such people are protected in legislation?

6.15 pm

Katy Clark: I congratulate my hon. Friend on her work on this issue. She led an Adjournment debate about it shortly before Christmas to commemorate the fifth anniversary of Farepak’s collapse.

I, too, pay tribute to Deborah Harvey, who is the current secretary of the Farepak victims committee and who has done a tremendous amount of work on this issue. The Farepak victims committee is unusual in that it has continued, in an organised way, to bring people together on this issue over a long period. One problem is that the type of people who tend to be affected when such things happen are not organised. The work done by Louise McDaid, Jean McLardy, Deborah Harvey and many others has helped to keep the issue in the spotlight. It is important to look at the situation again today, because it is a disgrace that, five years on, it has not been brought to a conclusion and people still do not know for sure how much money they will get back.

One reason for the huge problems was that the Farepak victims were unsecured creditors. That meant that when the company went bust, the money that they had paid in was not protected, as it is secured creditors who get preference. We need to look at the model whereby people pay money in and effectively save up for goods that they have not received.

Mr Robert Buckland (South Swindon) (Con): The hon. Lady is outlining the gap between the perceptions of those who were saving with Farepak, which was based in my constituency, and the reality of the regulatory framework. The gap was between people’s belief that they were saving into a pot that they would be able to reclaim from and the reality, which was that they were unsecured creditors. That must never be allowed to happen again. This is a chance for change so that we do not again see the abuse that we saw with Farepak .

Katy Clark: I am grateful to the hon. Gentleman for his intervention. He has shown that he has a full grasp of the issues. Many of those who saved through Farepak for Christmas 2006 believed that there was some form of protection for the money that they put in. They were of the opinion that they were being responsible by saving in that way. My view is that they were being responsible. We have a duty, as legislators, to put protections in statute to enable people to continue to save using such models. I think that those people had a reasonable expectation that there was regulation in place to protect the money that they put in. Many of them presumed that there was such regulation.

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Five years ago, a voluntary body called the Christmas Prepayment Association was set up. However, many prepayment companies are not members of that organisation and there is no requirement for them to belong to it. Some of the biggest players in the market, such as Tesco and Asda, are not members. The association covers only Christmas schemes and not the wider prepayment sector.

I believe that the prepayment sector has not been regulated because, over time, different forms of prepayment have developed. Mechanisms have been put in place to provide protection for the earliest types of prepayment, such as those used in the travel industry. The Farepak case highlights important failings in the regulation of the prepayment industry. It has become clear that that lack of regulation extends not just to the Christmas hamper sector, but to a wide range of prepayment situations in which consumers pay in advance of receiving goods. I have already mentioned the holiday sector, in which the Association of British Travel Agents operates, and there are many other situations in which a customer pays for something by way of instalments.

That practice is usually undertaken by those of limited means, who are at risk of losing both their money and the product if the fund goes bust before they take delivery. Such a form of payment is used by such large organisations as Tesco and Asda, but also by small organisations in all our communities. Some people pay over a period for goods for a celebration, for example, perhaps paying a butcher instalments of £10 a week. We should provide a statutory framework so that such people get some type of preference if the organisation in question no longer exists.

One reason why it is important to have regulation is that it tends to be people from poorer communities who pay in advance by instalment. They are exactly the people who can least afford to lose out, and I do not believe that they should carry the risk when they choose that model of payment for goods. Many of them honestly assume that their money will be ring-fenced in some way.

We need to move to a model whereby moneys that are prepaid are effectively held in trust, and any organisation that can no longer deliver the goods because of a collapse gives those moneys priority. I therefore believe that it is appropriate that an organisation such as the Financial Policy Committee examines the issue. Prepayment exists in a wide range of scenarios, with people paying over a period in advance of receiving the goods. I therefore ask the Government to look sympathetically on new clause 12 and consider pursuing the course of action that it suggests.

Lorely Burt: I begin by warmly welcoming the Government amendments that provide further clarity on the intention to transfer the regulation of all consumer credit businesses currently regulated by the Office of Fair Trading to the Financial Conduct Authority, while retaining all the protections that consumers currently enjoy under the Consumer Credit Act 1974.

New clause 9 would commit the Government to phasing out charges for debt management plans. Whatever the hon. Member for Nottingham East (Chris Leslie) thinks, businesses providing those plans are in the main legitimate. He talked about the scandalous behaviour in

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which certain debt management companies have indulged, but a number of companies look after their customers effectively and caringly.

Katy Clark: Does the hon. Lady agree that one cause for concern must be the fact that organisations profit from debt management? The charging of fees by profit-making organisations seems inappropriate. Does she agree that we should encourage voluntary and non-profit making organisations in the sector?

Lorely Burt: Of course I would encourage such organisations, and as my hon. Friend the Member for North Swindon (Justin Tomlinson) said, we need to give people financial education. There is an image of companies profiting from others’ misery, but there are companies that act responsibly and ethically, so I do not support new clause 9. It is a shame that all companies have to be tarred with the same brush, and the new clause would remove an element of choice from the consumer. Of course, many consumers would not choose a debt management company over a free service given the choice.

Yvonne Fovargue (Makerfield) (Lab): Does the hon. Lady agree that one problem is that consumers making a distress purchase do not know which companies are reputable? Unfortunately, the ones at the top of the Google list tend to be the least reputable.

Lorely Burt: I agree that the companies that spend money on unsolicited calls to people who may have a financial problem are the ones that need to make the most profit, to cover the cost of doing so. However, responsibility for debt management is moving to the new FCA, and new guidelines are being issued. As long as those guidelines are strong and properly enforced, part of the market may still be able to benefit from providing debt management advice.

Sheila Gilmore (Edinburgh East) (Lab): Will the hon. Lady consider the fact that it is not necessarily about whether there are charges so much as it is about who pays them? The intention behind the new clause is to protect consumers from being the ones who pay. Is it not possible that debt management companies can find another way of funding their work rather than having consumers pay the price?

Lorely Burt: That should ideally be the situation, and when the new regulations are produced there should be a careful consideration of whether any up-front fees should be paid to debt management companies.

New clause 10 would require mortgage lenders to inform existing customers about potential interest rate changes. I have to declare an interest: I was a mortgage adviser in one of my past lives, so I know a little bit about the matter, and I suggest that any reputable mortgage company should do that anyway. It is not in their interests to encourage people to take on mortgages that they will not be able to repay should financial circumstances worsen. The new clause may therefore be superfluous. I completely understand and appreciate the sentiment behind it, but the matter will probably fall within the FCA rules and within the ethical behaviour that one should expect from any mortgage lender.

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Chris Leslie: I appreciate the hon. Lady’s comments, but if she cannot support the new clause, will she at least join me in encouraging the regulator to ensure that all banks think about informing customers of potential interest rate changes as a matter of course? One bank doing it would not be enough; we need them all to engage in that forward planning.

Lorely Burt: I agree entirely, and we already have a provision to enable that to happen.

My hon. Friend said that one building society requires customers to save with it before getting a mortgage there. When I had my first mortgage, more years ago than I care to admit to, that was the norm. People were expected to be a customer of a building society before getting a mortgage from it, which encouraged a way of saving that we seem to have lost in many areas of our society. I support the sentiment behind the new clause, but I do not believe we need it.

New clause 12 calls for a review of prepayment schemes, including an analysis of whether customers should be preferential creditors in the event of insolvency. The Farepak issue, and the tragedy of its customers, is emblazoned on our minds. Victims of other financial schemes such as Equitable Life still write to me virtually every week, but the new clause relates particularly to prepayment. Many structural issues contributed to Farepak’s demise and they need to be addressed. Many unsecured creditors suffer when such a company collapses. I am attracted to the idea of giving prepayment scheme customers a form of secured creditor status, as the hon. Member for North Ayrshire and Arran (Katy Clark) suggests. The Minister has advised that such a measure is not appropriate within the remit of the Bill, because a prepayment company is not a financial services company, but perhaps he could advise us on an appropriate route for looking at the proposal in a little more depth.

6.30 pm

Amendment 40 is on the total cost of credit. Members on both sides of the House have a great deal of sympathy with it, because it would be an attractive way of controlling the enormous amounts of interest that are being charged. I do not want to go into all payday lending issues—I was reminded the other day that payday lenders constitute only 0.6% of the credit market, even if it is a hugely important part of that market—but the hon. Member for Walthamstow (Stella Creasy), who has spoken on the matter at some length, has pointed out that the market affects some of the most vulnerable people. The Minister has been kind enough to tell us that the report, which is eagerly and anxiously awaited by hon. Members, will come out in the summer. We look forward to the report, and to moving ahead as quickly as possible after it is published.

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.

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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.

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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.

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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.

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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.

6.45 pm

The Treasury Select Committee stated:

“There remains confusion about the role of the FCA in price regulation. We recommend that the Government clarifies”

the matter. That is crucial. We can make speeches in Parliament saying that we wish this to happen—I welcome the fact that the Minister believes such a power possible—but without explicit legal guidance it is unlikely that the new regulator will be able to take action. That is what the amendment is about.

The second question is about whether other powers will be available to affect the kinds of behaviour we all want stopped. In an industry where one firm posted a pre-tax profit this year of £162 million, a fine for consumer detriment would simply be an occupational hazard, not a deterrent. Given that the chief executive of another firm earned £1.6 million in a single year and that the maximum fine the OFT can levy is £50,000, it would simply be annoying, not a wake-up call.

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Taking away these firms’ consumer credit licences, which, as I said, has happened only once in the past eight years, is only one possible solution, and the regulators would rightly wish to hold such a nuclear response in reserve. On the other hand, regulating what companies can charge and the product through regulating their cost and duration could benefit consumer credit markets and the companies themselves by setting clear guidelines about what is acceptable in the UK. We would all agree, I am sure, that such a power would need to be used only once for the industry to get the message that this county no longer tolerated legal loan sharking.

This is the third time we have had this debate. I know the Minister understands the problems and that he shares my concerns about this industry and its impact on families across the country, but I question whether he is really committed to understanding the possible solutions at our disposal and the opportunity presented by the legislation to make progress and to send a clear message about the need to reform this market. He will win not only my gratitude and that of other Opposition Members dealing with these problems but the gratitude of “EastEnders” fans watching such problems unfolding on their screens and of the thousands of us living with high streets pockmarked with these companies. He will also win the support of the fans of the Cobblers, Tangerines and Jambos who are horrified to see companies targeting them through their football clubs. Let us do this now. Let us protect British consumers in the way they deserve. I ask the Minister please to support the amendment and to listen to Government Members who also wish to see progress. Let us have no more delay. The people whom we all represent who are struggling with these companies need and deserve better.

Yvonne Fovargue: I rise to support several of the amendments. I will speak first to new clause 9 on the phasing out of debt management companies. I accept that some of them might act ethically, but a great number do not, and the voluntary code of practice has simply not worked. We are talking about a distress purchase. People who buy a debt management plan will often have been worrying about it for months and months. They are looking on the internet at 3 o’clock in the morning and going to the first name they see. They do not know whether it is a member of a reputable trade body. They simply see, with relief, that someone can help them with their debts. It is no wonder that the number of complaints to the Financial Ombudsman Service about these companies’ practices has rocketed in recent years. The cost of policing and dealing with these organisations is disproportionate. It would be much easier to phase them out and put that money into the free sector so that it can ensure that creditors, via the fair share scheme or the financial inclusion fund, pay for such advice.

I would also like to speak to new clause 12 and the prepayment issue, which was so eloquently outlined by my hon. Friend the Member for Walthamstow (Stella Creasy). The people who invested in Farepak honestly thought that it was a savings scheme, which should be regulated. My experience of working for a citizens advice bureau is that one of the most difficult things to explain to people is the difference between a deposit and a prepayment. People do not understand the difference; they believe that they are equally protected whether a payment to a scheme is classed as a deposit or a prepayment.

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Indeed, I have seen people in my constituency surgery who have had problems with funeral prepayment schemes, most of which are covered, but some of which are not. I have had grieving relatives come to me and even people who have paid for their funeral, thinking that their family were covered and would not have to worry anymore, who have lost their money.

The voluntary Christmas prepayment scheme is simply not sufficient. As my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) said, the big supermarkets are not taking part. I wrote to every supermarket, and they said, “There’s no need for us to take part.” However, if they will not take a lead, how can we expect the smaller companies to follow? The scheme needs to be expanded. We need to ensure that people do not fall through the gaps, such as when the Government say, “It’s not this regulation; it’s that regulation,” or, “It’s not in this area; it’s a consumer matter.” The people who suffered because of Farepak do not care where it is regulated; what they need is some regulation.

Amendment 55, which deals with the money for specialist debt advice, is extremely important. We have heard on a number of occasions that the Money Advice Service does not provide debt advice, and nor should it. It should not be providing people with advice on debt, but putting the matter to the agencies that specialise in it. It is quite understandable, with face-to-face money advice and the financial inclusion fund, that the Money Advice Service should want more cases dealt with. However, there is a perverse incentive, because in being able to deal with one-off cases, the agencies are seeing more people, but giving less advice. The intractable cases, where people really need advice—those involving people who cannot deal with their debts, but need to keep coming back because their creditors keep asking them to—are not being seen. One-off advice is fine for those who can help themselves; indeed, there are a number of people who can be directed to the internet or telephone. My concern is that the removal of legal aid for debt and the Money Advice Service’s inclusion of one-off cases in the financial inclusion fund mean that the people who need ongoing support for long, complex cases are not being seen by the agencies. If amendment 55 is not accepted, therefore, I would urge that those people be considered when debt advice is reviewed.

Let me turn to amendment 40, which was so eloquently spoken to by my hon. Friend the Member for Walthamstow. I agree that capping the total cost of credit is simply one measure. However, we face an urgent situation. There are many other measures to consider, and I agree with the hon. Member for North Swindon (Justin Tomlinson): roll-overs indeed cause detriment. I have one constituent who has taken out 17 payday loans in one day alone—that is the highest so far; I am still waiting for an improvement on that. As companies have no way of checking in real time whether somebody has taken out any more payday loans, we need a database, run by the regulator so whether somebody has taken out any further loans can be checked, and a limit, whether monetary or numerical. We need to consider that, so I welcome the fact that the Office of Fair Trading is conducting a review. I hope that it will widen that review to include doorstep lenders, such as Provident, which have for so long caused detriment to consumers.

I would like to mention a case that would be solved by capping the total cost of credit. I had a constituent come to me because she had borrowed £300 from

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Toothfairy. She was a hairdresser. Unfortunately her washer had broken down and she had borrowed that £300 so as not to have to go to BrightHouse and pay its extortionate costs. Unfortunately, however, the hairdressers closed before her next payday—no notice; she lost her job. Over 12 months she had offered instalments to Toothfairy, but the company would not listen to her or accept any instalments. Twelve months on, she went to the citizens advice bureau. She owed £2,570 at that stage, from a debt of £300. She had also received threats from the debt collection agency, which purported to be a bailiff. The company refused to negotiate with the citizens advice bureau, and although the OFT is investigating, there is no action yet. The OFT does not have the power to suspend the company. It is investigating the case, but if it finds that there was consumer detriment, it cannot suspend the company’s licence, and it knows very well that the company will appeal. I cannot believe that there is no consumer detriment in that case, or in the number of similar cases. The OFT or the new regulator must look at the power to suspend. However, capping the total cost of credit would also be a way of doing something urgently to prevent people such as my constituent from getting into such situations.

Lorely Burt: The hon. Lady talks about the OFT not having the power to suspend, but does she agree that the new powers, which the FCA will have, will make it possible to address that?

Yvonne Fovargue: I do not believe that it has yet been confirmed that they will include the power to suspend a company. I would like the Minister to address that. If the FCA has that power and has the resources to act, that would help in cases where the company is breaking all the voluntary codes—it has been proved again that a voluntary code is not working. Again, however, consumers do not look to see whether such companies are regulated; they just need the money. They simply go to the nearest company—possibly the one at the top of the internet or possibly the person or company that sends them an unsolicited text. Consumers do not shop around for such loans.

Consumers need a robust regulator, and although I welcome the move from the OFT to the FCA in new clause 4, the Government need to clarify what that means for consumer protection. There needs to be a robust deterrent for firms entering the market. The bar needs to be set much higher. There also needs to be a real deterrent. I was therefore pleased to hear the Minister say that the £50,000 limit did not apply and that there could be an unlimited fine, because I believe that £50,000 will quite often be written into the business plan as a write-off. There needs to be the power and, as importantly, the resources to supervise and to stop bad practice at an early stage. Two years down the line is too late for the innocent people who have walked into the trap. We need a real consumer champion. As Which? has often said, what we want is a watchdog, not a lapdog.

Neil Parish (Tiverton and Honiton) (Con): I apologise to the House for not being here at the start of the debate.

I congratulate the hon. Member for Walthamstow (Stella Creasy) on her amendment 40, because payday loans and doorstep lending are a huge problem. There

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are many loan sharks out there and they need to be put back in their boxes. We need serious financial health warnings about their conduct, so that our constituents have some idea of how much they are borrowing and how much they will have to repay. For instance, anyone borrowing £100 at 2000% will have to pay back up to £2,000. That needs to be clearly laid out when people are taking out such loans. As has been pointed out, APRs—annual percentage rates—are not always understood by our constituents. Therefore, if they could see exactly what they had to repay, they would be much less likely to take out such loans.

Lorely Burt: The point of payday lending is that it should be for a very short period. Such issues arise when there are innumerable roll-overs, as outlined by the hon. Member for Walthamstow (Stella Creasy). What we hope the industry will do and the review will achieve is either to confine roll-overs to a small number or to abolish them altogether, which would address the problem of the £2,000, which no one in this Chamber wants to see.

Neil Parish: The hon. Lady is absolutely right. It needs to be clearly set out when people take out a loan that such sums could be the result if they are unable to repay it. Let us consider the analogy of tobacco. We no longer allow tobacco advertising, and shops cannot even display packets of cigarettes any more, yet people can ring up Wonga on their mobile phone and take out a loan for which they will be charged 4,214% interest.