Tabled by Lord Haskel To ask Her Majesty’s Government what
steps they are taking to deal with the concerns of the Money Advice
Service and the Financial Conduct Authority about the level of
consumer and personal debt in the United Kingdom. Baroness Liddell
of Coatdyke (Lab) My Lords, with the permission of the House
and at the request of my...Request free
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Tabled by
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To ask Her Majesty’s Government what steps they are taking
to deal with the concerns of the Money Advice Service and
the Financial Conduct Authority about the level of consumer
and personal debt in the United Kingdom.
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(Lab)
My Lords, with the permission of the House and at the
request of my noble friend , I beg leave to ask the
Question standing in his name on the Order Paper.
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The Minister of State, Department for International
Development (Lord Bates) (Con)
My Lords, the independent Financial Policy Committee stated
last month:
“The overall level of consumer debt relative to household
incomes was in line with historical averages”.
We set up the Money Advice Service, which spent £49 million
on debt advice last year, and are creating a single
financial guidance body to ensure that people can manage
their money better.
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My Lords, I thank the Minister for his response, but just
last week the director of the Financial Conduct Authority
pointed out that domestic debt was rising by about 10% per
annum. It is not irresponsible debt; it is debt on food and
accommodation. The Monetary Policy Committee has also
warned of these increases in personal debt. Behind these
economic statistics lie great hardship, stress and concern
for families. The Minister is known as a compassionate man.
When the Financial Guidance and Claims Bill comes before
this House tomorrow, will he impress on his colleagues the
need to introduce the measure in his party’s manifesto
which would give a breathing space to those with problem
debt?
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Certainly it is correct that the Financial Guidance and
Claims Bill will introduce a number of measures that will
improve the service for debt advice to those in greatest
need. We stand by our commitment on the breathing space,
which was in our manifesto and the manifesto of the noble
Baroness’s party. We will bring forward measures to deal
with it, which underscores the importance we place on
dealing with debt, particularly among young people.
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(LD)
My Lords, as people reach or exceed safe borrowing limits,
how do the Government expect them to cope with the
continued rise in the cost of living and the continued
decline in real wages?
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The Financial Conduct Authority placed a duty on banks to
make sure that lending is on a sustainable basis. In the
wider area, it is also important that we maintain the
strong and vibrant economy that has record numbers of
people in work and record low levels of unemployment. Those
things do the greatest damage to people’s ability to
service debt and are therefore the primary focus of our
attention.
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(Con)
My Lords, this is all about the horrible situation that
people get into because of debt. It is wonderful that the
Government are trying to do something to reduce it and to
make people more aware of it, but what incentive will they
give to people to save? The incentives to have debt are
being addressed but there is no incentive at all to save.
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The report referred to earlier contained the staggering
statement that more than 40% of Britons have less than £100
in savings as a buffer before they get into debt. That is
one reason why my noble friend will be pleased to know that
we have established the Help to Save scheme. It will help
3.5 million people save £50 per month over two years. If
they do that, the Government will give a 50% grant, which
represents a very substantial rate of return to encourage
saving.
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(Lab)
My Lords, does the Minister recognise that in our
debt-dependent economy, average household debt is 150% of
average household income? Unsecured personal debt is now
back above £200 billion. Council tax and utility bills are
at record levels of default and 40% of mortgage borrowers
in our country have no experience of dealing with an
interest rate rise. In those perilous circumstances will
the Minister join others in strongly urging the Bank of
England not to increase interest rates, which would
devastate families, businesses and the economy and do
nothing to diminish inflation, which is in any case largely
the result of the post-referendum devaluation of the pound?
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The noble Lord is a very experienced politician and will know
that it would be impossible for me to comment on interest
rate policy, which of course, rightly, is now set
independently by the Monetary Policy Committee. A lot of the
points he made are correct. These are areas of concern and
happening at a time when we have historically low interest
rates. There are some areas where things are better—for
example, mortgage repossessions are at their lowest level
since 1982—but we must do more, particularly in the area of
short-term debt, which he referred to. That is partly what
the Financial Guidance and Claims Bill, which has Report in
this House tomorrow, is about.
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The Lord
My Lords, a poll commissioned by Citizens Advice in June
found that 18% of people with credit cards who had debt
problems had had their credit limits increased automatically
without them even asking for it, thereby enabling them to
take on even greater debt when they were already facing
problems. I understand that the FCA is looking into this, but
will the Minister ensure that it is asked to bring in much
stronger guidelines on this situation to prevent it getting
worse?
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I was nodding as the right reverend Prelate made his point
about this irresponsible lending—it is very tempting—but of
course the Financial Conduct Authority was set up to be an
arm’s-length body and to advise Government on what should be
done. As he rightly says, the FCA has produced a report,
which it is putting out to consultation, and will be
announcing some policy changes in this area. Previously, we
have seen the introduction of things such as fee-free bank
accounts, which are now benefiting 4 million people, and the
cap on payday loans—I pay tribute to the most reverend
Primate’s role in bringing that about. These are making a
practical difference to people and we need action there too.
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(CB)
Is the Minister aware that as universal credit is rolled out,
personal debt is going to increase to unprecedented levels?
This is not the fault of the individuals but results from the
fact that new claimants have to wait, on average, seven to
eight weeks for their first payment. They then get a payment
for four weeks. It is not possible for them to survive, and
of course we know that their benefits are reduced by the
bedroom tax and all the other things, and then debt
withdrawals. We heard this morning at a meeting that
apparently people are resorting to burglary in order to pay
their debts. Can the Minister help them by consulting his
colleagues?
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There is no need for people to engage in any of those kinds
of activities. Help is there, including in the shape of the
advance, which over 50% of people now take advantage of, and
which can be based on that element. We need to remember that
universal credit was brought in with cross-party support,
with the very purpose that it would stop the perverse
incentives which meant that, under the previous benefit
system, people could work more hours and be worse off, and
move them to a system where people would always be better off
if they worked. We now need to address the details, which my
right honourable friend the Secretary of State is doing.
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(Lab)
My Lords, the crisis is upon us, and it is evident that it
is. Will the Minister recognise that the Government have an
opportunity tomorrow to accept an amendment tabled by the
Opposition for a breathing space for debtors? During the
general election, of course, the Conservative Party was in
favour of this proposal. Can he not see that the urgency of
the situation demands that the Government act positively
tomorrow?
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The Bill is about improving the quality of debt advice to
those in need of it and has been broadly welcomed. My noble
friend Lady Buscombe has tabled a number of amendments which
will be discussed on Report. As I have already said, we
remain committed to the concept of a breathing space and will
bring forward details on that very shortly indeed.
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