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My Lords, in moving the Motion standing in my name on the Order Paper, I stress that it is an attempt to bring forward an opportunity for those who are interested in this topic to debate it at length. In the absence of any other opportunities, and given the fact that there is space within our normally busy and packed schedule, I hope this will be welcomed by all Members of the House.
I declare my previous interests as a former chair of the StepChange charity and as a member of the Financial Inclusion Commission. However, I have no current interests which would otherwise need to be declared.
The main purpose of the debate is to draw attention to statutory instrument 2019/383, on financial services consumer protection. It deals with the naming of and consequential amendments to the body set up by the Financial Guidance and Claims Act 2018, which this House spent a considerable amount of time discussing and amending before it was completed.
As a result of the provisions of and powers in that Act, it was not at all unreasonable for the Government to suggest that the body previously known as the Single Financial Guidance Body should be renamed. Indeed, the naming has been done relatively quickly and seems to have gone down quite well. It is, of course, rather simple: the Money and Pensions Service. It does not try to confuse by any complicated and clever analysis of the work it is doing. One hesitates to quote, “What’s in a name?”, but I sometimes wonder whether in the simple name “Money and Pensions Service” lies a deeper worry that we are actually talking about two separate issues. That was a theme in all our debates on the Financial Guidance and Claims Bill. It may be inevitable that how people in this country operate and manage their money is quantitatively and in many other ways different from the way in which they save for and, we hope, live off their pension in the later years of their lives. The functions of the three organisations that were brought together to create one body—I am going to call the Money and Pensions Service “MAPS” in future as it is easier—are different. We should recognise that they are different. They will have different interests and concerns and there will be different pressures brought to bear on the body by those agencies.
The timescales over which those functions operate are clearly different. Debt or concerns about money are very often short term and operate at different times in people’s lives. Pensions have to be saved for over an extended period and are subject to much more concern about the impact they will have later in life. With people living longer, they need more concern and interest given to them. The impact that both issues have on the economy is different. Indeed, there was some logic in the Government’s original proposal to set up two bodies to look after issues that arise from debt and money more generally, and those that arise from pensions. The final decision was to combine them in one, and we are where we are. I do not think there is much point in going back over these issues. We should acknowledge that we need to give the new body time to settle in and should build in an appropriate review period in which decisions can be looked at. As I say, we are where we are.
Looking at the body itself, it is early days. It has established itself. It has developed a logo, as one would expect. I have no particular views about that. I noticed that at the official launch, the chief executive—it is hard to get a sense of this from reading the speech—made a slightly tentative poke at whether people thought it captured the spirit of what the body is trying to do. I could not hear echoes of laughter or concern in the room as a result; I am sure it went down well. After all, it is a very clean, rather curly object which I am happy to wave around. At least we have it: the body is established. It has its format, it has a board of significant people with real contributions to make in this area. It has a very distinguished chair, Sir Hector Sants, who not only comes from the debt charity StepChange—indeed, he was my successor there—but is also the former chief executive of the FSA. We are talking about a substantial body, at a time when it needs to draw together the issues that have been given to it by Parliament. It now has its senior staff in place, and they look to me to have considerable skills and expertise. I am sure they will do very well. A real commitment comes through in all the documents I have seen—they are largely two speeches, but there are some other papers—to consult about the future, to build on possibilities for the business plan, to engage with as many people as possible and to take advantage of the new body going forward. That has to be a good thing, and I welcome it and look forward to it.
Having said that, there would be little point in having this debate if we did not raise some issues for the Minister to respond to, so I advised her beforehand that I might ask a couple of somewhat difficult questions and raise issues that she might want to reflect on over time. I am going to focus mainly on the debt side of the new body—I think others will come in on the pension side. I hope that together we will get some sense of the overall issues.
We have to recognise that considerable problems in the economy are still arising from unmanageable debt. Recent figures from the StepChange yearbook, which has just been published, show that the total number of people in contact with the charity has increased significantly over the last 10 years—from 577,000 to 657,000. That is significant given the capacity of the body to deal with that number. We are talking about why people get themselves into unmanageable debt. It is mainly down to reduced income arising from unemployment, redundancy or injury. Therefore, there is no change there, and the individual contributions are very interesting.
More people have increasing levels of debt, which is bad news for society as a whole. Interestingly, a larger number of younger people are coming forward to seek advice. The statistics from the last 10 years show that almost two-thirds of StepChange clients are under 40, compared with a figure of just over half in 2014. Therefore, there is a change in the demography of the people who seek advice.
The gender mix is also changing. More women now seek advice—again, that is a change over the last 10 years. Now, 60% of those approaching StepChange are female and that is an interesting development. Housing is obviously a key contributor to all people’s domestic economies. It is interesting to note that over the last 10 years there has been a shift of just over 10% from owner-occupation to rented accommodation, and that might reflect further difficulties and vulnerabilities.
The north-east of England remains the area where most people have difficulty in coping with their finances. It has continuously ranked the highest since records have been kept. The main focus of pressure is, as always, the utilities, but increasingly council tax brings its own issues and problems, as well as hire purchase.
Therefore, we are seeing growth in unsecured debt, which is a bad thing for people who have difficulty in managing their money. The level dipped slightly between 2014 and 2016 but it has now begun to rise, and it rose again last year. Again, unfortunately, we are also seeing a small rise in the proportion of new clients with short-term, high-cost credit debt relating to money lenders and others. Some further attention needs to be given to that by the authorities, including government.
That is the context for the issues that I want to talk about. I hope that the new body will make a better fist than predecessor bodies of understanding what works, what can be supported and how to make sure that the message gets across to people who experience difficulty with their day-to-day budgets that there is no value in waiting and that they have to seek advice early. Getting people on to the systems that will be available will be crucial in dealing with that in the future. The new body will need to understand better than perhaps previous bodies have done how the funding operates and how to ensure that those who need advice get it.
I was very pleased to see that the chair of the MAT said that a key element of the strategy is to ensure that all those with problem debt are able to access free debt advice. If that were possible, I think we would all support it. I see no reason why that cannot happen, although obviously consultations, debates and discussions need to take place. Several large, important and independent charities—Citizens Advice, the Money Advice Trust and others—all need to be brought together with a coherent approach that allows for a general improvement in the ability to reach out to people in debt. Last year, 657,930 people were approached by StepChange, but we are talking about over 2 million people who may well need support, although not all those who approach the charities can be helped.
That is the main thrust of what needs to happen. The pieces that need to be added to that picture will perhaps not fall primarily to the MAT and will still be the responsibility of either government or other agencies. I would be grateful if the Minister could give us some advice on that.
The most important of the additional policies that we should look for in the near future is the question of a breathing space. The proposals for this were much explored when we were talking through the issues in the Bill; indeed, we had amendments at all stages of the Bill but were not quite able to get it to work in the way we wanted. We left the Government with the opportunity to come forward, and there is no question that HM Treasury’s proposals on this are pretty good. We are impressed by them. If they come in the form that is currently being discussed, they will offer a good level of protection to people in debt and will provide important incentives for them to seek advice, by providing freezes on enforcement action, interest and charges.
However, there are some issues that still need to be bottomed out. I will list them for the Minister, although I am sure that she will not have all the answers to them, even with inspiration from her usual co-pilot who has special lines into the Treasury—because this is a divided responsibility, not limited solely to her department. So, although the Government always speak with a single voice, it might on this occasion be difficult for them to come up with precise answers to my questions.
One important thing—the noble Lord the Minister will be amused by this—is that there is increasing understanding that some of the people affected by unmanageable debt owe money to the Government. I am afraid that it is becoming clear that the Government—both central and local government—are not the best people in dealing with those who are in debt to them. We hope that it will be possible for the Government to agree, for instance, that government debts should be included in the Breathing Space scheme. That would set up a system under which protection is offered to those who owe money—and I am sure that they accept that they do—to the Government. They would not be threatened, as they currently are rather too often, by the bailiffs and other systems that are routinely the recall mode of first choice by local government. There are difficulties with this, to which I will return. So government debts should be included in the scheme; I hope that the Government will do that. If debts to local and national government are not included, there is a real risk that schemes will fail, because there will be a lack of consistency in how different debts are being treated, which could leave people still facing unaffordable repayments and collections, and undermine the stability and protection that they need if they are to recover financially—which many people are able to do.
There is a need for broader, comprehensive protection for people in debt and who go on to the Breathing Space and debt management schemes. I hope that this will ensure that all the charges and interest accumulations that currently apply are stopped in a way that allows people to be supported. We need to make sure that the overall scheme fits into the broader schemes arranged by the MAT to make sure that those reached out to get the advice they need timeously and are able to take that forward.
Other changes are perhaps a bit more technical. I hope that the Government will look favourably at the suggestion that the breathing space period which is currently proposed as 60 days may need some extension in certain cases; there needs to be a mechanism under which that could operate, perhaps triggered by debt advisers. The Government are currently minded to have a public register of people who join the schemes. This is what happens in Scotland, but the evidence from there is that it can put a significant number of people off accessing those schemes—so I hope that the Government will think very carefully about whether to go ahead with that. A public register could also leave people at risk of being targeted by disreputable, exploitative or fraudulent entities. That is an issue we need to bear in mind in these internet-happy days.
The right gateway for accessing Breathing Space is through free-to-client debt advice of a type beginning to be sponsored and supported by the MAT, but we should not add extra burdens. The process should be as simple as possible, because all the experience we have is that, when people first make approaches for help with their debts, they are very easily put off—so if there is a complicated bureaucratic system behind all this, it will not work in practice.
In a sense, the Breathing Space issue that we broadly support and would like to see in place as soon as possible is moving in the right direction. There are some tweaks which the Government could easily put in at this stage, and I do hope that these points will be considered. But there are wider issues: the question of whether we have the statutory debt management plan system that is currently being advocated is important, and we must not lose sight of it. A statutory basis will be much better in relation to creditors, giving them confidence that they will not suffer themselves as a result of the debt. I hope that we can hold on to that as much as possible.
But it is not possible to analyse and support the Breathing Space and statutory debt management plan systems without also looking at the wider context for debt relief. The DRO—debt relief order—system operated by the insolvency services, and therefore outside the remit of the DWP, is a good way for people with small amounts of debt to resolve their problems, but it is far too expensive to operate at the moment. The costs fall entirely on the charities, which are not funded for that. There has to be better alignment between the costs of the system and the question of who is going to pay for it. The original problems arose from changes to the legal aid system. However, we are now some way down the track on that and need to think again about how it will happen if we are not to lose the very good DRO system.
It is also time to reflect again on the IVA system, which works reasonably well but still tends to prioritise the repayment to creditors in a way which is in many people’s minds rather too generous. If there is to be a review of the broader range of debt processes, we need to look again at the wider context. As I said at the start of this section, these issues are not the direct responsibility of the Minister and I understand if she needs to take time to respond—but they make a package which we hope will be sufficient.
The new Money and Pensions Service that replaces the Money Advice Service and brings into scope the previous schemes around pensions is a bold and imaginative solution to a problem that affects the way in which our economy operates. The dead weight of personal debt and the problems caused by bad pensions advice and poor investment create a drain on the economy that has been estimated as in excess of £8 billion per year. This is not small beer in any sense; it is something that we need to tackle for the good of the economy. But the individual problems caused by debt, and the problems caused to older people by lack of pensions advice and proper information when it is needed, is also something that we should have the power to change. I very much hope that the Government will be prepared to respond to this take-note Motion in a positive way so that we can make some progress. I beg to move.