I beg to move, That the Bill be now read a Second time.
I hope that the House will not take fright at the mass of figures in this short and really rather simple Bill. It is, of course, an amending Measure, and is unintelligible without reference to the legislation it seeks to amend. I shall, therefore, have to mention some of the figures of the existing statutory limits on the charges made in the pawnbroking business, and the manner in which the Bill seeks to bring the money limits that were fixed as long ago as 1872 into line with present-day values.
I could, perhaps, have wished that I could have adopted the normal Ministerial practice in answering Parliamentary Questions and have said that as my speech contained a number of figures I would have it circulated in the OFFICIAL REPORT. But I shall keep off the figures as far as I can, as there are one or two matters of principle involved.
I suppose that there is not a right hon. or hon. Member who has not, at some time, found himself in need of a temporary loan. I ask hon. Members to think of the ordinary householder who has to make periodical payments for rent or H.P. instalments, and who, on some occasions, through some necessity of accident or illness, or just because he has been unwise in his spending on a holiday or celebrations, finds that he has overspent his income and needs temporary help to make those payments. If he is lucky, he has a real uncle to whom he can plead for a little financial assistance—
Or, as the hon. Member for Brixton (Mr. Lipton) says, the bank manager; but many of these people do not have bank accounts, and, even if they have, bank managers are not always so accommodating.
A man in that position may, of course, ask his landlord or hire-purchase firm to suspend his payments for the time, but that spoils his future credit with them. He looks for something to sell, but everything in his house has a sentimental value—and what will he get for it from a second-hand dealer?
He can adopt a most dangerous course by taking advantage of the facilities now being offered by what I might call the "pub-door" moneylender or the "factory-gate" moneylender, who is prepared to lend £1 this week and demand 30s. back next week. This practice is increasing. Illegal moneylenders practise in this way, and their methods of recovery are not those of peaceful persuasion. They have no hesitation in using violent methods to get repayment of their money at exorbitant interest.
Therefore, if our imaginary householder in need of a temporary loan has no real uncle, he will go to the man who is affectionately called "Uncle", the pawnbroker, if such a man is available. The pawnbroker is, by law, bound to treat fairly those to whom he lends money. He is controllable by law because, unlike the illegal money-lender, he is not mobile.
It is not cynicism that has led the pawnbroker to become known as "Uncle". He performs a useful social function. If a pawnbroker is not available, that fact will not stop the man in need of temporary financial assistance raising the money somehow or other, and he may do so in the dangerous way that I have just mentioned. During the past few years the pawnbroker has become less available to the public. The number of pawnbrokers in practice has been considerably reduced, but I say positively that it is not because the public do not require their services. There is, I am told by those who remain in business, a considerable demand for their services at present, although the pattern of borrowing has changed over the years. Perhaps it is the popularity of hire purchase which has caused that change, but I understand from those in practice as pawnbrokers that the great majority of their loans are for very short periods, within a month, and that nine out of ten of the articles which are pledged to them are redeemed.
I have not the figures handy, but I should like to tell the hon. Gentleman later if I can find the figures. They have been reduced by about 75 per cent. over the past 10 to 20 years. It is my argument that that reduction in business has not been due to the fact that they are not performing a useful function, or that the public do not want them any more. The reduction has been caused by the fact that it is not worthwhile carrying on a pawnbroker's business when the charges which by statute a pawnbroker is allowed to make are tied to the value of money nearly 90 years ago. That has been amended only once, in 1922—37 years ago—and in all fairness I would ask the House to look at the figures and see whether we can now give the pawnbroker a fair deal which will bring his charges more in line with modern conditions.
I am not asking the House to legislate to preserve a business which is dying a natural death. I am asking the House to legislate to preserve a business which is dying from statutory strangulation, through being tied to the charges which were fixed 90 years ago. The increases in those charges which this Bill seeks to make are very modest. The average amount of money borrowed by those who go to pawnbrokers is a little over £1. The present cost to the borrower of borrowing £1 from a pawnbroker for a month is 8d. Under this Bill it would be 1s. 3d. The sum of 8d. as fixed so many years ago, and 1s. 3d. at the present day, seems to me a fair and reasonable comparison of the figures. I could go through a number of other figures for different periods of loan and different amounts of loan, but that is an example of the modesty of the increase sought by this Bill.
My hon. Friend has said that the charge for a loan of £1 for a month is 8d. As I understand it, that is a rate of interest of about 40 per cent. per annum. Is that not rather excessive?
The sum of 8d. includes items like the pawn ticket which the pawnbroker is allowed to sell for ½d. or 1d. varying with the amount of the loan. It includes a valuation fee of ½d. per 5s. of the loan and it includes also a certain profit charge. If one compares that sort of figure with the amount which a retail trader will expect to make from purchasing goods wholesale and selling them retail, it is very modest. I am sure my hon. Friend would not like to run a shop entirely on the basis of buying an article wholesale at £1 and selling it in a month's time at £1 0s. 8d. I do not think his shop would be a success. That is, in effect, what the pawnbroker is doing at present.
To give the House some idea of the amount of income which a moderate-sized pawnbroker makes, I can give the figures of 92 firms which were investigated by the Pawnbrokers' Association—and I think these figures are confirmed by the investigation which was carried out by the Board of Trade later—each firm using capital of approximately £5,000. The average gross receipts, using a capital of £5,000, were 25 per cent. in the year. That is £1,250 gross per annum. Those firms on an average employed either a manager or a working proprietor plus an assistant plus a junior assistant. In addition to the wages of those persons, the proprietor had to pay, out of the £1,250, the rent, rates, insurance, lighting, heating, printing and all the rest of the shop and office overhead expenses. That does not leave very much. We are hoping by the Bill to increase the 25 per cent. gross receipts to about 35 per cent. which, when compared with the ordinary retail business, which probably makes 75 per cent. out of the use of its capital, seems a fairly moderate figure.
There are other minor amendments in the Bill such as an increase in the charge of ½d. or 1d. for the inspection of the pawnbroker's books, up to a charge of 6d. Perhaps I might mention a fact which I do not think is generally known, that for all pledges of more than 10s. a pawnbroker must account for the proceeds of sale. That is to say, if a person pledges an article and fails to redeem it, for a matter of three years he can return to the pawnbroker, demand to inspect his books and demand also that the pawnbroker accounts to him for the balance of the proceeds of sale of the article over the amount of the loan plus the permitted charges. Furthermore, a pawnbroker can sell those articles by auction only so that there can be no cheating in his books.
The Bill seeks to increase the minimum figure at which goods have to be sold by auction in that way from 10s. to £2, and to reduce the period of redemption from 12 months to six months. These are the additional consequential amendments to the old law, matters which are obviously Committee matters rather than matters of principle for discussion on Second Reading.
I beg to second the Motion.
I support the hon. Member for Crosby (Mr. Page) in what he has said. We normally associate the hon. Gentleman with the interests of pedestrians. Today, he has drawn our attention to the problems of pedestrians who have to walk to the nearest pawnshop, for financial reasons, and he has told us of the difficulties which face the pawnbroker at the present time. For a variety of reasons, pawnbroking seems to be a dying business. I doubt very much that, even if the increased charges proposed in the Bill before us are accepted and put on the Statute Book, they will lead to a very large increase in the number of pawnbrokers.
The charges which are now legal are, as the hon. Gentleman said, very modest indeed. Quite apart from the more affluent society—let us call it that—in which we live, which is, of course, one reason for pawnbrokers not being so necessary now as they used to be, there are other reasons which make pawnbroking less necessary than hitherto. The hon. Gentleman referred to the growth of the hire-purchase system. The hire-purchase system is a glorified form of moneylending, and the hire-purchase organisations of this country are the largest moneylenders today. I would put them in almost the same category as building societies.
Hire-purchase organisations and building societies are the largest money- lenders in this country today, and the poor old pawnbroker comes a long way behind. As the hon. Gentleman pointed out, as a result of the meagre returns which the pawnbroker has, it is quite clear that, quite apart from all those other factors, the pawnbroking business, in its declining years, is being subjected to a form of statutory strangulation.
I wish that the hon. Member had included in his Bill some simplification of the procedure which has to be followed when someone who has pawned an article loses the pawn ticket. Very frequently constituents come to me, in my capacity as justice of the peace, bringing with them a rather complicated form which has to be completed and witnessed before a pawnbroker will release any article pledged to the person who has lost the ticket. I do not know to what extent the form itself is governed by statutory provisions, but, if it is so governed, I hope that the hon. Gentleman will, perhaps in Committee, do something to simplify it.
My main complaint is that the person loses a pawn ticket, he goes to the pawnbroker, the pawnbroker gives him the form, and then that person takes the form with him to see me or some other person in a position qualified to witness it, but he overlooks the fact that, in addition to the other requirements, it is necessary that the identity of the person who has lost the pawn ticket be vouched for by an independent witness.
This independent witness must sign the form. It seems to me, especially if, as the hon. Gentleman says, the average amount of transaction involved is about £1, that it is hardly necessary to have three signatures on the form, one, the signature of the person who lost the ticket, two, the signature of the witness as to the identity of that person, and, three, the counter-signature of a justice of the peace or commissioner of oaths. I put forward that suggestion to the hon. Gentleman, because I hope that during the Committee stage he will find no difficulty in accepting an Amendment for a revision which will mitigate the inconvenience arising when a pawn ticket is lost.
I am sure that pawnbrokers usually know their customers, since they work in a fairly small area. No doubt they have their regulars as they used to have in the old days. Therefore, it will hardly be worth while for the average person who has pawned a comparatively small article to pretend to be somebody else for the purpose of getting some other article. I hope, therefore, that the problem of the lost pawn ticket will be scooped up by the hon. Gentleman when he takes the Bill to its Committee stage, as I hope he will.
In his usual persuasive fashion the hon. Gentleman has made out a case for the Bill. There is this body of tradesmen in the country known as pawnbrokers so let us, as we want to do for the old-age pensioners, make their declining years a little easier than they are at present.
I hate to disturb the pleasant reception which the Bill has received so far, but I am wondering whether it is desirable in any way. My hon. Friend the Member for Crosby (Mr. Page) and the hon. Gentleman the Member for Brixton (Mr. Lipton) agreed that the Bill refers to a dying business. In view of the prosperity which the country is enjoying, and which it will go on enjoying as long as hon. Gentlemen opposite stay in opposition, I do not think that there is much future in the pawnbroking business, and I doubt whether the Bill would do anything to improve its prospects.
My hon. Friend referred to the charges at present permitted by law, namely, that pawnbrokers are allowed to charge 8d. in the £ for a loan of a month. In many cases, I believe that the loan is often for less than one month, so the rate of interest is higher than the figure I gave when he was speaking, namely, 40 per cent. My hon. Friend pointed out that the 8d. included the cost of a ticket and the valuation. As I understand, it is part of the pawnbroker's job to value the goods and no outside person is brought in to do that work. The pawnbroker looks at the article and says it is worth, say, 5s. or £2, and then says he will allow that amount of money on it. So I do not think the statement of my hon. Friend that there is a valuation to be considered is a valid reason for increasing the rate of interest chargeable.
Of course, if the loan continues through the year, it does not work out at multiplying 8d. by twelve. In fact, the profit on a loan of £1 for a full year is approximately 25 per cent.
I was talking about a short-term loan. Most people would prefer to lend money for a month if they could get a rate of 40 per cent. Even Her Majesty's Government do not pay anything like that when they borrow on the money market and I should have thought that it was an excessive rate of interest.
This is not saying that it is easy to run a pawnbroker's business with such charges, because I do not think that it is easy so what my hon. Friend said in that respect was valid. However, the proposed increases under the Bill are liable to make it unwise for anyone to make use of the facilities offered by a pawnbroker, because if the figure of 1s. 3d. in the £ is permitted the gross rate of interest works out at 75 per cent. for a loan of 30 days. At that rate anyone who wished to borrow money would not be serving his best interests by going to a pawnbroker.
Therefore, if the Bill goes through, I think that the result will be to accelerate the decline of the pawnbroking business. People will say more and more that this is a heavy price to pay for temporary loans and that they will not avail themselves of this service. The result may be a considerable falling off in business of the pawnbroking industry, as it has been referred to, and I do not think that it is in its best interests that the Bill should go through.
I will not reply to that, because we are not discussing betting shops today, although I could say a lot about them if I had the opportunity. Last week, unfortunately, my Parliamentary duties kept me away from the House of Commons.
In the interests of the pawnbroking business, I do not think that this amendment in the law should be made. I do not say that I shall force a Division on this occasion, but there should be very careful examination of the Bill in Committee and I say to my hon. Friend the Member for Crosby that in the interests of the business which he is seeking to protect his best service would be to drop the Measure.
If I say that there is a Government interest in the Bill, I hope I shall not be misunderstood. In the past, the National Association of Pawnbrokers has made representations to the Home Office and I should say a word about this. First, perhaps, I may establish that the Pawnbrokers Acts—my hon. Friend the Member for Crosby (Mr. Page) did not make this completely clear—of 1872 and 1922 lay down the maximum charges which pawnbrokers may make for loans of £2 or under. At present, loans of over £2 and under £10 may be made the subject of a special contract between the pawner and the pawnbroker, the terms of which must be set out in a prescribed form. Loans of over £10 are governed by the Moneylenders Acts, 1900 and 1927.
As I have said, on several occasions since the war the National Association of Pawnbrokers has represented to the Home Office that owing to the changes in money values and the decrease in pawnbroking business, pawnbrokers were no longer able to obtain a reasonable return on their business. Early in 1957, the Association put forward to my right hon. Friend proposals for increasing the statutory charges. With the co-operation of the Association and of the Accountants Division of the Board of Trade, my right hon. Friend the Home Secretary arranged for a confidential examination of the accounts of a number of pawnbroking businesses. My hon. Friend the Member for Crosby had this in mind when he spoke.
The object of the inquiry was to ascertain whether revision of the charges was justified and, if so, whether the Association's proposals were reasonable. My hon. Friend probably knows the results of the inquiry and he will know that although the number of pawnbroking businesses examined was not adequate for a complete survey, the figures obtained support the Association's claim for its proposed increases in the statutory charges. If my hon. Friend the Member for Crosby and my hon. Friend the Member for Exeter (Mr. Dudley Williams) wish, I can place a copy of the Report in the Library of the House of Commons.
In that Report—this is the answer to the interjection by the hon. Member for Brixton (Mr. Lipton)—the number of pawnbrokers was assessed at about 1,000, of whom 90 per cent. were members of the Association. Most pawnbrokers also maintain a retail or other side of their business, but the inquiry showed in respect of the pawnbroking establishments that the surplus or profit on capital employed amounts to 2½ per cent. per annum. Therefore, on financial grounds, there is evidence to support the view of the trade that an increase in the statutory charges should be made.
As my hon. Friend the Member for Crosby said, the Board of Trade, in its Report, examined proposals similar to those contained in the Bill and came to the conclusion that if similar proposals were adopted, the surplus or profit would rise from 2½ per cent. to 10 per cent. per annum.
As I understand, the 2½ per cent. does not make any addition to the remuneration of the pawnbroker, on the pawnbroking side of his business, but practically all pawnbrokers carry on another side to their business. It is for the House to decide whether 2½ per cent. per annum or 10 per cent. per annum as proposed in the Bill is reasonable.
I should like to make comments on just two parts of the Bill. The first is the proposed increase from £2 to £5 as the upper limit of loans on which charges are controlled by Statute. This proposal does not benefit the pawnbroker. Any revision of the law should take account of changes in money values and should also take account of those changes in matters affecting the protection of the client; and that is what this provision does.
The second point is the proposal to cover loans up to £50 instead of £10 as at present. It may be that this figure is also justified by the change in money values, but it was not—possibly my hon. Friend did not know this—one of the proposals submitted by the Association to the Home Office two years ago or considered in the inquiry made by the Board of Trade. Therefore, it is not possible to say what effect the proposal would have on the financial conclusions reached by the inquiry. In all other respects, as far as I can ascertain, the Bill follows the proposals put to the Home Office and investigated by the Accountants Division of the Board of Trade.
My hon. Friend suggested that illegal money lending was increasing owing to the restrictions on pawnbrokers' charges. All I can say about that is that we have no evidence to that effect, but, of course, I accept what he said. I would suggest to him that in its present form the Bill, by constant reference to earlier Acts, is not particularly easy to understand. It may be that it will be possible to improve upon that. I would suggest that if the House gives it a Second Reading consideration should be given—I will co-operate in that respect—to see whether the Bill can be established in a clearer form.
It can be argued, and I think this is the argument of my hon. Friend the Member for Exeter, that the place of the pawnbrokers in society today is very different from what it was in 1872 and that there is no need, or very little need, to introduce amending legislation to enable them to stay in business. I think that that is a matter for the House to decide. I am not advising the House to support or oppose the Bill. What I have tried to do, bringing in evidence the Report from the Board of Trade, is to confirm that so long as it is the wish of the House to impose maximum charges upon pawnbrokers, then there is a case for agreeing to proposals along the lines of the Bill.