I absolutely agree with the hon. Gentleman. I have been a close reader of the work of Paul Gregg at Bristol university, who has shown how unemployment can scar young people and affect their earning potential for life. I am extremely worried about young people in this country who are facing unemployment and have little prospect of a place on a training scheme or in a university.
There is little sign that these pressures on family finances will ease. With the current wage squeeze expected to continue until at least 2013, average wages are expected to fall to less than £25,000, which is more than £1,800 lower than in 2009. People do not have the pounds in their pockets that they need in order to keep spending in the way our economy needs if it is to grow. If we add to that the anticipated rise in interest rates and mortgage payments, which has been one area of respite in the past few years, we can see that things are going to get a lot bleaker. As our newspapers warn daily, and as the Bank of England has pointed out, interest rates are likely to climb, piling pressure on the 60% of low to middle-income families who are already struggling to pay their bills.
It is no wonder that four in 10 people are worried about their current level of debt, with 4 million fearing redundancy and 4 million more having taken on debt in recent months. We know that the cuts that we have seen so far are just the beginning. The ones that families across the UK felt this month accounted for a mere 10% of the total savings planned before 2015 from changes in the tax credit and benefit system. More than 40% of the cuts kick in in 2013.
Loading debt on to households helps this Government to cut the deficit at the pace they desire, but it is the job of Opposition Members to challenge them on the cost and consequences to all of doing so. In an economy where jobs and growth are in short supply, such debts do not just mean lower consumer spending, higher levels of bankruptcy or repossessions. Nearly 30% of British parents admit they are arguing over their family finances and a third of parents are suffering the stress of sleepless nights because they are worried about money.
Such changes also directly impact on our chances for economic recovery. As the Bank of England pointed out,
“prospects for consumption…have an important bearing on the outlet for activity”,
but it added:
“Near-term prospects have weakened further over the month. The squeeze on households…was likely to dampen consumption materially over the next year or so.”
Even after a sharp reduction in its private consumption forecasts, that favourite of the hon. Member for West Suffolk, the Office for Budget Responsibility, expects British households to account for just over a fifth of economic growth this year and for almost a third next year. The truth is that if the average family is not willing to dig itself deeper into debt, those figures might have to be revised.
The Bill reflects the Government’s complacency about the challenge. There is no commitment to act on these problems—only a general sense of unease, summed up best by the Minister for Equalities, Lynne Featherstone, who wrote:
“What is tough—and will get tougher—is losing jobs. People in work will mostly get by—somehow. People on benefits will mostly get by—somehow. But for those who lose their job—it will be devastating. The cuts were announced last year. Their impact has yet to fully hit. This budget promised growth. The proof will be in the pudding. And the question will be whether there’s a new job to be found within a time frame that can keep health, hearth and home together—and we need to keep a watch over that.”
Well, I want to do more than keep a watch over that, and I hope to answer a question posed by Government Members about what policies Labour Members could suggest.
Today, I argue that we could do more than squabble over Keynes or the Ricardian equivalence; we could do something to help those people in immediate danger of insolvency and bankruptcy. At present, this Bill is missing that. Given the large numbers of people facing financial difficulty, we should be deeply concerned about the strategies that families have to cope with these pressures and how the Bill could do something to help.
To cover costs, more and more people are turning to sources of credit, which might seem like short-term solutions but quickly become long-term problems. The number of people who say they are likely to use an unauthorised overdraft this month has nearly doubled since July last year—from 900,000 to 1.6 million. Similarly, the payday lending industry in the UK, with its 4,000% interest rates and more, has quadrupled in the past 18 months.
Being able to borrow in a way that does not leave a long-term scar on the family finances is the new dividing-line in our society. Those who can access mainstream credit might just scrape by in austerity Britain. Those with little option but the legal loan sharks, maxing out their credit cards or racking up unauthorised debt, could spend a generation or more trying to become debt-free.
This Government want to pretend that such kinds of personal debt are solely a private matter, but Opposition Members see the social and economic consequences and we must beg to differ. A lack of regulation of the high-cost credit market in comparison with other countries allows that industry to go unchecked in the UK. Recognition of the problems caused by casino banking in the City is widespread across the House, but that is only half the battle; we should not forget the financial needs of those in our communities. For the sake of our economic recovery and for the sake of those families, credit should not be lent in a way that is detrimental to consumers without those who profit from exploiting them being made liable for the consequences.
When this Government announced their Budget, I asked a simple question: how can they be so keen to show that they are so tough on national debt, yet so blind to the growing crisis of personal debt that their policies are stoking? Today, with this Bill before us, we are no closer to an answer, but thousands more edge closer to personal financial problems as a direct result. That is why I will table amendments to review whether the supplementary charge or the bankers’ levy could be applied in a way that would disincentivise negative, high-cost credit lending. It is time that this Government put the fortunes of every family first. Other countries have done that to protect their consumers, and I do not see why British consumers should be denied the same opportunity.
Let me offer an open invitation to Treasury Ministers to do what their colleagues in the Department for Business, Innovation and Skills have signally failed to do, and respond to the concerns of Members throughout the House. I invite them to meet us to discuss how we could cap the total cost of credit. Campaigners all over the country who support such action—Churches, trade unions, community groups and consumer associations—would thank them for taking it.
I hope that Members who share my concern about personal debt will support my amendments, and will join me in holding the Government to account for what they are doing to the personal finances of families in every constituency in the country.