Catherine West
Main Page: Catherine West (Labour - Hornsey and Wood Green)
Catherine West (Hornsey and Wood Green) (Lab)
In the time that I have, I will confine my remarks to two issues. The first is household debt, and the second is Brexit and the economy.
We face a rapidly growing balloon of household debt, a problem that eight years of crippling Tory and Liberal Democrat austerity, stagnant wages, insecure zero-hour jobs, savage benefit cuts and rising living costs have compounded. Some 8.3 million people are classed as over-indebted, while millions more are in a permanently financially precarious position. Household debt was worse last year than at any other time on record, and I encounter it time and again in my advice surgeries. The debt charity StepChange has estimated that more than 3 million people are in significant financial difficulty, falling behind with their payments of crucial household energy bills, council tax, mortgages or rent, and, once they fall behind, finding it incredibly difficult to get back on track.
The Chancellor’s intention to explore a zero-interest loan scheme is long overdue and welcome. I await the full details and hope that the scheme will be implemented as quickly as possible, but what are the Government doing to crack down on the drivers of household debt? What are they doing about the exploitative employment practices that lead to problem debt? People who are on zero-hours contracts, or whose income changes from month to month, are twice as likely to have fallen behind with essential household bills over the past 12 months, but the Government have kicked the can down the road rather than providing any kind of comprehensive response to the Taylor review of modern working practices. Even in today’s speech, it was skated over in the briefest of terms.
It is a national scandal that so many people do not know how much they will earn from week to week, which leaves them unable to budget for basic necessities and unsure whether they can pay their rent. The debt crisis in our country is not about people living beyond their means; it is about people whose incomes have been squeezed so hard, for so long, that they simply cannot make ends meet. As the incisive Treasury Committee report said, real wages are lower now than they were in 2010, and nearly 10 million people are struggling in insecure work. That is a third of the workforce, a staggering figure. In the vast majority of cases, those are people who used to have permanent employment, but are now in the precarious position of not knowing what will be in their pay packet, if anything, at the end of each month.
The Government have stood back and allowed unscrupulous employers to make vast profits on the backs of hard-working people. They have failed to tackle bogus self-employment, failed to ban zero-hours contracts, and failed to address the fact that a record number of working people are living in poverty, with 6 million workers taking home less than the living wage. On average, working people are still £800 worse off than they were a decade ago. That is a shameful state of affairs, and one that pushes households into debt, ill health, and the hands of irresponsible lenders.
Earlier in the debate, the right hon. Member for Sutton Coldfield (Mr Mitchell) mentioned that poverty was set to increase if the roll-out of universal credit went ahead. Many other Members have talked about that issue, so I will not dwell on it, but so many working families who are already living from month to month will find themselves up to £2,400 a year worse off. What has been the response of the credit industry? It has been breaking the rules and selling unaffordable loans to vulnerable people for years.
In Parliament last week, I launched a new non-profit service called Debt Hacker to help people who have been mis-sold loans to claim compensation. The research findings that it has uncovered are appalling. A third of the people who have taken out a payday loan have not been able to afford to get to work. Payday borrowers are twice as likely as the average to skip meals because they cannot afford to eat, and seven times as likely to use food banks. Who are the biggest users of payday loans? They are NHS workers, public sector workers and those in the gig economy, and this Government have failed them. But payday lenders are not the only culprits. The flagrant disregarding of Financial Conduct Authority rules on affordability has happened on an industrial scale with doorstep and catalogue lenders, credit cards, car finance and more having a lot to answer for. Why is it taking so long to replicate the interest rate cap on payday lenders across all forms of borrowing to help to prevent people from falling into this spiral of debt in the first place?
To stamp out these practices once and for all, the Government should throw the book at the significant parts of the lending industry that have built their business on the back of ignoring the simple principle that a loan should be affordable. The Government must take tougher action to produce a cultural change in lending, with proper enforcement and penalties on those lenders who disregard FCA rules.
Today’s pledge to extend the “breathing place” scheme is welcome, but that has to include all debts, including those to Government such as tax or benefit overpayments as well as student loans. Part of the reason why the Budget looked a little more healthy tonight is because so much is being pushed on to the shoulders of young people in the shape of student loans.
Finally, Brexit will make all of this worse. The 2.5% contraction of the economy is already making us all feel worse off, as is the depressed sterling and the impact that is having in terms of future uncertainty for employers.