Pat Glass
Main Page: Pat Glass (Labour - North West Durham)(13 years, 6 months ago)
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Pat Glass (North West Durham) (Lab)
I thank my right hon. Friend the Member for Walthamstow (Stella Creasy)—sorry, my hon. Friend the Member for Walthamstow, but soon to be promoted—for securing this debate. As a new Member, I am struck whenever I speak in Westminster Hall by the quality of the debates that take place here. It is such a shame that we do not have the same quality of debate on the Floor of the House, and I believe that that is recognised by all Members here.
Members on both sides of the Chamber have made good points. I know that many people wish to speak, so I intend to keep my remarks brief and largely to restrict them to the north-east and my constituency.
This problem arises in constituencies such as mine and many others because of a lack of affordable credit. People who work part-time and live on low incomes or minimum wage often find themselves with few options, which has resulted in an outbreak of high-cost credit. My constituency is large and made up of many small towns. I cannot walk down the high street of any of the small towns in my constituency without seeing an array of pawn shops that buy gold, cash cheques at exorbitant prices and generally prey on the poor in our communities who, like many hon. Members, I see in my surgery.
In the past seven years, the number of pay-day loan users has increased fourfold and the number of pawnbrokers has trebled. That is happening in constituencies such as mine and that of my hon. Friend. This is probably one of the best attended Westminster Hall debates that I have seen, so the problem clearly exists in other constituencies—not just in the north-east or poorer areas, but right across the country.
Irresponsible lending serves only to make things worse. Companies such as Oakam, which has been mentioned, and the Money Shop charge annual interest rates of more than 444%, despite a Bank of England base rate of just 0.5%. Borrowing at such rates can tip vulnerable people into a cycle of debt and poverty. High debt repayments are linked to rent, council tax and utility arrears, as well as other poverty indicators such as constraints on job-seeking behaviour, poor diet, cold homes, and mental and physical health problems.
The hon. Member for East Hampshire (Damian Hinds) said, rightly, that loan sharking has not resulted from the comprehensive spending review, but the review will simply make things worse. The Government’s plans to reduce housing benefit by 10% after a year will make things worse in constituencies such as mine. So far, the arguments in that debate have centred around what will happen in London, but the effects of the cuts will not be restricted to central London. In my constituency, they will mean people who are already struggling and in debt being forced to find another £15 a week that they simply do not have, and being forced to go to loan sharks and disreputable loan companies.
The north-east is a hot spot for illegal loan sharking. The North East Illegal Money Lending Team, which was set up by the previous Government in December 2007, has identified 1,083 illegal lenders—92 in the first quarter of this year; convicted 40 loan sharks; and saved borrowers more than £2 million. When loan sharks are convicted, the cases are publicised widely in the local press and on television.
Some people have argued that a cap on total lending will simply increase illegal loan sharking, but, coming from an area where it is prolific and is blighting the lives of the poor, I would argue that a cap on total lending, as well as investigating and jailing loan sharks, and publicising the cases widely, would improve the position for the poor in my constituency.
This is very much a gender issue. Fair Finance, a social enterprise bank that offers loans and debt advice, has seen clear trends in those seeking its help: 75% are women, 70% are single mothers and 80% are on benefits. The issue disproportionately affects women. In the north-east, there are recorded cases of women being forced into prostitution because of loan sharks.
All families—all of us—experience financial emergencies from time to time, but when a financial emergency hits a poorer household, it is often the catalyst that sets it into a downward spiral of debt. Many people in such situations are vulnerable at all kinds of levels. Many live on the margins and are preyed upon routinely. One of my constituents was forced to borrow £200—a relatively small sum—from a loan shark to fund a trip to Wales. His sister had been murdered by her partner, and he needed to make a trip from the north-east to Wales to organise the funeral and to settle her debts and affairs. His neighbours rallied round and paid off the loan, but many of them are also poor and vulnerable. If those people can see that there is an issue, surely we can, too, and the Government should act on it.
Andrew Bridgen
The hon. Lady speaks with great passion about individuals in her constituency, and I really feel for them. I hate the phrase, “This is not a partisan point,” because we all know what comes next, so I shall not say it. Does she think that the previous Government’s claims to have ended boom and bust encouraged or discouraged vulnerable people to gear up with more debt?
Pat Glass
I understand what the hon. Gentleman is saying, but I do not think that it is relevant to the debate, or helpful.
The current situation of allowing very high interest rates to be charged to the lowest-income households leads to greater wealth inequality and greater child poverty, and it constrains efforts to regenerate deprived communities. We have heard about Provident Personal Credit, a legal loan company that operates widely in the north-east. It controls 60% of the home credit and legal doorstep lending there. It mainly offers small, short-term and unsecured cash loans. The typical annual percentage rate on a Provident loan is 272.2%, and 70% of its customers are women. The Government can address those issues and make the lives of those living in the poorest households easier.
Richard Graham
On the three recommendations made by the hon. Member for Walthamstow (Stella Creasy), does the hon. Lady agree that the second, which was about the role played by credit unions in the post office network, is the most exciting opportunity for combating loan sharks that we have seen in this country for a long time? The Minister with responsibility for the Post Office has already made it clear that he welcomes a future role for credit unions in the structure and distribution network of Post Office Ltd. In my constituency, the new Gloucestershire Credit Union, which is partly funded by the Department for Work and Pensions, represents an important step forward for us all in our different constituencies.
Pat Glass
I thank the hon. Gentleman for making that point, which I was going to come on to. What I will say now is that this is not either/or, and we can do both.
The Government could provide a cap now on the total lending rate that may be charged for providing credit, and on additional interest on late payments and default charges, and that could be targeted on companies that charge excessive interest—and then interest again on that charge—to customers who borrow from them. That would be a popular move. A recent YouGov poll, carried out in April 2010 and highlighted on the “End Legal Loan Sharking” campaign’s website, found that 89% of the people polled would support such a move.
The Government could also provide alternative sources of affordable credit. Many organisations have called for such action on high-street loan sharking, including Compass, Citizens UK and the “End Legal Loan Sharking” campaign. The Government need to provide local authorities with powers to enable them to restrict the provision of premises for licensed consumer credit agencies within a local area, and to give locals a say over what happens in their high street. When people are asked, they say that they do not want these pawnbrokers and “gold for cash” or high-interest-rate companies on their high streets.
I am disappointed by this morning’s announcement that the people’s bank will not be part of the post office network, as it could provide affordable short-term credit. Using the post office network to provide back-office functions that integrated the network’s services with credit unions would help the poorest people to access credit unions, current accounts and savings accounts through post office branches. However, I welcome the announcement about bringing together the synergy of post offices and credit unions.
The credit review and a cap on interest on store and credit cards are both welcome, but in themselves will not help the poorest people in my constituency and in many others. A credit review would seem to be the right way to go, but I ask the Minister to look again at the terms of reference and to include some of the very strong arguments that have been made from both sides of the Chamber today.
The Government need to do something to stop what is happening. It seems that the only growth on high streets in my constituency and in many others is in charity shops and pawnbrokers. The Government have made a commitment to reducing child poverty and this would be a very good place to start.
[Mr Christopher Chope in the Chair]