High Cost Credit Bill
Debate between Robin Walker and Jacob Rees-Mogg
Jacob Rees-Mogg
The great thing about the Governor of the Bank of England’s eyebrow is that it is not a matter of statute. We have not put it in statute—indeed, I cannot think how that the statute would be phrased—that the Queen’s most Excellent Majesty, her Lords temporal and spiritual and her House of Commons have decided that the Governor of the Bank of England’s eyebrow should have legal force. It is not an accountability issue. I must confess that such legislation was rather better drafted under Henry VIII than nowadays. The language used in the section I read out has the greatest attractiveness and beauty, whereas ours is rather more mundane, but even in the 16th century—before the Bank of England was even founded—the Governor’s supercilious qualities could not have been brought into statute law.
Let me move on to one of the issues raised by my hon. Friend the Member for East Hampshire (Damian Hinds), who made an absolutely fabulous speech and covered the issues with the greatest intellectual rigour. He got into the question of supply creating its own demand and demand creating its own supply. There is an important quality about demand creating its own supply and that is that it tends to reduce prices. If we regulate, we find that we interrupt the natural creation of the supply that comes through. Let us look at it this way: if more payday lenders come to the market, they provide excess capital that is available. They want to lend it out and they have it on their books. They then have to advertise and build up the market. They produce the supply available, but others are doing the same. There is then an excess supply in the market and the demand will fill it up, but only if the price falls. If we regulate in such a way as to reduce the supply that is coming on board so that that excess of credit is not made available in the market, the price will increase as there will be fewer people participating in the market.
Mr Robin Walker
Was my hon. Friend as surprised as I was, given his point about the availability of supply potentially reducing costs, to hear the Minister celebrating from the Front Bench the fact that people are exiting the market? Would he not agree that we ought to be encouraging people to take part in the market in a more responsible manner rather than driving people out of it?
Jacob Rees-Mogg
I am in agreement with that. I think we have to be careful, therefore, about introducing new regulation, because new regulation has a tendency to drive people out of the market, or, worse still, favour the largest players, who find it easiest to deal with the regulation, and will then create an oligopoly or ultimately a monopoly, which of course produces the highest pricing possible. I would very much not like us to legislate in such a way that it is hard for new entrants to come in, that existing participants are able to consolidate their positions, and that one or two of them are able to push their prices up even higher. That would be deeply undesirable and would increase the amount of abuse.
The concentration of power in a very small number of banks has reduced the competitiveness of the banking system in this country. If we had a more competitive banking system, we might find that the banks were more interested in making lower-level loans, but because they only need to concentrate on the biggest business, which is the easiest—the least risky—the major banks are not in this area. They leave it to the payday loan companies, which are less well organised; they are organised in a more aggressive way, and a relatively unattractive way compared with the major banks. They are dealing with people who have a lesser ability to protect themselves against the payday lending companies, and they are not so much a part of the full regulated system in the way that the banks are. My hon. Friend is spot-on to say that we should not make it our aim to be able to boast about how many payday lenders we are forcing out of business, because we want an active and competitive sector rather than just having one or two players left in the end.
One aspect of the Bill that has been much praised—including by my hon. Friend, in a speech with which I otherwise agreed a great deal—is the power to enable high-cost credit providers to levy and provide a fund. That is exactly the sort of thing that Parliament should not allow. Moreover, it is in contravention of Magna Carta to allow such a power to be given to third parties. The power to levy fines and taxation belongs, in this country, under Magna Carta, only to courts, and that includes the High Court of Parliament.
Mr Walker
I was very interested when my hon. Friend mentioned some forms of regulation of the investment sector and the banks, and argued in favour of the extension of such regulation to the payday loans sector. Does he accept that at the moment, banks and credit unions are paying towards the cost of financial advice, but payday lenders are not? Does he not find that an extraordinary situation—admittedly, one that we inherited from the previous Government, and one that we should try to rectify?
Jacob Rees-Mogg
I completely agree with my hon. Friend that it is an anomaly, but not all anomalies are corrected by adding people in to the anomaly. It is much simpler to abolish the anomaly and say that the right to levy taxation is a fundamental right of Parliament. I quoted specifically from Magna Carta, which refers to a court, and we are the High Court of Parliament. It is important to remember that fines should only come through a proper judicial process or through the will of Parliament extracting fees. As soon as we delegate that to other bodies, over which there is no democratic control, we give up something that is fundamental to this House and what it is for. The consent to taxation is what this House has done since 1265. Perhaps the last Labour Government passed it over in a fit of absent-mindedness; they were not known for their love of the history of the constitution and their strictest adherence to it.