Finance (No. 3) Bill

Tracey Crouch Excerpts

Monday 4th July 2011 Commons Chamber

I ask Members not to make the public wait but to vote yes today, tell their constituents how they plan to cap the cost of credit, and then get on with doing it. The people who depend on us to fight for their interests and those of their families need and deserve nothing less.

[Tracey Crouch (Chatham and Aylesford) (Con)]

Having listened to the lengthy speech made by the hon. Member for Walthamstow (Stella Creasy) in the Public Bill Committee, and having checked Hansard to find that it was almost identical to the speech that she just made, I congratulate her on raising, yet again, both her profile and the issue of unscrupulous and high-cost lending. As she knows, she has a great deal of cross-party support on the underlying problem, but I fear that her new clause has little to do with identifying a workable solution, and I found her speech today disappointingly partisan.

I have been rather bemused by the hon. Lady’s recent Twitter stream, which refers to the campaign to persuade Members to vote for her Consumer Credit (Regulation and Advice) Bill. Perhaps she does not realise that we are voting today not on her Bill—although many of us may agree with its principles—but on amendments to the Finance Bill. For reasons that I shall give later, her new clause is fundamentally flawed.

The problem of vulnerable consumers being preyed on by high-cost credit lenders is not new. It did not suddenly appear following last year’s general election. It is a problem about which Members in all parts of the House have felt strongly for some time. My constituency contains areas of severe deprivation, and I deal regularly with case work relating to debt. I am active locally in trying to ensure that those with debt understand that there are good people to turn to, such as local credit unions and citizens advice bureaux, and that they need not rely on high-cost credit lenders.

Through the local media I have highlighted my own earlier debt problems, incurred when I worked as a researcher here in the House of Commons in the mid-1990s. I have received messages from local people saying that it was brave and courageous of me to be so honest, but I do not think that it was anything of the sort. I saw it merely as a way of removing some of the stigma from debt, and demonstrating not only that anyone from any background can get into debt, but that there are good people out there who can help to put those in debt back on the right track.

Increasing debt is an issue that should concern Members in all parts of the House. It, too, is not a new issue. I remember talking about the nation’s personal debt topping £1 trillion before I entered the House. For some time my local citizens advice bureau has been advising clients with debts totalling £1 million per week, including priority and non-priority debts, but the figure is now nearing £3 million per week. Unfortunately, Medway has a high repossession rate: on average, about 70 repossession hearings take place each week. In these worrying times, what we do not need are unscrupulous credit lending and, indeed, debt management companies taking advantage of those who are in financial trouble and at their most vulnerable.

The new clause proposes taxation measures as a means of clamping down on, or even stamping out, the industry. I fear, however, that the Opposition have not thought it through in any great detail. For a start, they have not addressed its unintended consequences. It is likely that any additional tax on the companies in the industry, just six of which control about 90% of the market, would simply be passed on to the consumer in the form of even higher rates. What is being proposed as a solution to the problem could exacerbate it by increasing the cost to the consumer and creating an even larger debt.

[Sheila Gilmore (Edinburgh East) (Lab)]

The new clause asks for a review and a report. It does not suggest that the proposed measures should be implemented immediately. I fail to see the detriment that the hon. Lady seems to have identified.

[Tracey Crouch]

The hon. Lady obviously did not listen to the Minister’s response to a point made earlier. As he said, a review is currently taking place. The new clause proposes

“a review of all taxation measures contained in this Act”.

I think that, on this occasion, the hon. Lady is wrong.

[Andrew Percy]

Surely any tax review is likely to come up with a suggestion for raising taxes. It is unlikely to propose that taxes should be cut. If that is on offer, however, I certainly do not intend to vote for a measure that would cut the taxes of the people whom we are discussing.

[Tracey Crouch]

My hon. Friend makes a good point. Whether or not the tax goes up following a review—and the hon. Member for Walthamstow will probably say that it will go up—the result will be passed on to the consumer.

Organisations such as Citizens Advice recognise that the problem of debt is not confined to the high-cost credit industry. It is also caused by other practices, such as irresponsible lending, the imposition of high contingent charges, and the mis-selling of debt management services. I am not a supporter of the high-cost credit industry, but a tax on one part of the sector would not only be anti-competitive, but would not address problems in other parts of the consumer credit market.

The simple truth is that the industry needs better, if not more, regulation. Although the House may not often hear Conservatives say that we need more regulation, a number of Government Members believe that in this context, and particularly in the context of debt management, it is the appropriate solution. We have met the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), and have told him that.

[Duncan Hames (Chippenham) (LD)]

The hon. Lady is right to refer to the need for regulation. What troubles her more, the profitability of high-cost lenders or the techniques that they use to entrap their customers? Does that not provide a clue to where we should focus any Government interventions?

--- Later in debate ---

[Tracey Crouch]

That is a good point. In fact, what troubles me most is the impact on consumers. As we have been told by Members in all parts of the House, these companies prey on people who are incredibly vulnerable, and we need to ensure that the industry behaves much more responsibly.

A response to the Government’s call for evidence on consumer credit is due shortly, and I look forward to the findings of the review. I have always had some sympathy for the proposal of a rate cap. However, it is interesting to note that Citizens Advice does not share the hon. Lady’s view, and nor does the money-saving expert Martin Lewis.

[Stella Creasy]

It is true that Citizens Advice opposes a cap on interest rates, but I think the hon. Lady will find that both it and Martin Lewis have been very positive about the proposal for a cap on the total cost of credit, which the new clause would allow to be investigated. I hope that the hon. Lady will correct the record accordingly.

[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.

--- Later in debate ---

[Chris Leslie]

I am sorry that the Financial Secretary has taken that attitude to the new clause, which is pretty innocuous in calling for a review. We have not put specific proposals in it, because we thought that in the spirit of cross-party working it would be useful to set up provisions to allow the Treasury and the OFT, working together in harmony, to work through the options and possible policy devices. Asking for a review on an extremely serious issue such as this is a bit like motherhood and apple pie; it really should not be objected to.

[Tracey Crouch]

rose—

[Chris Leslie]

I am sure the hon. Lady will not object to a review.

--- Later in debate ---

[Tracey Crouch]

Will the hon. Gentleman acknowledge that a review is already under way, and that all these issues are being considered as we speak? The new clause would serve only to delay the outcome of that review.

[Chris Leslie]

I must correct the hon. Lady. I know that there is a review of sorts going on, but it relates to credit card lending and high bank charges on lending. The letter that my hon. Friend the Member for Walthamstow (Stella Creasy) received in May from the Under-Secretary said that the high-cost credit market

“was not specifically included in the call for evidence”

for the current review. That was what the letter of 25 May said—from the same Minister, incidentally, who refused to meet my hon. Friend.

The Financial Secretary is far too relaxed about this issue, and the Government are not exercised enough about it.