Public Sector Pay Cap

Oliver Heald Excerpts

Wednesday 5th July 2017 Commons Chamber

[Elizabeth Truss]

The hon. Lady is not acknowledging the fact that more than half of those people on Agenda for Change are receiving average incremental pay of 3.3%.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

My right hon. Friend will be aware that the NHS has attracted workers from across the EU, particularly in nursing. When she looks at how we set public sector pay, will she look at international comparisons across the EU to ensure that pay is set in such a way as to continue to attract those very much needed staff to Britain? Does she have data on that that she can consider?

[Elizabeth Truss]

I thank my right hon. and learned Friend for his question. The pay review bodies are responsible for gathering the data on how we ensure that we retain and recruit the high-quality staff that we need in our NHS. I know they have looked at that in their reports this year, as I am sure they will do in future.

Oral Answers to Questions

Oliver Heald Excerpts

Tuesday 19th April 2016 Commons Chamber

[Damian Hinds]

The reduced rate of VAT remains in place on all 11 of the categories of energy saving materials. Following the decision by the European Court, we have consulted interested parties on the issue and, given the complexities involved, we are still considering the responses.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

Does my hon. Friend agree that about 90% or more of the solar-powered energy available in Britain has been put in place under this Government? Does he also agree that, in order for intermittent renewable power to provide a steady baseload, the investment with which the Government are supporting battery technology is absolutely key?

[Damian Hinds]

My hon. and learned Friend is, of course, right on multiple counts. Solar has been a great British success story: more than 99% of the installed solar PV capacity has happened since May 2010. He is also correct to say that the development of battery technology here and elsewhere is incredibly important for the future.

Tax Credits

Oliver Heald Excerpts

Tuesday 20th October 2015 Commons Chamber

[Damian Hinds]

As I will come on to outline, the Government are doing a number of things that have some offset against what is happening on tax credits.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

Does the Minister not agree that the Opposition have completely ignored the background, which is that at the moment wages are rising at a rate of 3.5%? We are seeing wages rising. The policy is working and it would be wrong in those circumstances to continue to subsidise and act as a drag on wages by using tax credits in the way they have been used.

[Damian Hinds]

As a result of this Government’s strong economic management, we are indeed seeing strong wage growth coupled with strong employment growth. This is the right time to make lasting economic reform.

On the deficit, much progress has been made, but this year we are still having to borrow £3,300 for every household in the land. To tackle a deficit of that proportion requires all income groups to share the burden. I agree with the hon. Member for Feltham and Heston (Seema Malhotra) that it is right that those with the broadest shoulders should bear the most.

Oral Answers to Questions

Oliver Heald Excerpts

Tuesday 10th March 2015 Commons Chamber

[Mr Speaker]

Last but not least, Sir Oliver Heald.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

The Financial Secretary to the Treasury will be aware that Hertfordshire is a prosperous and successful county. However, it had reached the point at which growth was being compromised because the A1M was not being widened between Stevenage and Welwyn. That work has now been announced but, for the future, are the Government satisfied that they are planning such infrastructure projects far enough ahead to enable us to maintain the kind of strong economic growth that we have at the moment as a result of the long-term economic plan?

[Mr Gauke]

I am grateful to my hon. and learned Friend and fellow Hertfordshire Member of Parliament. He is absolutely right to highlight that issue. As my right hon. Friend the Chief Secretary to the Treasury said earlier, we have in place a pipeline of road building and train improvements, the like of which we have not seen for many years. All of that will benefit Hertfordshire in particular and the United Kingdom as a whole.

Tax Avoidance

Oliver Heald Excerpts

Wednesday 11th February 2015 Commons Chamber

[Shabana Mahmood]

I am grateful to my hon. Friend for his intervention, which goes to the central point: we need to make sure we are collecting all the tax that is owed. That is fundamental not just for trust in the system for our taxpayers and businesses, but for our public services that depend on that tax take.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

Does the hon. Lady not accept that Labour was lax on tax? Look at the arrangements for hedge fund managers paying 18% tax, when their cleaners were paying a lot more. It is quite wrong for her to take this high position. When was the Lagarde list from? It was from 2007, when the shadow Chancellor was City Minister.

[Shabana Mahmood]

The hon. and learned Gentleman should look at last week’s Financial Times report on tax avoidance and tax collection. It compared the Government’s anti-avoidance measures for companies with the measures Labour put in place to tackle corporate tax avoidance during its time in office. It found that the tax collected by the Government’s measures was going to be 90% lower than under measures introduced by the previous Labour Government:

“Measures put in place by Labour during its 13 years in power to counter corporate tax avoidance are projected to raise ten times as much over the next four years as those introduced by the current coalition government.”

Financial Conduct Authority Redress Scheme

Oliver Heald Excerpts

Thursday 4th December 2014 Commons Chamber

[Guto Bebb]

My hon. Friend makes a very important and interesting point. There was a need at the outset to ensure that the issue of redress was addressed as quickly as possible and it was felt that a voluntary scheme would do that without the need for a fully judicial process. However, in view of the lack of transparency in the scheme as it stands, I sympathise with my hon. Friend’s point.

My third concern is that the redress scheme lacks an appeal process. That issue could be dealt with very simply without creating any further confusion, and I will go on to talk about that in due course. There is also a serious concern about the issue of consequential losses in the redress scheme as it stands.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

On consistency, it is hard to see exactly what the difference is between an embedded swap and a separate swap that is tied to a loan agreement. Is that an issue of concern to my hon. Friend, and what does he think could be done to improve it?

[Guto Bebb]

I am sure my hon. and learned Friend’s point will be supported by thousands of businesses that feel they have been excluded from the scheme. They might not think that it is working properly, but they do feel that they should have been included. That exclusion has not been explained to the satisfaction of either the businesses affected or the all-party group on interest rate swap mis-selling. Indeed, that is one of the issues I will touch on when I address the scheme’s lack of transparency.

Stamp Duty Land Tax

Oliver Heald Excerpts

Thursday 4th December 2014 Commons Chamber

[Mr Speaker]

Yes, the hon. Lady is welcome to take guidance from me, and it is this: the hon. Lady’s responsibility is to speak to the motion on the Order Paper rather than to any particular speech that might be made, so while I understand that this is an unusual state of affairs, the responsibility is to speak to the motion. The hon. Lady knows what the purport of the motion is, so she should not unduly trouble herself by trying to anticipate what the Minister might say if he were here—because he can’t, because he isn’t.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

On a point of order, Mr Speaker. Yesterday we heard from the Chancellor of the Exchequer about a change to stamp duty land tax on residential property transactions, and I notice that the information he gave yesterday is set out at step 2 of the motion before the House. Would it therefore be in order for the hon. Member for Birmingham, Ladywood (Shabana Mahmood), in making her speech and her remarks, to go through those points which are already clearly on the record and are contained in the motion?

[Mr Speaker]

It would be. It would be perfectly orderly, and it is good of the hon. and learned Gentleman to offer to help, but I think we can get by without his assistance for now.

I hope my guidance to the hon. Lady is clear. I realise this is an unusual situation for her to face, but if I remember rightly she is a product of Lincoln college, Oxford, so she is what they call prodigiously bright, and I am sure she can cope with the situation.

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[The Financial Secretary to the Treasury (Mr David Gauke)]

Inadvertent though it may have been, may I begin by apologising to you, Mr Speaker, and to the House for my late arrival for this debate? May I also thank my right hon. Friend the Minister for Pensions for moving the motion and the hon. Member for Birmingham, Ladywood (Shabana Mahmood) for permitting me the opportunity to address the House on this important matter? May I also thank you, Mr Speaker, for your encouragement and support on delivering this important reform and for having the opportunity to discuss the parliamentary procedure in advance?

Yesterday, as we have heard, the Chancellor, in his autumn statement, announced an important reform to stamp duty land tax. Moving from a slab to a slice arrangement is right in terms of fairness and economic efficiency. As the Chancellor set out, 98% of people who pay the tax will benefit, and the previous economic distortions in the system have been removed, benefiting the housing market generally.

[Sir Oliver Heald]

The Minister will be aware that in north Hertfordshire house prices are challenging for first-time buyers. I believe that 91%-plus of people will benefit from this reform and that the relief for the purchaser of an average house costing £275,000 is as much as £4,500. I do not know whether he can confirm that, but I just wish to pay tribute to the reform, which will help a lot of people to get on to the housing ladder.

[Mr Gauke]

I thank my hon. and learned Friend for his thoughtful and timely intervention. He raises an important point and is exactly right in saying that the purchaser of a house worth £275,000, which is the average house price in the UK, will pay £4,500 less in stamp duty land tax than they would have done under the old system. The purchaser of a property worth the London average of £510,000 will pay £4,900 less SDLT, and in every region, nation or city of the UK people will pay less in the vast majority of transactions.

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[Mr Gauke]

The point I would make, as the hon. Gentleman draws me into that issue, is that it is better to collect this tax at the point at which people are entering into transactions, the revenue is available, and there are not the same cash-flow difficulties and problems with the asset-rich cash poor. This is a much better policy than a mansion tax, which would create very significant difficulties—a point that was repeatedly made by a number of Opposition Members who represent London seats.

[Sir Oliver Heald]

My hon. Friend talks about Opposition Members, but they are not here in the Chamber. The hon. Member for Birmingham, Selly Oak (Steve McCabe) is the only one and he has come in to moan about a policy that will help 98% of homebuyers. What sort of party is that?

[Mr Gauke]

Again, my hon. and learned Friend makes a valuable point. Just on percentages, in Birmingham, more than 99% will benefit from this change. I am sure that the hon. Gentleman’s constituents will welcome these matters.

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[Sir Oliver Heald]

The hon. Lady seems to have forgotten about the great recession that her party visited on this country. It is not surprising that, in those circumstances, fewer houses were built during that period.

[Shabana Mahmood]

I find it interesting that Government Members are happy to plead global circumstances to explain their failures in Government yet conveniently forget that we had a global financial crisis in 2008. I think the hon. and learned Gentleman made that point in a slightly petty way.

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[Mr Jones]

I agree. Some of the people in that position will probably have enough equity now to move on and buy second and third homes. The measure will be extremely valuable to such people.

[Sir Oliver Heald]

Does my hon. Friend agree that one of the other aspects was that some property prices were pitched that little bit higher so that people were not right next to the line? That created a gap in the market pricing structure in both directions.

[Mr Jones]

Again, I agree. The old system created nothing but distortion in the property market. What will happen now—as I said, I am glad it is going to happen straight away—is that people buying at £250,000, although that is not a realistic price, will pay just 1%, the same £2,500 as before, and 5% only on any amount above that, which will make a massive difference.

EU Budget (Surcharge)

Oliver Heald Excerpts

Monday 10th November 2014 Commons Chamber

[Mr Osborne]

We have the normal scrutiny methods. Indeed, the Chair of the Treasury Committee and I have already discussed my happily answering questions from members of the Committee, and of course my hon. Friend the Member for Stone (Sir William Cash) has his Committee as well.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

Does my right hon. Friend agree that it is worrying that the shadow Chancellor forgot to mention the rebate before today? Has my right hon. Friend had a chance to make a detailed calculation of exactly how much less Britain would have to pay had Labour not given away the rebate in the first place?

[Mr Osborne]

Of course, giving away the rebate cost Britain billions a year. My hon. and learned Friend is right to draw attention to the pattern of forgetfulness on the Opposition Front Bench. They forget about the deficit and about immigration, and now they forget about the rebate. It reminds everyone why the British public are quite clear that they are unfit for government.

Sovereign Grant Bill

Oliver Heald Excerpts

Thursday 14th July 2011 Commons Chamber

[Tristram Hunt]

I take my hon. Friend’s point, but we should not over-emphasise our Whiggish stability over the years. We often used to think of the 18th century as the age of equipoise and stability. In fact, underneath that monarchy, all sorts of revolutionary fervour was going on. The campaign of my hon. Friend the Member for Newport West (Paul Flynn) to have the Chartists properly recognised in the House hints at a slightly different history. It is a source of great sadness to many people that, although the House was rebuilt in the 1830s and ’40s, it took until mid-1890s for the statue of Cromwell to appear outside.

For all its narrow, Eurocentric and white family structure, the royal family also has a curious internationalist sensibility, for to understand the British royal family in the 19th and 20th centuries is to understand empire and the nature of Britain in the world. As we have heard today in respect of reforming the Act of Settlement, the monarch was also monarch of imperial nations across the world, then the British Commonwealth and then the Commonwealth. That points to the unique nature of Britain: its openness and sense of citizenship, which is, again, above and beyond blood and soil. Part of the strength of monarchy is that it speaks to the multicultural, multi-faith age in which we live. There is a curious modernity about the nature of monarchy, which, again, keeps its strength going.

The real virtue of the royal family today is the soft power embodied within it. We have heard, quite rightly, detailed discussions about £35 million or £37 million costs this afternoon, but the royal family as a brand vehicle for Britishness is worth huge sums more than £35 million or £37 million. The sums regained from the world’s media focus on London during the royal wedding recently were far in excess of its cost. Although our beloved former Prime Minister, Tony Blair, used to describe Britain as a young country, it is, in fact, a very old country.

[Oliver Heald (North East Hertfordshire) (Con)]

I am listening carefully to the hon. Gentleman, but does he agree that we do not need a new, written constitution because we have gradually evolved as a country. Other countries look at us and at Parliament—the mother of all Parliaments—because we have been through a great, long history. We have managed to achieve something. We stand for things in the world. We stand for democracy, freedom of speech, common law and the rule of law, whereby this country has made the sort of decisions that it has over the past few days.

[Tristram Hunt]

I thank the hon. Gentleman for his intervention, but he knows far better than I do that, of course, in the quote about the mother of Parliaments, John Bright was referring to the whole country, rather than to Parliament. The hon. Gentleman points to the dangers of a written constitution, although my hon. Friend the Member for Nottingham North (Mr Allen) would vehemently disagree and do so in quite some detail if pressed.

Part of our strength as an old country is connected to the royal family and monarchy, which has taken different forms over the years. We have in this country a natural resource in history. As other nations have oil and diamonds, we have the past, and we need to use it as a source of leverage in the world.

In addition to soft power, the royal family also brings hard currency. I am privileged to represent Stoke-on-Trent, where the Chancellor will soon visit many successful businesses in the area. Many ceramics companies in my constituency have enjoyed record profits on the back of the royal wedding. The profits of Bridgewater, Portmeirion and Hudson and Middleton show that the ceramics industry is booming on the back of the royal wedding.

According to VisitBritain spokesman, Paul Eastham,

“Our culture and heritage reputation is very strong around the world. At the heart of that lies monarchy.”

Many historians and I would disagree that the nature of Britain is innately bound up with monarchy, but we should not kid ourselves about the fact that, as the success of the visit of the Duke and Duchess of Cambridge to Canada and California has shown, it brings remarkable attention to Britain. I was involved in constituency business in Australia at the time of the royal visit to Canada and California, but the media attention focused on that young couple—and another great global icon, Ms Kate Moss—from right around the world was remarkable.

There is a job to be done, and many members of the royal family do it very well. We come to the tricky question of financing it. I share my Front Benchers’ concerns about making sure that we have a proper vehicle to ensure that excessive profits and marked changes in the amount of money flowing to the royal family are properly looked after. I, too, still have questions about the shared ownership of assets when it comes to the royal family. I also share concerns about security costs. We in Stoke-on-Trent were greatly privileged to have a visit by the Earl of Wessex recently, but I have to say that I thought that the security costs and the entourage involved were not wholly necessary.

On timetabling, the move from seven to five years is quite right. When we return to government in the imminent future and return, hopefully, to four-year Parliaments, that period can go down to four years from five years, to reflect the length of a Parliament.

The Chancellor has come up with the least worst option for financing the royal family. As the hon. Member for Gainsborough suggested, the royal palaces are in real danger of decay. Many of them have not had the infrastructure investment that they demand, and demands on their fabric will grow. As part of the quid pro quo of the settlement, we need from the royal family further opening-up of some of the royal palaces, and we need to think more creatively about the art collection held by Her Majesty. We need to continue bearing down on costs, and we need the kind of public accountability and audit that the Bill brings to bear.

The Chancellor and shadow Chancellor spoke of the language of utility and satisfaction, in terms of the relationship between Parliament and monarchy, and this settlement sets us on that road.

Finance (No. 3) Bill

Oliver Heald Excerpts

Monday 4th July 2011 Commons Chamber

[Tracey Crouch]

The total cost of credit involves more than just the high-cost lending industry, but the hon. Lady spent most of her speech talking about individual high-cost credit lending companies such as Wonga. We must find a focus, and the fact is that wider issues of consumer credit are involved. I hope that the review will come up with a solution on which we can all agree.

The Government are considering specific product regulation as part of their draft Financial Services Reform Bill. Under the proposals to establish the financial conduct authority, a new model of conduct regulation will be established that will use early and proactive intervention to ensure that consumers are protected. That is a far more pragmatic solution than the blunt instrument of taxation, which, as I noted earlier, could have the adverse and opposite effect of creating a greater problem.

[Oliver Heald (North East Hertfordshire) (Con)]

Does my hon. Friend share my concern about the fact that it is often very convenient, and made very easy, for a person to take out a loan? A door-to-door salesman may appear and try to build a relationship with someone. Part of the battle is to provide responsible institutions such as credit unions, and to ensure that people know how to contact them. I think that there should be far more advertising and signposting so that people know how to get in touch with their local credit unions.

[Tracey Crouch]

I met the members of Kent savers credit union on Saturday, and look forward to meeting members of the Medway credit union in the autumn. I am a keen supporter of credit unions, and I think that all of us here are responsible for ensuring that our constituents are aware of alternatives such as lending and debt management advice. Citizens advice bureaux also offer a fantastic service. We should take it on ourselves to ensure that the message reaches our constituents.

The House should know that there is a cross-party consensus on this issue, and that the consumer credit market—particularly the high-cost credit industry—is an area of concern. In Committee, new clause 11 was billed by the hon. Member for Walthamstow as a measure in line with nudge economics. While there are some taxes that have arguably altered behaviour, such as those on cigarettes, it is highly unlikely that a tax that could be passed directly to the consumer will halt the growth or the unscrupulous practices of the industry. It would be far better to concentrate on regulation rather than taxation, and it is for that reason that I urge Members to vote against the new clause.

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[Oliver Heald]

In the circumstances, I shall not trespass on the House’s good will for too long.

I want to start where the hon. Member for Makerfield (Yvonne Fovargue) did by making the point that if a child of people on low incomes or on benefits needs a pair of trainers or some piece of equipment is broken, it is often a disaster and the money is needed right away. That is the background to this issue. The social fund does a good deal. [Interruption.] I think the hon. Member for Makerfield would acknowledge that 400,000 people a year make more than three claims on the social fund, so they are obviously finding it useful. It is important that a credit facility is available, and it is excellent that in Northern Ireland mutuals and credit unions are so well established. We need to do more in this country to develop that idea; otherwise, we will be in the hands of the high-cost operators we have been hearing about.

[Yvonne Fovargue]

Does the hon. Gentleman agree that many people do not realise that some credit unions offer loans to people who have not saved with them? The growth fund has been very useful in that regard, but many credit unions do not have access to the growth fund with which people have to save before they can get a loan. That makes the situation impossible for many people.

[Oliver Heald]

The hon. Lady makes an important point, which I imagine will be considered by the consumer credit review. I am a member of a credit union, and I think that all MPs should be because it is a good way of illustrating—

[Chris Ruane (Vale of Clwyd) (Lab)]

I’m in two.

[Oliver Heald]

I am a member of one, and membership is a good way of trying to convey knowledge about credit unions. I pay tribute to the all-party group on credit unions, chaired by my hon. Friend the Member for East Hampshire (Damian Hinds). We need to do more to increase the amount of credit that is available on reasonable terms.

I am a member of the all-party group on financial education for young people, chaired by my hon. Friend the Member for North Swindon (Justin Tomlinson). The move to teach children the basics of budgeting from quite an early age is long overdue. In households that are chaotic and at the bottom of the economic pile there is very little understanding of basic budgeting, which we must resolve.

Finally, I want to support the point about advice. In the past, I have given free legal advice and dealt with welfare rights. I have experience of the people the hon. Member for Makerfield described, who come to see us carrying bags of documents from companies and unpaid invoices. The people who sit down with them, go through everything carefully and present their case to creditors do a marvellous job. The other day, I went to the Shelter facility in Hatfield, which offers debt advice in that part of Hertfordshire. Someone there had been working on debt advice for 29 years and she had lots of letters on the wall from people saying how grateful they were to her for trying to sort things out for them. We must certainly support debt advice, but we need to do other things in relation to education and credit unions. I would like more regulation in this field and, possibly, a cap.

[Sheila Gilmore]

Unfortunately, it seems that debates on this subject are beginning to follow a pattern: we all agree that high-cost lending is terrible and a scourge of many of our communities and that we would like something to be done about it, but the problem arises in agreeing to act. In February’s Back-Bench debate, the teeth were drawn from the motion proposed by my hon. Friend the Member for Walthamstow (Stella Creasy). The amendment agreed by the majority of Members of the two Government parties removed any impetus for immediate action or any agreement that the regulator should consider doing something. I see exactly the same pattern beginning to emerge. We are told that we all agree that high-cost lending is bad, but when Opposition Members want something to be done about it we are accused of breaching the consensus. In the words of the hon. Member for Brigg and Goole (Andrew Percy), we are the ones who are being political.

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High-cost credit is exactly the sort of issue that I got involved in politics for in the first place. The issue is totemic, as it represents the sort of fight that I hear politicians talk about all the time in this House. The word “fairness” is bandied around the Chamber like confetti. Even the Prime Minister claims that coalition policies are about fairness. Although I point to the juxtaposition between the reality and the rhetoric, today is an opportunity for Government Members to put their money where their mouth is, because this really is about fairness.

[Oliver Heald]

There is of course wide acceptance across the House that some regulation is needed in this area, but why should it be about taxation? A Finance Bill obviously provides an opportunity to raise the issue, but does the hon. Gentleman not agree that there is a risk—[Interruption.] He should at least let me ask the question before learning the answer from the hon. Member for Walthamstow (Stella Creasy). Does he not agree that there is a risk, through the law of unintended consequences, of high-cost companies simply passing on the costs of higher taxation to the poor people in Liverpool he is worried about?

[Steve Rotheram]

I always listen to my hon. Friend the Member for Walthamstow, as she is much more of an expert on these matters than I am. I hope that the hon. Gentleman’s intervention is not indicative of the thinking of all Government Members.

I have a particular reason for wanting to see a cap on the cost of credit. I come from a family of eight kids, and unfortunately my beloved mum was often a victim of door-to-door credit. She took it not to pay for luxury goods, but so that she could afford to buy us things like school blazers and winter coats. She would get a Provident or Sterlers cheque and pay it back on the “never-never”, as it was known colloquially. This meant paying back hundreds of per cent. of the original loan in interest charges, but like millions of others she did not really understand the rudimentary economics and looked only at how much she could afford to pay back each and every week, rather than the interest rate or the cumulative payment total. Unfortunately, she was not unique in this respect and, even four decades on, far too many people are still caught in this poverty trap.

The high cost of credit has not improved much for families at the wrong end of the socio-economic ladder. Home credit lenders often charge astronomical annual percentage rates of up to 3,000% or 4,000%. I had to check those figures, because the current bank base rate is only 0.5%, but I found that interest charges of thousands of per cent. are not uncommon. In fact, the UK’s poorest pay the highest price for credit in Europe. This is an obscene state of affairs and the Government must act. Before we hear the same old mantra from Government Members, I admit that we in the Opposition did not do enough to tackle the issue head-on when we were in power. However, as my hon. Friend the Member for Makerfield (Yvonne Fovargue) rightly pointed out, this is an escalating problem that needs to be tackled immediately.

I urge Members on both sides of the House to support what my hon. Friend the Member for Walthamstow is trying to do to stop this most socially iniquitous of practices. Even Boris supposedly supports measures to protect the financially vulnerable, and if he can do it, there should be nothing stopping Government Members doing the same.

Members on both sides of the House have highlighted the problem and provided examples of the unfairness, but it is worth reiterating that credit lenders can charge, in real terms, £82 in interest and collection charges for every £100 lent. A gentleman came to my constituency advice surgery only last Friday and told me that his wife was suicidal because of the level of debt that they had got themselves into. I highlighted last week in a Westminster Hall debate the fact that the banks are failing to meet the Project Merlin targets for lending and the adverse effect that this is having on the construction sector. The banks are also failing ordinary families as they are refused credit from high street lenders, which often results in them taking the only option left: high-cost lending through payday and doorstep loans and hire purchase.

The rising cost of credit traps those least able to cope with the pressures of economic stagnation as they struggle to make ends meet, and believe me, the VAT increase has not helped those families. Some payday lenders are rubbing their hands at the expansion in their “target audience”, as one put it, 70% of whom have a household income below £25,000. I know that we will never completely stop this most lucrative of immoral trades, but we can certainly put a cap on lending to regulate the total amount that can be charged for supplying credit.

This is one of the occasions on which I do not understand how a proposal could not receive unequivocal support from both sides of the House. I have listened to some of arguments against taking action, such as the suggestion that it might make things worse or restrict credit to those who need it, but that is an absolute cop-out with no basis in evidence. Therefore, I ask Government Members to support the new clause to ensure that consumers are protected and simply pay a fair price for credit.

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[Mr Hoban]

The hon. Gentleman needs to look carefully at the impact of tax in different sectors. Just because one rule applies to one sector does not mean that it applies to others. We know that there is real concern, for example, that if we forced excise duty up too high, people would resort to smuggling to evade it. The impact varies from tax to tax and from area to area, and we need to consider which measures will be effective.

There are broader concerns about how the Opposition want to use tax. As I said, tax is used to change behaviour from time to time, but it is a blunt instrument, and if it is not properly thought through it can lead to perverse outcomes. An increased rate of tax on lenders would not have any obviously positive impact on how consumers are treated. Studies from other areas show that lenders will find ways to circumnavigate regulations and pass costs on to borrowers. A different tax rate for those businesses would be detrimental to consumers and would raise the cost of providing credit to those who may be unable to access mainstream credit.

Members have a responsibility to take seriously the potential for such measures to drive lending underground. I am sure that no one in the House would like to see a rise in illegal loan sharking, which can so devastate lives. The risks to individuals’ financial and personal well-being would be increased by loan sharks, who do not follow regulations or take legal action when debts remain unpaid. They use whatever means they can to recover their money, often forcing borrowers into more debt, or much worse. The provision of short-term credit can prevent financial exclusion, and it has allowed more consumers to access credit in a regulated market.

A number of comments have been made about an interest rate cap. There were three separate reviews under the previous Administration that considered, among other things, price controls in the high-cost credit market in the UK. They all came to a similar conclusion—that introducing price controls may lead to unintended consequences that would not be beneficial to consumers. The OFT review found that

“introducing price controls would not be an appropriate solution to the particular concerns we have identified in this market”,

and that

“developing a system to enforce and monitor price controls or interest rate caps in the UK would be complex, expensive and difficult to administer”.

In Committee, the hon. Member for Walthamstow mentioned a recent European Commission study published at the start of this year, but it found that restrictions on interest rates could deny people access to small amounts of credit, do not reduce overall average interest rates and lead to increased fees and charges being imposed by lenders. The idea of a cap on the total cost of credit sounds appealing at first, but it would have its consequences.

[Oliver Heald]

Does my hon. Friend agree that two initiatives that were described earlier are valuable? One is credit unions—my hon. Friend the Member for East Hampshire (Damian Hinds) chairs the all-party group that is promoting their work—and the other is financial education for young people, which my hon. Friend the Member for North Swindon (Justin Tomlinson) and his all-party group are pursuing vigorously. Are those not two positive things that the House can get behind?

[Mr Hoban]

Yes, my hon. Friend is absolutely right. The provision of better education, information and guidance to help people manage their money is extremely valuable. That is why we have been very supportive of the Money Advice Service in its work to help improve financial capability and capacity.

Sustainable solutions to the issues raised by the Opposition are not simple or obvious. As my hon. Friend the Member for North Swindon (Justin Tomlinson) said, an individual making the minimum repayment on their credit card could be subject to a higher total cost of credit than someone using payday lenders. The vast majority of people who borrow from payday lenders and then re-borrow pay off the amount that they borrowed by the third time. That shows that careful and considered thought needs to be given to the impact on consumers of a cap on the total cost of credit, and how it would be implemented in practice. The majority of available research focuses on interest rate restrictions rather than such a cap, but some of the same challenges apply.

We need to gather evidence before we introduce new rules, or else risk unintended consequences. That was why we launched the consumer credit and personal insolvency review, and we are considering carefully the evidence that has been provided. The Government will announce the next stage shortly, and are committed to taking action when we can be sure that it will be effective. The Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), and I will continue to engage in the matter, along with the hon. Member for Walthamstow. However, I am afraid the new clause is not the right way to take things forward. It is flawed in both detail and effect. We need sensible, well-thought-through interventions to improve the functioning of high-cost credit markets and get better outcomes for consumers. The new clause would not achieve that, and I ask the Opposition to withdraw it.

I know that it cannot be easy for the Opposition to work with the Government on this issue and appear to concede on the new clause. It could seem like a climbdown for them to accept that more work is needed before action is taken, but that is the sensible, responsible approach.