Financial Guidance and Claims Act 2018 (Naming and Consequential Amendments) Regulations 2019

Lord Sentamu Excerpts

Wednesday 1st May 2019 Lords Chamber

[Baroness Janke (LD)]

My Lords, I did not participate in this Bill but I share the sentiments expressed so far about the need for financial guidance, advice and education to help people come to better decisions. I support the remarks of the noble Baroness, Lady Neville-Rolfe, about the importance of including this as a regular part of the curriculum. As a teacher, I have spent some time trying to teach basic financial skills as part of personal and social education, but it is very difficult when there is not proper time allowed for this in the curriculum. I agree that it needs to be given much greater importance. That is even truer now when so many young people have easy access to the internet and easily become fair game to scams, complex bogus schemes and systems of advice which are really there to deceive and take their money. Therefore, I broadly welcome the scheme.

I was interested to hear the remarks of the noble Lord, Lord Stevenson, about debt and debt management and the importance of the latter not just to the economy but to individuals who may be going through a particularly dreadful period in their lives.

As I said, I did not work on the Bill, but I wanted to ask a few things about the Act’s progress. Section 3(7)(b)(i) commits the Minister to publishing,

“an assessment of whether unsolicited direct marketing is, or may be, having a detrimental effect on consumers”.

Has any analysis of that been done yet? If not, could something to do with the quality of advice and the qualification of some of the advisers be included in that? I do not know whether there was debate on that during the passage of the Bill. Section 4(1) says that the single financial guidance body must provide advice to a member of a pension scheme or an inheritor on what to do with the flexible benefits. Are there any early thoughts or a timetable on that?

I know that with regard to Section 22 there was an issue about whether the Government would limit or control the direct marketing of financial services. Again, has any progress been made on that? If not, is there a timeframe in view? My observation—I speak as a counsellor who has given advice on debt and other topics—is that the question of resources is very important. As part of the programme of austerity, financial and legal advice were two of the areas that were severely cut back. I would welcome assurance that the finance for this will be protected, as has previously been mentioned.

I also wonder about declarations of interest and vested interests. How can customers know whether their advisers have these, and what they are? We talked about lists online about people taking advice. There may be a provision already about who is registered to give advice.

There is also the issue of redress. The legislation talks about the FCA, but my experience is that redress can be very difficult for people who are not knowledgeable about these things. It can be very long and very inaccessible. I hope the Minister can enlighten me on that. Having said that, this seems a very good measure and I look forward to hearing more as the measures in the Act are introduced.

[The Archbishop of York]

My Lords, I want to support the main thrust of the speech from the noble Lord, Lord Stevenson, about debt. Julia Unwin, who was chief executive of the Joseph Rowntree Foundation, did a big research project on why people were going to Wonga. They went to Wonga because it asked no questions; people knew they could get their payday loan. Other lenders asked more questions and were far more intrusive and credit was not readily available. Noble Lords know that my archiepiscopal colleague, the most reverend Primate the Archbishop of Canterbury, said that he intended not only to reform Wonga but to do away with it, and we know what has happened to Wonga.

Credit unions have been set up, which the most reverend Primate and I support. However, people still find it hard to get credit easily and the organisations responsible have caused a lot of people to go deeper and deeper into debt. When he was Archbishop of Canterbury, William Temple suggested that interest rates should be set only by the Bank of England, and not by credit companies, because the Bank of England is accountable to Parliament, which can ask it questions. Noble Lords know what happened with subprime mortgages, with debt being put into little parcels and sent all over the globe until eventually there was no money anywhere. We all know what happened in 2008 with the credit crunch, which was caused purely by excessive debt.

I welcome the Financial Guidance and Claims Act 2018. The noble Baroness, Lady Neville-Rolfe, is right that education about the dangers of debt should start at a young age. Nevertheless, in the meantime, is there a way for those who genuinely find themselves in real trouble to get support and help in a similar way to how food banks work? A lot of people have found that their money is sometimes not enough to meet their needs and so they have gone to food banks. The good thing about food banks is that they do not give food all the time. People know when to collect it and when they last collected it. This has become a marvellous way of taking people out of great debt.

Will the issues raised in the Financial Guidance and Claims Act 2018 and by the noble Lord, Lord Stevenson, be taken seriously by all of us and particularly by the Government? It is their responsibility to provide the guidance required to ensure that Wonga—this payday lending stuff—will not be resurrected and that the people who genuinely need credit can get it in a sensible way. I am very glad that the Government are trying to say that we should be responsible citizens, not only for pensions but for the whole question of social care, with people beginning to put a little money aside for their social care.

It sounds a bit simplistic, but could we not create some sort of food bank-type arrangement? This would help ensure that people on low incomes do not find themselves borrowing from places that will demand more and more money. Noble Lords know what happened with people being given interest; banks also behaved very badly. In a wonderful economy such as this, could some thought be given to ensure that those who are really up against it do not get into greater and greater debt? They may find that their houses are repossessed or their goods taken away and this again throws them back to bad lenders. They find themselves in a cycle of bad debt, which goes through the family for years. If I took your Lordships around Middlesbrough, you would realise that unless you actually tackle debt, some children are condemned to it and, even if we educate them properly, this will not bite.

[Lord McKenzie of Luton (Lab)]

My Lords, with this take-note Motion my noble friend Lord Stevenson has made an important intervention and it is a timely reminder that we should be making progress on matters covered by the Act. Indeed, he has covered a lot of ground, so I can be brief—or briefish.

We are reminded that the decision to name the body the Money and Pensions Service through regulation was to minimise the risk that individuals and organisations might impersonate it prior to its launch. In the event, it seems that it would not have taken a team from Bletchley Park to get close to its actual name. Could the Minister say whether there have, in practice, been successful attempts to impersonate the body before today? To what extent is the juxtaposition of pensions and money guidance in the title considered sufficient to repel impersonators?

This is not just about a name. Getting the business infrastructure of the body in place should involve the making of transfer schemes under Schedules 1 and 2. Are these now complete? So far as its members are concerned, could the Minister confirm that the appropriate proportion of execs and non-execs has been secured for its governance? We do not have the benefit of an impact assessment, but we have an explanation of why not. Could we be told the key monetary amounts attached to these transfers?

We have been reminded of the Act’s key provisions, which were the establishment of a single financial guidance body with the objective, inter alia, of improving the ability of members of the public to make informed financial decisions. The strategic function of the body is the development and co-ordination of,

“a national strategy to improve … financial capability”,

and to improve,

“the provision of financial education to children and young people”.

A number of noble Lords focused on this aspect of the Act and its ambition. We debated this latter point at some length and the extent to which there was scope to use the national curriculum, which had less than full mandatory configuration. I think that we on the Financial Exclusion Committee were surprised by just what a small percentage of the total education infrastructure was subject to the mandatory national curriculum. I cannot remember the precise statistic, but it was less than half. Therefore, that mechanism could not be used effectively to undertake the education one would ideally want. Can the Minister say whether there has been any early planning to enhance the education of young people? It featured strongly in our debates.

There has already been delivery on some aspects of the Act, such as the banning of pensions cold calling, but for other key aspects it seems we have hardly got to first base. It may be a bit early, but can the Minister say anything about how effective the cold calling ban is proving? It is a vital power to stop the scammers. What are the key challenges in making it more effective?

The debt respite scheme, referred to extensively by my noble friend, is increasingly relevant to consumers. As we heard, StepChange, in its 2018 statistics yearbook covering personal debt, set out the scale of problem debt. I will not repeat it, but there was the staggering statistic that it had one new client every 48 seconds. As for the age profile, as we have heard, there is a continuing increase in the proportion of younger clients. Over half its clients or their partners are actually in work. Not surprisingly, a rising proportion of clients rent their homes. To focus on housing and its impact on spirals of debt is absolutely right. I recall from my time as a local councillor, going back a bit, when right to buy came in and people had a bright new shiny door for a little while, then they mortgaged the property again to have some improvements and then again to have an overseas holiday. They ended up homeless and back with the local authority. It is a very important area.

Council tax arrears feature at the top of the list of the bills that create household debt. There, we can put the blame squarely at the feet of the Government for changing the benefit rules and grinding down on local authority support for these matters.

--- Later in debate ---

[Baroness Buscombe]

I thank my noble friend for her point, which is so well made. One reason I am so pleased to have this debate is that it helps, in a sense, to put more pressure on those taking this forward to look a little harder and further at what more we can do to develop financial capability. Yes, as raised by the noble Baroness, Lady Janke, there is always an issue with regard to squeezing this into the curriculum but of course this makes absolute sense, as many noble Lords said during the passage of the Bill. Many thanks to my noble friend for pushing that point a little further. We need to ensure that we can start the process of education by informing people, when they are as young as possible, about planning for their future; that is, in terms of pensions but also in managing their money. Great work is done by charities, but I am sure it will also be done by MAPS.

The most reverend Primate the Archbishop of York made an important point about exploitative lenders. While this is a matter for the Treasury, I can say that MAPS has ambitious plans to help people make informed decisions about their money—an app has been suggested. We are looking for ways to include this in the issues to do with Breathing Space. As I said, the Government will take forward plans on this in due course.

I am very aware of the time but I will say quickly that MAPS is due to publish the national strategy in the autumn, alongside its corporate plan. I also want to say something quickly on pension scams, which have devastating consequences such as the loss of an entire pension fund. That can leave victims without the means to fund their retirement. The Government are committed to implementing a ban on pensions cold-calling and created the powers to do this through the FGC Act. I am delighted to say that the ban came into effect in January 2019, making it more difficult for scammers to initiate pension fraud. Although the ban will have a significant impact on tackling scams, the Government do not consider it as a job done and we will continue our efforts to understand, and take action to prevent, pension fraud.

I think I have covered almost everything. There may be one or two other points that I have not included but I thank noble Lords for their contributions to this debate. It has been important and I feel proud to stand here to talk about the progress being made. I thank again the noble Lord, Lord Stevenson, for giving me that opportunity. We are in a good place with setting up the right bodies and organisations to tackle some of these really important issues, which are close to all our hearts. I would like an opportunity in the not-too-distant future to tell noble Lords more.

[The Archbishop of York]

I know that the Minister will not want to go into areas covered by other departments, but will she at least commit to take seriously the question of the curriculum? Governments of all parties in the past have done many good things—a noble Lord formerly in education was here at one point. It is important that this should be part of the curriculum and not purely a vague idea of education, because that can go nowhere. Is the Minister giving a commitment that she will talk to those in education who would like to look afresh at the curriculum and that this, like many other important things, could be included in it?