Mortgages: Eligibility — [Mr Philip Hollobone in the Chair]

Part of the debate – in Westminster Hall at 5:34 pm on 23rd October 2017.

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Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury) 5:34 pm, 23rd October 2017

It is always a pleasure to see you in the Chair, Mr Hollobone. It has been a particular pleasure to listen to this debate. I congratulate Paul Scully on presenting the e-petition this afternoon and I congratulate all of the people who were able to sign it and put their views on the record.

Being able to respond to this debate as the shadow Economic Secretary is a pleasure. It is one of the best portfolios in politics because the issues that the Minister and I cover are interesting and important. It is a portfolio where we learn things. Also, it is the best because of the fact that the UK is the world’s leading financial centre. It is a pleasure to interact with that, to learn more about its dynamism and to see the advantages that that brings to the UK.

This debate brings us to one of the central issues that we should discuss more in this country. How can we combine being the world’s leading global financial centre with a situation in which so many of the people of this country, so many of our constituents, are financially excluded or marginalised, and where more than a million are unbanked? Crucially, how is it that, with this incredible dynamism that we possess, we have allowed a situation to occur where the poorer someone is, the more financially excluded they become? If I did not spend all of my time in the City listening to City institutions and their legitimate concerns about Brexit—I am sure that is true for the Minister, too—this is the agenda we could spend more time talking about. It is a personal issue for me. My mum worked for Provident, the noted door-to-door lender. I spent much of my childhood learning about credit and creditworthiness, how people need access to credit and where they get it from. It should be a much greater priority for our debates in the House. It is certainly right to start the debate with a discussion about how it impacts on the housing market.

The hon. Member for Sutton and Cheam said we have a broken housing market, and I certainly second that; so many of the country’s problems come from that dysfunctional market. As the hon. Gentleman said, a lack of supply is at the heart of the problem, but we need to be pragmatic and recognise that the private sector alone cannot build sufficient homes. The operation of right to buy without replacement is a problem. I support right to buy because I want working class people to own their own homes, but clearly we have to replace the units that we lose with like for like, and we have never done that. We have a poor planning framework that hands far too much power to developers. Frankly, we have to blame ourselves. There is a lack of courage in political discourse when it comes to things such as new towns and tackling the green belt. We have failed to remediate brownfield land. There is a lot of blame to go round for all of us to share.

The problems of the housing market are extreme. They defeat benefit reform, hamper labour mobility and ruin lives. Through some of the churches I am involved in, I am aware of families less than a mile from this building made up of couples and four or five children who are living in one room. Clearly, that is not a situation that any of us should be happy or satisfied with, so I particularly welcome the chance to respond to this debate and to the sentiment that has been expressed so warmly by all Members today.

There are 11 million renters in the UK, and that number is growing. A large rented sector is not necessarily a bad thing. Germany, for instance, has a well-functioning, well-regulated private rented sector, but we get the worst of all worlds. We have a very large private rented sector, but without the secure regulatory environment to protect the tenants in it. Britain’s renters deserve fair access to credit and much better access to the housing market. As has been said, up to 80% of renters have seen their credit rating rise when they have been able to include their rental payments in their credit score. Crucially, it has added a digital footprint, which is so important these days, for many people who simply did not have one before.

My hon. Friend Jim Fitzpatrick talked about ground rents and leasehold reform. I am firmly in agreement with him. It is a particular problem in the north-west of England, where I have used the phrase “legalised extortion” at times, because I am not able to see what service is being offered for many of the huge payments now levied on people through the leaseholds they signed up to. That will stop the housing market functioning effectively, because no one will want to take on such a liability when they realise the scale of it. Mr Jones gave support in principle, but said that there are some complexities. He was absolutely right to talk about the CreditLadder system, but fundamentally I think he was saying that there is a role for the Government in trying to solve this problem, which is very welcome.

My hon. Friend Martin Whitfield rightly talked about past personal relationships. A Conservative member of the Treasury Committee recently told me that when he was a student his bank manager not only wrote to him to warn him about his spending, but copied the letter to his father as well. I am not sure that any of us present today, even at our ages, would wish for that to happen. His point was that there has to be an individual assessment of a person’s needs, outgoings, liabilities and expenditure.

James Cartlidge referred to his experience as a mortgage broker, which was very interesting, and said that many rental payments are already taken into account. I think we need to look at whether we can improve people’s credit ratings more broadly with such initiatives. I thought that his comments about the future of work, lending into retirement and buy-to-let were absolutely right. I will not give him any more praise or he will probably be accused of supporting Venezuelan-style socialism, which would not help his career at all, but I thought all his points were very well made.

My hon. Friend Luke Pollard talked about the impact of this issue on his constituents, 32% of whom are in the private rented sector. Clearly, if a third of his constituents are in a poorly regulated form of tenure and are not getting the proper response that they need, that is a problem. He talked about how this e-petition could make a difference and managed to plug his own e-petition, which I thought was particularly skilful and well done.

The Scottish National party Front-Bench spokesperson, Kirsty Blackman, made many points that I agree with. She talked about the impact on young people in particular. There is an under-remarked on phenomenon in that the burden of student debt, combined in most parts of the country with house prices that, in real terms, are up to three times what they would have been in the early ’70s, and higher pension contributions, which are a necessity based on the demographic profile of the country, produce a difficult scenario for a lot of people. Older generations are perhaps not aware of the burden of that, and it makes the affordability of things such as housing scarcer still.

The hon. Member for Sutton and Cheam mentioned the Bill introduced by Lord Bird in the other place, which would essentially put the sentiment of this e-petition into law. I met Lord Bird recently and had a chat about the principles behind the Bill. If you will excuse the pun, Mr Hollobone, it is to his credit that he has tabled the Bill. Clearly, we would all like to see a concerted attempt to tackle the root causes of poverty in this country. There will be disagreements about aspects of Government policy that the Opposition would say have exacerbated some of those problems, but such popular cross-party consensus proposals can help us find a way forward.

There is so much more that we can do, not only on creditworthiness but on things such as using smart meters to end the poverty premium on gas and electricity, which we have talked about many times in the House. We still need further action on that. We have proposed initiatives such as capping the cost of credit card fees so that no one pays back more than double the principal sum that they borrowed. That is not writing off debt, but making it clear—as other countries have—that there has to be a framework that protects people in persistent debt so they are in a position to get through their problems eventually.

We should also have a much stronger focus on financial education in this country. Frankly, very few people really understand what an annual percentage rate is telling them. It looks frankly inevitable that the Monetary Policy Committee will put up interest rates, but a lot of people may be unaware of what that means for the debt that they have already taken out in mortgages.

When I talk to people in the City about some of that agenda, their eyes light up with passion. Clearly, there are a lot of people in this country with the expertise, passion and commitment to see progress on those things. We must talk not just about the effect of Brexit on financial services but about how we can use the expertise and skill of the people in this country, who hopefully will stay, to tackle some of these long-term problems.

I am absolutely happy to pledge in principle the support of the Opposition Front Bench for the kind of initiative that this e-petition suggests, and for Lord Bird’s Bill, which seeks to put it into legislation. That seems a sensible way forward, and I hope we can all agree on it.