Affordable Credit for People on Low Incomes

(Limited Text - Ministerial Extracts only)

Wednesday 5th December 2018 Westminster Hall

[Sir David Crausby (in the Chair)]

Order. It is not normal, in a half-hour debate, for hon. Members to speak unless they have sought the permission of the mover of the motion and the Minister. Is the Minister happy for other Members to speak at this point?

[The Economic Secretary to the Treasury (John Glen)]

Yes, as long as I have a bit of time.

[Sir David Crausby (in the Chair)]

In that case, I call Faisal Rashid.

--- Later in debate ---

[Sir David Crausby (in the Chair)]

I think that the Minister wants about 10 minutes to respond to the debate. Is that right?

[John Glen]

indicated assent.

[Sir David Crausby (in the Chair)]

I call Stella Creasy.

--- Later in debate ---

[The Economic Secretary to the Treasury (John Glen)]

It is a pleasure to serve under your chairmanship, Sir David. I thank the right hon. Member for Birkenhead (Frank Field) for raising this important issue, which, as he knows, I have been passionate about since our days of setting up Feeding Britain. We went to South Shields and Salisbury to look at the experience of people using food banks. We even travelled to Paris together to try to get some inspiration for how to get the right model—

[Frank Field]

Before the riots.

[John Glen]

Absolutely. I really want to make progress on the issue during my time as Economic Secretary, and in my response I will draw attention to some of the measures that have been taken.

I also had the pleasure of working with the right hon. Gentleman on the Select Committee. The assiduous way that he has pursued the challenges that people on low incomes face is legendary across the House. The whole House admires his efforts.

I want to get to the heart of the matter. The right hon. Gentleman has raised a number of issues about the conduct of Provident, as have five other hon. Members. We also had a conversation earlier this week. I recognise that he sees a citizens bank as playing two roles—first, ensuring that the poorest members of society can access core banking services, and secondly, providing credit to those people to help them to smooth their income, spread costs over time and cope with unexpected financial shocks. I will address each of those in turn.

I will set out how the progress that the Government have made on ensuring access to core financial services such as bank accounts has been achieved. The nine largest personal current account providers in the UK are legally required to offer a basic bank account to customers who are unbanked. Those accounts must be fee-free and must not have an overdraft facility.

The right hon. Gentleman drew attention to the key issue of the need to access affordable credit. The Government’s vision is for a well-functioning and sustainable consumer credit market that can responsibly meet the needs of all consumers. I think there is some agreement on that vision on both sides of the House.

I recognise that we face a playing field that is not level. My hon. Friend the Member for South Suffolk (James Cartlidge) and other hon. Members raised the point about advertising budgets, which is why one of the Budget announcements seeks to tackle the barriers faced by key partners such as housing associations to referring people to sources of affordable credit. The default setting is to find a better option than some of those that can be found on Google.

[James Cartlidge]

Has the Minister considered speaking to Google and other companies about that? It is a good point that it is very difficult to police the robot algorithm that sets up their adverts. I do not see how he can do that unless he speaks to the companies themselves.

[John Glen]

I am happy to take on that suggestion. I will look into what we can do as part of the challenge we also set in the Budget to introduce technical solutions to try to level that playing field and to make community development financial institutions such as Scotcash, which I visited in Glasgow in September, more accessible earlier in that process.

On Financial Conduct Authority regulation, I will try to address the points raised by the hon. Member for Walthamstow (Stella Creasy), who has raised the matter in the House previously. There was a review in May, although she does not agree with all its conclusions. Since the review, I have had more conversations about Amigo Loans and other issues, such as what can be done to monitor and to provide the evidence. In the interests of responding to the right hon. Member for Birkenhead, I will not carry on, but I do not want to be flippant about the serious concerns of the hon. Member for Walthamstow.

The FCA governs the rules about the provision of credit and is responsible for the regulation of consumer credit. It is a robust regulator, which I always encourage to be even more robust. It has the tools to take swift, effective action against improper practices. My regular dialogue with the chief executive, Andrew Bailey, and the director of strategy and competition, Christopher Woolard, covers that topic, and I know that high-cost credit is a priority for them.

The right hon. Gentleman specifically highlighted a number of worrying examples of high-cost credit lenders in Birkenhead. I listened with concern and serious dismay to the impact of those practices on vulnerable consumers. I hope the action that the FCA is undertaking in relation to lenders, as part of its broader review of the high-cost credit market, will have some impact.

The right hon. Gentleman mentioned Provident. The FCA is consulting on new rules and guidance specifically for home-collected credit firms. I will draw its chief executive’s attention to this debate. The rules will include requirements for firms to clearly explain the costs of a new loan compared with the cost of refinancing an existing one, and guidance stating that firms cannot visit customers to offer new loans without an explicit request from the customer.

The provision of affordable credit is a multifaceted problem and there is no single solution to overcome it. It is not sufficient to simply tighten regulation for high-cost lenders. Therefore the Government are desperately keen, and have taken steps, to ensure that low-income consumers can access safe, affordable and sustainable credit. In our civil society strategy, we announced that £55 million of funding from dormant assets would be directed towards addressing the problem of access to affordable credit and alternatives.

In the autumn Budget at the end of October, the Chancellor announced a package of measures to support affordable lending, including a prize-linked savings scheme to encourage the growth of the credit union sector. Although the sector is variable in quality, as has been discussed, there are opportunities to expand it. Another measure is an affordable credit challenge fund to encourage the UK’s vibrant FinTech sector to solve the challenges that I just discussed with my hon. Friend the Member for South Suffolk. A further measure is a change in the regulatory boundary to allow registered social landlords to offer their tenants better community lenders. A final measure is a feasibility study into a no-interest loan scheme, and a pilot of that scheme.

The right hon. Member for Birkenhead is absolutely right that banks have a responsibility to assist and facilitate better solutions in this area. Earlier this year, we took through the House the single financial guidance body, which will be a huge partner in working—I hope—with the banks, which often have worthwhile initiatives that are piecemeal and not joined-up. My vision, which is very similar to his, is of the banks coming together to recognise that, across the country, there are pockets of poverty and deprivation that need a new solution, which involves pooling their expertise and endeavour and working closely with the single financial guidance body to deliver a better set of options and outcomes for the constituents for whom he has been fighting so earnestly for 40 years.

I thank the right hon. Gentleman for securing the debate. He and other hon. Members have raised some significant issues that I take to my heart and back to my office. I hope I have offered him some reassurance by setting out the comprehensive and concerted actions that the Government have taken with the FCA to address the challenges in this area. I am clear that the Government are on a journey to actively and comprehensively support vulnerable borrowers. I want to continue to work with him, and other hon. Members from both sides of the House, using the knowledge and expertise that exists, to come up with even better solutions to deal with a real problem in some communities in this country.

Question put and agreed to.