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Westminster Hall

Wednesday 12 February 2003

[Mr. Frank Cook in the Chair]

Low Income, Debt and Poverty

Motion made, and Question proposed, That the sitting be now adjourned.—[Gillian Merron.]

9.30 am

Mr. David Clelland (Tyne Bridge): It is a pleasure to initiate this very important debate, which is my first debate in Westminster Hall, having been locked up in the Whips Office for quite a long time.

For many of us, Christmas is now a distant and, I hope, happy memory of good food, companionship and gifts. We might wince a little as we think of the cost. Perhaps we will joke with friends about the need to cut back on our waistlines, as well as our credit cards, but for many families the cost of Christmas is no laughing matter. Indeed, for many of those whom we represent, the phrase "the cost of living" is no abstract economic theory. Many families are paying for last Christmas, the one before that and the one before that, too, and will go on paying not only until next Christmas, but even far beyond.

One mother told me, quite calmly, that she fully expected to die in debt. She is not a profligate woman, simply a single mum caring for a severely mentally handicapped son in a household dependent on benefit. She first got into what she called "a little bit of debt" when the washing machine broke down and she could not get social fund loan because she was still repaying a previous loan. So she borrowed money to buy a second-hand washing machine. Then Christmas came along, so she borrowed more money, as she put it, "to give the bairns a good Christmas."

She was struggling to keep her head above water when her son was reclassified from a dependant to someone in receipt of benefit in his own right. Inevitably, there were delays in processing the claim and, although the family are now once again receiving all due benefits, they had two weeks without any income at all. In those two weeks, it was necessary to borrow money to feed the family, as well as the electricity and gas meters, and she was unable to pay the catalogue, with the consequence that an already tightly stretched budget simply ripped apart. That case, which is replicated a hundred times over in estates in my constituency, illustrates the problems that face those on low incomes in our country. For too many people, debt is part of their day-to-day financial reality.

Debt has always been with us, of course. I have a 96-year-old aunt who regales family parties with tales of family members or friends pawning dad's suit on Monday, redeeming it on Friday for the weekend and pawning it again the following Monday. Often, those were laughably called "the good old days", but poverty in this day and age is no laughing matter. When people are poor, money is very expensive.

A recent survey by the company Datamonitor estimated that more than one in five adults—7.8 million people—are victims of financial exclusion. They are

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routinely refused credit by banks, building societies and conventional lenders. We stand at the beginning of the second millennium, in a wealthy country, yet hundreds of thousands of people have to borrow money not for foreign holidays, but for food, gas, electricity and rent.

Although hon. Members look at those figures and try to reconcile them with the raft of initiatives to fight financial exclusion—I am proud to say that they have come from a Labour Government—there are others who view the concept of social exclusion as a wonderful business opportunity. The only alternative for most people refused credit from a conventional source is to borrow from loan sharks. Loan sharks come in different guises and different sizes—some in the guise of reputable businesses—but they all have one thing in common: extortionate interest rates and charges.

Some weeks ago, during Deputy Prime Minister's questions, I raised the plight of one of my constituents—I shall call him Mr. X—whose £7,500 debt in 1986 had risen to a staggering £43,000. My constituent had multiple debts. I must take this opportunity to correct the record, because I attributed the £43,000 debt, to Provident Financial when I should have placed the blame fairly and squarely where it belonged, on another company, Paragon Finance—a successor to Universal Credit. Provident Financial was naturally upset about that mistake and felt that it damaged its good name, so I am pleased to put the record straight now.

Provident Financial is, however, a major player in my constituency and one of the most successful credit providers. It was actually founded by a Wesleyan Methodist preacher, Joshua Waddilove, to provide small loans to the poor. Nowadays, its main business is to offer short-term, unsecured loans of between £100 and £400, with weekly payments collected by company agents. On the face of it, Provident Financial's most popular loan of £100, requiring weekly payments of £3 over 53 weeks, sounds easily manageable to low-income families. The overall cost of borrowing that £100, however, is £59. I am told by the Library that that is equivalent to an annual interest rate of 95 per cent. In this industry, however, interest rates can reach a staggering 160 per cent. and more.

For many in Tyne Bridge and elsewhere, taking out a loan with the "Provy" is an accepted way of life. The "Provy" deliberately recruits friendly, local members of the community to collect its money. Incidentally, they are paid a commission on what they actually collect, not on what is owed, which also means that they are self- employed, thus saving Provident the tedium of personal injury insurance and other employment expenses. There is no doubt that they know their customers well, and they help their clients to take out new loans for Christmas, birthdays, new school uniforms and so on. Knowing the market is a feature of the enterprising lender.

Cattles, another big shark in the pond, claims that it knows when to collect because

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That is a cynical stereotype, of course, but several common threads unite the cases of constituents who come to me for help. All are on low incomes. All bump along financially until an unexpected event—a cooker breaking down or, as in the case of Mr. X, sudden unemployment. All are at the mercy of high interest rates and charges.

Unemployment meant that Mr. X could not meet his monthly repayments and he was therefore taken to court. Imagine his relief when the court decided that he should repay the debt by a fixed payment of £40 per month, but froze the loan at its then level of £9,500. At least he could see an end to the debt, albeit many years away. Imagine his horror when, in 2000, the House of Lords, in its wisdom, decided that lenders should be able to continue charging interest on their loans even after courts had set fixed repayments. Within months, Mr. X's loan account resembled a list of telephone numbers as the interest accrued. Perhaps the £60 it costs to borrow a Provident loan fades into insignificance in comparison, but both illustrate the same high cost of borrowing for desperate people.

I do not think that unscrupulous lending is confined only to loan sharks. Many banks offer payment protection insurance—PPI—to people taking out loans. My hon. Friend the Member for Glasgow, Anniesland (John Robertson) recently outlined a case in which a constituent of his had been advised to take out PPI, adding another £1,000 to the loan that she took out with Lloyds TSB for her daughter's wedding. That was no problem, except that PPI is insurance to ensure repayments in the case of loss of employment. My hon. Friend's constituent was unemployed and therefore ineligible for the benefits of PPI . She was not advised of that; on the contrary, she was advised that the insurance was in her interest. I had a virtually identical case in which a woman had taken out a loan with Lloyds TSB and had also taken out PPI. She, too, was unemployed—in fact, her income came from maintenance payments from her ex-husband—so she, too, could not benefit from PPI. Yet the policy had added massively to the cost of loan repayments: more than £1,000 extra on a £3,000 loan. It was virtually worthless to the borrower. To add insult to injury, interest was charged on the full amount including the insurance premium.

No one would advocate that Provident, Paragon or any other lender should lend without charging any interest. We do not expect them to behave like charities. There should, however, be a maximum level of interest that a lender can charge. Interest rate ceilings operate in several European countries and most US states. In Ireland, for example, lenders are required to register their charges, while Holland has an interest rate ceiling of 40 per cent. Right now, in the UK, the only curb comes from the Consumer Credit Act 1974 and the Office of Fair Trading. The Trading Standards Institute has admitted that the legislation is ineffective and that successful prosecutions are rare.

The Labour party has a manifesto commitment to crack down on loan sharks, and to consider statutory limits on credit interest rates. The legal definition of extortionate credit therefore needs to be redefined to provide effective protection against creditors who

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charge extortionate rates or operate oppressive practices or impose oppressive terms. There should also be an obligation on finance companies and banks to advise customers that payment protection insurance is not relevant in all cases.

Too little attention is given to the regulation of the activities of the alternative credit market, yet that market is growing. We are now subjected to television advertising by debt management companies, unsolicited e-mails from loan companies, and mountains of junk mail offering easy money. The rights of low-income customers to financial services are not sufficiently supported or enforced and too little is done to promote consumer power or confidence.

We penalise our poor several times over. For instance, it is cheaper to pay for gas, electricity and water by direct debit, but that option is not open to people who do not have a bank account. They pay correspondingly more for their fuel because they use the key system, in which a meter key is charged up to enable access.

On one estate in the north-east, two thirds of the people who took part in a recent survey had had credit applications to conventional sources refused. That was for a variety of reasons, such as postcode, outstanding debts, the credit history of a previous occupant, or too low an income. Of those surveyed, 46 per cent. were in debt to buy clothes, 37 per cent. to buy food, and 16 per cent. to meet fuel bills. We drive our poor into the arms of loan sharks.

There is an alternative. Credit unions exist in many communities to offer credit to people who are excluded from the high street banks and building societies. Of course, they charge interest too, but at a much lower rate—usually about 13 per cent. A person taking out a £100 loan would pay back as little as £106.50, compared with the massive £159 they would pay back to the "Provy". A credit union is owned and run by its members, who save regularly into a common fund and who share the common bond of where they live or work. Credit unions keep money within a community and increase people's control over their finances. In the areas where credit unions operate, they have an obvious and immediate impact on the amount of extortionate borrowing.

The Government support credit unions and have done much to promote them. I hope that my hon. Friend the Financial Secretary to the Treasury will be able to tell us today that more will be done to help the development of credit unions and to curb the worst excesses of those who prey on the financial problems of too many low-income families in our constituencies.

9.42 am

Mr. John Battle (Leeds, West): I welcome my hon. Friend the Member for Tyne Bridge (Mr. Clelland) back to the land of the living from the Whips Office. He has done his constituents, the House and the country a service by raising this deeply serious matter, and I hope that this will not be the last time that it is debated in the House. Unjustifiable charging locks the poorest into deep and long-term debt and people are left with no alternatives to get the basics they need to survive.

In the heady world of economics, we refer to financial shocks. My hon. Friend put it well when he spoke of unexpected events. A new baby will need a pram or a

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carrycot. If a relationship breaks down, people may need a new home, for which a bed, sofa, cooker and curtains will be needed. To people who are poor, £4.99 a week may seem a manageable offer. However, in practice, a degree in maths is usually needed to work out the compound annual percentage rate noted in the small print.

I am pleased to see the Financial Secretary to the Treasury here today. She was at the launch of the "end doorstep debt" campaign, which was set up by Church Action on Poverty and others. I know that she takes these matters seriously, so I am pleased that she will be responding to the debate today.

We must take steps to tackle this injustice. The loan system is generating poverty. All our efforts at regeneration are being undermined by the increase in poverty that is caused by the loan system—loan sharks and legal lenders who lend at incredibly high rates of interest.

In my neighbourhood, at the corner of Armley town street and Branch road, in Leeds, West, a Lloyds bank was boarded up for some months but has now been reopened as the Western Union Cash Connector. It sounds like something from the wild west. It is plastered with luminous red and yellow signs advertising financial services, pawn broking, cash loans, cheques cashed, and pay day advances. The signs also say "Goods back later, raise your cash today." It is not the only such lender in the neighbourhood. Non-standard loan companies offer loans to people who cannot get credit from banks and buildings societies and who do not have enough money to have a bank account or an ordinary credit card. Such companies are proliferating, especially the cheque-cashing companies or what are known euphemistically in my constituency as the wage-stretcher businesses. A company called Clear-a-Cheque has two branches in Wortley and Old Farnley and it offers to cash wage cheques, pension payouts, social security cheques, giros or even a lottery ticket if it can be seen to be a winner.

Companies, such as Provident Financial, First National and others, put leaflets through doors advertising their rates of interest, but their charges for cashing a third-party cheque include a deduction of between 8 and 15 per cent. They then add on a cheque-handling charge of between £2 and £5. Therefore, in practice, cash advanced against a personal cheque for £100 to be settled 28 days later can run up interest charges of at least 17 per cent.

The injustice is that a loan of £100 can mean repayments of—to quote three companies—£191.76, £202.80 or £220.24 at unbelievable APRs. I have worked out the APR in those cases at 280.5 per cent., 329.9 per cent. and 440.1 per cent. respectively. How out of line those rates are with the current bank rate of 4 per cent.! As my hon. Friend the Member for Tyne Bridge spelled out, a credit union commendably offers a rate of 12.6 per cent. The figures I cited illustrate how the poorest in our neighbourhoods are being deliberately targeted to tie them to long-term unsustainable debt.

In my neighbourhood, there is a company called Brighthouse, which used to be called Crazy George's, and it put a catalogue through doors with the offer:

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Its brochure says:

Unlike other discount stores, the goods are expensive and all the goods are quoted at the per week hire purchase price which appears, in bold letters, as £4.99 a week. However, the total cash price is buried in the small print underneath. The cost of a bed is £4.99 for 156 weeks—that is three years—and that runs at an APR of 29.9 per cent. In other words, the actual cost of the bed, without a mattress, works out at £432.38. At MFI, the same bed costs £189 with a mattress. People are getting over-priced goods at incredibly high rates of repayment.

Mr. Mark Lazarowicz (Edinburgh, North and Leith): I am glad that my hon. Friend has mentioned Crazy George's as there is a branch of that outfit in my constituency. Does he agree that action should be taken to ban such activities or, at least, ensure that the true costs of lending and the true interest rates are made clear and visible to customers, who should not be misled in the way that he has highlighted?

Mr. Battle : I completely agree.

We should be open about the fact that this activity is perfectly legal. It can be licensed. But we need to spell out who is paying the highest price. Brighthouse is funded by a major bank, so we are all locked into an unjust loan system for the poorest. Those involved are fostering deep debt, so I could argue that use of credit cards by the rest of us is at the expense of the poorest, because the cards are being subsidised by those paying the highest rates—inflated rates—as in the case of Brighthouse customers.

We could also make it plainer that there are alternatives. The cost of a second-hand washing machine at £421.51, with a payment of £6.50 a week over three years, will work out at £1,028.04 on an APR of 29.9 per cent. In addition, service and insurance charges can be as much as the price of the machine. Remploy is reconditioning washing machines that can be bought for a quarter of the cost. People need to be aware that there are alternatives.

I stress that what the companies are doing is not illegal, but what little the poorest have is being taken off them by incredibly exorbitant interest rates. The poorest are being forced to pay the most in our society, not least because they have nowhere else to go. An estimated 7.9 million people in Britain, one in five, unable to obtain money direct from a high street bank or a finance house, have no choice but to borrow at very high rates of interest from those money lenders.

This sub-prime lending market, as it is sometimes described, is not illegal, but it is highly lucrative. The market analyst, Datamonitor, claims that it is huge, worth at least £16 billion a year. Who is that money coming from? Answer: the poorest.

Datamonitor published in January a report on sub-prime lending, "UK Non-Standard and Sub-Prime Lending 2003", which provided five-year forecasts for these markets, examining competitive and regulatory developments. It suggested strategies for new business developments, providing non-standard lending products to the poorest. Chapter 6, on home-collected credit,

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contained an assessment of the impact on the debt of the doorstep campaign, led by Church Action on Poverty and other charities, commenting:

If my hon. Friend the Minister wants her Department to buy the Datamonitor report, it will find it quite difficult, because the report costs $3,215, which is beyond the budget of the Library of the House.

If that organisation is suggesting to sub-prime lenders that the Government will do nothing to interfere with them, but will enable them to expand their market, we should be interfering more to tackle the problem and not leave reports advising the bankers buried in documents that no one can afford. It is big, lucrative business.

On 26 January The Sunday Times spelled out that some of Britain's banks are behind the sub-prime lenders. They are making millions by charging interest rates of up to 80 per cent. on loans and credit to the poorest. The Associates, owned by Citibank Group, is pushing unsecured personal loans at rates of up to 36 per cent. Next the newspaper referred to First National, then owned by Abbey National, which recently sold it to GE Capital.

I pause for a moment to reflect on Abbey National and First National. First National was the consumer credit arm of Abbey National. It was sold to GE Capital last week for £848 million. GE Capital pointed out on its website that the £848 million price included £355 million cash or "surplus equity" as well as £630 million underlying net tangible assets. Where has that £355 million surplus come from? Answer: the poorest in our society, locked into paying high interest rates for years.

Brighthouse is owned by Nomura bank, which is making money out of the poorest and hiding behind the high street banks and finance companies, perhaps hoping that we shall not notice.

The huge profits that are going to the banks are being sucked out of the poorest areas. A study of residents of the Meadowell estate on Tyneside found that 85 per cent. of households on three streets were paying moneylenders nearly a third of their weekly income in credit. Collectively, they were paying an astonishing £370,000 a year. The average income was £200 a week. What are we playing at when that amount of money is being sucked out of poorer neighbourhoods? Those companies, which charge up to 20 times more than the base rate through their subsidiaries, are targeting low earners in a £16 billion lucrative sub-prime money lending market.

It is not simply a matter of leakage, as the New Economics Foundation calls it, as money is pulled out of poor areas, but a matter of the banks making a profit from the poorest which they use to run their whole organisations. In practice, the banks are forcing the poor to subsidise the credit cards of the better-off by making them pay the highest rates of all. What sense can we make of social inclusion policies when the poorest are forced to pay the most? It is the inverse of justice. It is not just one circle, in which poor people go to those companies because they do not know any better and cannot add up while the rest of us sit by and say, "If only the poor were not so ignorant and organised their affairs

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better, the world would be a better place." We are all locked into the problem. Our lower-cost credit cards come on the backs of the poorest in society, who are locked into deeper debt by extortionate lenders. We are tied into the same system. The credit cards of the better-off are provided at the expense of the poorest who are crippled by debt.

What should we do about it? I have three suggestions, and I thank the 140 Members who signed early-day motion 257. The first is to have a cap on lending rates, as set out in the Consumer Credit Act 1974. Let us put that cap back so that people are not allowed to lend on APRs of 100 per cent., 200 per cent., 80 per cent. and so on. The second is to ask the Minister to ask her colleagues in the Department for Work and Pensions to revamp the social fund. People who apply to the social fund are told that they cannot get a grant. Instead, they have to get a loan and, as they are not wealthy enough to pay it back, they are locked into the system run by the sub-prime lenders. The social fund should give people an alternative.

My third suggestion is to back up the plea by my hon. Friend the Member for Tyne Bridge for more support for alternatives, such as credit unions, in our neighbourhoods to give people a practical choice. They need a collective bank and lending organisation that lets them get at the basics. The issue will not go away overnight, but I am convinced that the Government could do more to introduce preventive measures now to ensure that the poorest do not pay the highest price.

9.58 am

Mr. Colin Challen (Morley and Rothwell): I, too, congratulate my hon. Friend the Member for Tyne Bridge (Mr. Clelland) on securing this important debate. It takes place in the context of a Government who have done more than most to tackle poverty, first and foremost by cutting unemployment, but also by such means as introducing working tax credits, the national minimum wage and the extra and targeted help for pensioners. For some loan sharks, however, the prospect of the poor getting a bit more money is a mouth-watering proposition to be exploited to the full. Judging by the news I read last week, the Low Pay Unit has been disbanded. That is a great shame and I hope that steps will be taken to maintain an organisation that speaks up for the low paid and identifies the causes of poverty, because it is still widespread.

Poverty is not simply about having a certain level of income, but about how that income is spent. In contrast to the poor, it is often the case that the rich pay less, and sometimes nothing, for their loans. Better interest rates, more understanding from the banks and special deals are always on offer to those who have a decent income. For those who have an indecent income, there is always the lure of offshore tax havens, where they can shelter their no doubt hard-earned cash out of reach of the taxman.

For many of my constituents, no such opportunities arise. Their financial advisers are of a different, unscrupulous variety—loan shark is the name that we mostly associate with such people. However, in my constituency it is more common to find respectable companies making a killing from selling expensive loans to people in urgent need of money. Those public limited

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companies sport well-designed websites, produce glossy leaflets and no doubt have a sales patter to match. Loans are not their only business. Being the caring people that they are, they are into expensive insurance as well.

A case brought to my attention involves a constituent who was loaned £500—not much by today's standards. On top of that, he bought health care insurance at £130 and optional payment protection insurance for another £100. In addition, he faced a £65 acceptance fee, making a total of £795. He received the whole sum on credit, and the APR was 90 per cent. Such charges are both extortionate and disproportionate, especially as the loan was only for 12 months. None of that insurance protected my constituent when repayment became difficult for him. Indeed, the authors of his misfortune, Welcome Financial Services Ltd.—a misnomer if ever there was one—called at his mother's house threatening court action. To add to the irony of its name, the company has won an Investors in People award. It would say that it is doing nothing illegal and would, no doubt, point to other loan sharks whose behaviour is 10 or 100 times worse. However, that is no defence. Those rip-offs may seem more respectable, but they are still rip-offs. According to a copy of my constituent's repayment record, he had managed to repay about £290 of the original loan—more than half of the lump sum that he wanted—before he ran into difficulties.

Miss Anne Begg (Aberdeen, South): One of my constituents borrowed money for a car. He took out a protection loan of almost £700, but he was fooled into taking out extra insurance, most of which was covered by his car insurance anyway. After a year of paying back a £2,000 loan, he was still almost £3,000 in debt.

Mr. Challen : I am grateful to my hon. Friend for that example, which shows that insurance mis-selling is rife. Never mind interest rates and so on, we must urge the Minister to address the problem of insurance mis-selling.

The loan period for my constituent began in May 2002. By 5 November last year, his debt was £902.43, despite the money that he had paid back. I am dealing with a similar case, in which one of my constituents borrowed £7,000 plus an astonishing £1,400 insurance fee in 1990. She now owes more than £11,000. Some of that debtor's problems stem from the fact that shortly after getting the loan, she was diagnosed with breast cancer. The lender, the Consumer Loans Company Ltd., apparently thought that she should have known about that before taking out the loan. A sum of £8,000 has been repaid, but £11,000 is still outstanding. The loan company is a subsidiary of a larger, respectable corporation and is part of Nikko Principal Investments Ltd. We are therefore not talking about little back-street outfits which double up as cowboy wheel clampers. These are companies that pride themselves on their image as big players, but their apparent corporate social responsibility does not bear scrutiny.

There must be much tougher regulation of consumer loans and, indeed, other types of personal finance. Like, I am sure, every Member here today, I fully support the work of credit unions, and am pleased to have attended an exploratory meeting in Morley, which sought to extend the credit union movement to the town. There must be an attack on two fronts; not only do we need the

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sound, reliable credit union alternative but we must crack down on loan sharks. I think that some credit card suppliers fall into that category. We must establish limits on what companies can charge in relation to loans. All the insurances that prove to be useless when the time comes to call upon them must bear some relation to the amount that is borrowed, and it must be clear whether they are optional. There should also be a statutory limit on interest rates. We should not permit extortion. I want local registers of licensed loan companies to be publicly available, and door-to-door loan selling should be outlawed.

Perhaps some of those measures could be described as anti-market. So be it. I remember a loan market that did not operate unscrupulously. My first record player was bought in 27 instalments of £1 a week, funded out of my pocket money, and £27 was the ticket price of the item. I might add that at the age of 13 or 14, I did not have a previous credit record, so by today's standards, I would never have been given the opportunity to borrow in the first place. Now it seems that what people are being sold is not the merchandise so much as the loan and insurance, and that the people at whom the loans are being targeted are generally the low-paid. This is a market in misery and it is time for the Government to stamp it out.

10.6 am

Mr. Mark Lazarowicz (Edinburgh, North and Leith): I, too, congratulate my hon. Friend the Member for Tyne Bridge (Mr. Clelland) on securing this debate. Of course, this is not the first debate in this Session on subjects related to debt. The fact that the issue arises time and again in Westminster Hall shows that in constituencies throughout the country, this is a problem of which we as Members of Parliament are all aware and on which the need for continued action grows day by day.

I should like to highlight a particular aspect of the difficulties faced by people—especially those on low incomes—who fall into debt that they cannot repay: the growing business of debt management companies, which is taking an increasingly high profile in many of our constituencies. I am sure that hon. Members will be aware of the activities of debt management companies, which offer an apparently attractive way of dealing with the mountain of debt that presses down on people by bringing all their debts, whether they are from credit cards, store cards or loans, into one easy-to-pay monthly offer. Such companies appear to offer an attractive way of getting out of the financial difficulties caused by multiple debts.

Many hon. Members will have seen that advertising by such companies is appearing increasingly frequently on television, in the newspapers and elsewhere. Such advertising could persuade the consumer that the companies are altruistic enterprises that offer their services almost out of the goodness of their hearts. What customers often do not realise until they become trapped in debt management companies' tentacles, however, is that they are commercial organisations that are rapacious in the charges and fees that they extract from the people whom they have encouraged to use their services.

Customers of debt management companies typically pay charges for the service provided that equal about 15 to 25 per cent. of their total debt. They will normally

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have to pay an initial set-up fee and will be charged an ongoing monthly fee that can be a very high percentage of their total repayments. Guidance is provided by the OFT and there is legislation that seeks to regulate this area of activity, but the evidence shows that the regulation is not effective and needs tightening up. People often need to be freed from the further entrapment in debt that can result from their taking out contracts with debt management companies.

A recent survey by the Consumers Association published in Which? magazine investigated the behaviour of a total of seven different debt management companies, most of which were big operations functioning throughout the country. For every single company, there was at least one instance of its having breached the OFT guidelines. Indeed, the Consumers Association came across other examples of practices which may not have been in breach of the guidelines but which were certainly unacceptable.

I would like to highlight some examples of the practices of these debt management companies. One of the most obvious ways in which such companies operate—one that I find totally unacceptable—is to use misleading advertising. This issue was drawn to my attention not only by the Consumers Association report but because one of these organisations has recently started advertising in the Edinburgh area. That stimulated my interest in this subject. I have here an advert from a company called EuroDebt, which advertises the fact that the company has opened a new Edinburgh office this month. The advert itself is described as "advertorial", which is obviously designed to encourage readers to believe that it is not what it seems to be. It tells us that the regional adviser for EuroDebt in Edinburgh is aware that

The advert ends by urging its readers:

it gives a number—

Nowhere is there any mention of the fact that charges or fees will be involved. The innocent reader could well get the impression that this is some kind of altruistic enterprise by the company. This company is not unique and these practices are not unique to that part of the country.

Miss Begg : I do not know whether my hon. Friend has satellite or digital TV, but I was quite shocked when I discovered that most of the adverts on such TV channels are about debt relief. These adverts often give the impression that if someone signs up to what the adverts propose, all their debts will suddenly disappear or be managed much more easily. What they do not say is that, in offering these services even to people with a bad credit record, the companies will demand ginormous repayments that will leave people with a worse debt than the one they already have.

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Mr. Lazarowicz : That is absolutely correct. My hon. Friend has illustrated how the advertising and publicity for this type of company is now very widespread. It appears in all forms of media, but it is typically directed at those who are likely to be either on a low income or suffering from heavy levels of debt, or both. I am glad that my hon. Friend has drawn that issue to hon. Members' attention.

The fact that people are not aware of the initial set-up fees—the cost of getting involved in this type of service—was highlighted by the Consumers Association report, which found that only three of the seven debt management companies that it investigated made it clear that an initial set-up fee was involved. This was just one example of ways in which companies were extracting more money from those who were already in a difficult financial situation.

I have received a briefing from Citizens Advice Scotland on this issue, which gives a host of examples of ways in which a fee-charging system can operate. There is not time for me to outline them all, but I would like to highlight two examples that illustrate the type of practice that is going on. A citizens advice bureau in east Scotland told of a single female client who received incapacity benefit. She had multiple debts incurred through illness, which required her to leave her full-time job. She contacted a debt management company to deal with debts of approximately £58,000. The company calculated a repayment of £526 a month, of which £95 would be a fee. If the agreement ran its term, the client would be required to make payments to the debt management company for 11 years, during which it would receive more than £12,000 in fees.

At the opposite end of the financial scale, a CAB in the south of Scotland told of a client with two children who received income support. Her debts amounted to approximately £2,000. She had used a debt management company and was paying £110 a month towards her debt, of which £19 was the fee to the company. In her case, the CAB could offer her a free money advice service. She got the service for nothing from the CAB when she was paying approximately 20 per cent. of her debt repayments to the debt management company.

EuroDebt, as I said, has begun to advertise in the Edinburgh area. The Consumers Association, in its investigation, was shown a letter from that company which suggested that a client should pay £10 a month to be split between various creditors but EuroDebt would charge £29 a month for its services. It charged more for its services than the sum that it suggested for repaying her debts.

I have given examples of the way in which debt management companies frequently behave. The Consumers Association and Citizens Advice Scotland have a host of other examples of the way in which such companies rip off the people whom they have encouraged to use their services.

Mr. Clelland : Does my hon. Friend agree that if our debate conveys any message to low paid people in our constituencies, it is that those who get into financial trouble should contact an accredited credit union or, if none are available, the CAB, which does fantastic work and can guide them along the right path?

Mr. Lazarowicz : Absolutely. We must always advise people not to use to such loan companies and to go to

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the CAB and bodies such as the Consumer Credit Counselling Service, which offers a free service, as hon. Members know. People should also use the debt helpline, which the Government have set up in various parts of the country.

As my hon. Friend the Member for Tyne Bridge and others have said, one of the most effective methods of dealing with debt management companies is providing alternative services and ensuring that they are funded and well publicised. No matter how tight the regulations, some companies will try to find ways round them because debt is big business, and big companies and big interests are involved in it.

EuroDebt claims in its advert that it employs approximately 200 people nationwide. I am sure that that represents the tip of the iceberg. Alternative forms of debt management advice and credit need greater publicity and support. However, the legislation and the guidelines need to be tightened. Such businesses currently operate legally, and conditions and guidelines are meant to be in place. Evidence that I have gleaned from surveys by bodies such as the Consumers Association and Citizens Advice Scotland shows that the guidelines are not being enforced as tightly as they could be.

Under existing guidelines, we want the Office of Fair Trading and, when appropriate, the Financial Services Authority to police debt management companies and clamp down on their practices, which drive so many of our constituents into ever deeper poverty. That should be a priority. I hope that the Financial Secretary can give a commitment that she will tell the OFT and the FSA that they should clamp down on the practices that I have described more effectively and directly.

Mr. Deputy Speaker (Mr. Frank Cook): I ask hon. Members to remember that it is normal practice to set aside the final 30 minutes of 90-minute debates for the three winding-up speeches. Each generally takes one third of that time; at least, they do not exceed it. The exception is the Minister, if time allows. We have 41 minutes and I expect the winding-up speeches not to exceed one third of that time.

10.19 am

Norman Lamb (North Norfolk): I am sure that I shall be able to comply with that request.

I congratulate the hon. Member for Tyne Bridge (Mr. Clelland) on raising an important issue. It has been debated before, but it is essential that we keep returning to it. It is felt that a lot of talk is going on, but no action has yet been taken to deal with the abuses perpetrated by a range of companies—not just small loan sharks, but some of the major high street retailers, through store cards, and some of the major credit card companies.

Much has already been said today about the lower end of the market, the most disreputable end—loan sharks, for instance. I want to concentrate on the behaviour of the major high street retailers and credit card companies, some of whose practices are also pretty disreputable.

There is nothing wrong with borrowing; we all indulge in it, myself included. It is when borrowing gets out of control that it causes real problems. Those on the lowest incomes are affected most, and the misery that they suffer is quite unacceptable.

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Back in October, during a debate initiated by the hon. Member for Edinburgh, North and Leith (Mr. Lazarowicz), the Under-Secretary of State for Trade and Industry, the hon. Member for Welwyn Hatfield (Miss Johnson), said

I agree with all that, but we are not there yet, which is why this debate is so important.

A recent report by the Select Committee on the Treasury examined the issue of credit cards. The Committee found a serious lack of transparency in the information given to consumers. Everyone thinks about the APR advertised by credit card companies, but the Committee discovered that it was possible to have three credit cards with the same APR, but to pay a different price for the credit in each case. That is because a number of other charges are involved, depending on the length of the interest-free period, on whether there is an interest-free period, and on which debts are paid off first. Changes in the rules are often not made clear to consumers. When taking evidence, the Committee was told that it would take a mathematician to calculate the amount that was actually due.

That is not acceptable. I would like companies themselves to regulate the situation by agreement, but they are reluctant to get to grips with the problem. They are, as it were, drinking in the last chance saloon. They need to get their act together and demonstrate that they can provide transparency. If they do not, regulation must be considered.

There has been a good deal of talk about amendment to the banking code, but nothing of any substance has happened yet. I think that all credit card companies should be required to present clear examples based on, say, borrowing of £1,000. They should say how much it would cost, in actual pounds, to repay that amount after a certain number of months. It is no good setting out an APR that, as I said, may mean very different things, depending on all the other charges. Consumers need to know about the actual cost of the credit, rather than the very complicated ways of calculating it. That reform is possible, but still no action has been taken.

The interest rates charged by some of the major high street retailers on store cards are absolutely scandalous, to the extent that they make credit cards look cheap. Again, it is the poor who suffer most. Those with financial nous and plenty of cash flow can play the system: they can take advantage of introductory offers and pay the card off within the specified interest-free period. However, those without that ability and cash flow end up getting themselves into real trouble.

Just before Christmas, my researcher and I conducted a small study. He went to Oxford street to find out how much credit he could get in one day by wandering into a number of major high street retailers. He built up, in theory, a total of £6,850—I should hasten to add that he did not actually spend the money—in a single stroll down Oxford street. The interest rates charged constitute a scandal. There is a real hall of shame of high street retailers, of which I shall give some examples. It is worth pointing out that most of these companies

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provide a small discount for those who pay off the debt by direct debit, but for those who do not—often, people on the lowest incomes find it impossible to pay by direct debit—the example interest rates are as follows. British Home Stores charges an APR of 29 per cent; Laura Ashley charges 30.7 per cent; River Island charges 29.9 per cent; Top Man charges 29.9 per cent.—"Top Man", but a top rate of interest—Wallis charges 30.9 per cent; and Allders charges 29.8 per cent. So it goes on.

The House of Commons Library made the following calculation in respect of Allders, which offers up to £2,000 credit on the day that one goes into the shop. If minimum payments are made on that maximum credit limit, the cost for just one year is £451. That is totally unacceptable. Total borrowing on credit and debt cards was estimated to have reached some £20 billion by December last year. The lack of transparency in respect of store cards that is unacceptable. The details are often hidden in the small print, so the consumer simply does not notice them when they take out the card. Here, I should mention the honourable exception of John Lewis, which charges only 13 per cent. That demonstrates how unacceptable the others are, and if John Lewis can do it at 13 per cent., so can they.

I want to add to the comments of the hon. Member for Edinburgh, North and Leith about the outrageous behaviour of debt management companies. The Consumers Association made a serious contribution to the debate by carrying out the investigation to which he referred. However, such companies prey on the fear and panic of people who are already having real difficulty paying off debt. As we have heard, those companies advertise in all sorts of media, including daytime television. Their aim is to capture people who, in fact, do have the sensible alternative route of their local citizens advice bureau. There are also other means of obtaining free advice—advice that is often much more effective in determining what best such people should do to address their debt problems. As others have done today, I pay tribute to the work of citizens advice bureaux throughout the country, and to the army of volunteers who do so much to help people in these desperate situations.

Mention has been made of the Office of Fair Trading standards, but the Consumers Association found that those standards had been breached by all the companies that it surveyed. Some of the breaches have already been referred to, but I want to pick out one or two examples. Companies often fail to carry out a proper assessment. Sometimes, assessments are made merely after a nine-minute telephone conversation. That is an inadequate basis on which to determine the scale of the problem and how best to resolve it.

There is a complete lack of transparency about the fees charged by debt management companies. Having to pay fees when one is already deep in debt simply makes the debt worse. The same applies to the penalties for terminating contracts early.

Companies do not deal with the priority debts. They put to one side debts such as council tax payments, rent arrears and court fines, which is extremely irresponsible. If those debts are not given priority, the person could lose their home or go to prison.

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Extraordinary means are used to sell products to people in desperate need. For example, Gregory Pennington Ltd. recommended that the Consumers Association investigator take out an account with the Royal Bank of Scotland, that had a £25 set-up fee and a charge of £8 a month thereafter, when a basic bank account would have been a much more sensible choice. The same company advised taking out payment protection insurance, a point to which the hon. Member for Tyne Bridge referred. The charge for the insurance was £7.50 per £100 of cover. That is completely unacceptable. Pressurised selling techniques were also used by another company, Baines and Ernst. Such companies play on the fact that people are desperate for help.

People are persuaded to consolidate their debts or to secure debts against their property. A range of debts may pose real problems for an individual, but if they end up with a loan secured on their house that they are unable to repay, they could lose the house. That can only make the situation worse.

I referred earlier to the Minister's comments in the debate last October. What is being done to ensure that the abuses are addressed? At present, we have an over-indebtedness taskforce; a Department of Trade and Industry working group on marketing techniques; a performance and innovation unit report, "Lending support: Modernising the Government's use of loans", which recommended a review of Government policy on over-indebtedness, so a further review was set up; a review of the Consumer Credit Act 1974; and the Cruickshank report. There is a lot of talk, but where is the action?We need proper controls in this sector, ideally by agreement and voluntary self-regulation, but if that is not possible, the Government must look into regulation.

10.33 am

Mr. Mark Prisk (Hertford and Stortford): I, too, congratulate the hon. Member for Tyne Bridge (Mr. Clelland), not only on securing the debate but, as he rightly said, on escaping from the Whips Office. This is his first outing since that event.

The hon. Gentleman brought out the issues at the heart of the debate by highlighting the general question of debt through personal stories. The key point is the link between low income, debt and poverty, which is why the title of the debate is so apt. Money is not the only thing that we should consider when we are trying to break the cycle of low income and poverty. We should also give people opportunities to help themselves and make their own way in the world. We need to bear that wider point in mind.

As well as providing immediate practical help, whether dealing with loan sharks or with other problems, we should think about the wider issues. We should try to create ladders of opportunity, especially in education, so that we can help people genuinely and permanently to break the cycle of poverty.

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At the heart of the Government's plans to assist people on low incomes are tax credits, which are not the only way of providing real help. In 1971, Keith Joseph introduced family income supplement with the express intention of boosting the incomes of people in low-paid jobs. In 1988, it was replaced by family credit, which by 1997 had provided more than £2 billion of support to families on the lowest incomes. The new Labour Government could have chosen to invest in that scheme but tried to introduce their own system of tax credits. The Public Accounts Committee has identified many of the problems of complexity and administrative cost.

The first problem that I have identified is low take-up by the very people whom the system is meant to help. The latest figures from the Child Poverty Action Group show that 600,000 low-income families are losing out on anything up to £1.4 billion a year. That represents 30 per cent. of those entitled to help, and, for families, that can mean anything up to £42 a week.

We should have realised how bad the figures were by the way in which the Government issued them. Late on 23 December—the eve of Christmas eve—the figures were quietly posted on the Inland Revenue's website. If it had not been for the prompt action of the CPAG and others, those figures might have been missed. That kind of behaviour, whether intentional or the result of incompetence, undermines public trust. I hope that the Minister will address that point when she replies.

The second problem with the tax credit system is that it can trap people in low-paid, part-time work when increased income from working longer does not cover the loss in benefits. Since the introduction of working families tax credit, just 9 per cent. of lone parents have been able to work longer. The Minister will say that the new child tax credit will raise the threshold before recipients lose out but does she recognise that such traps are inherent in the system and explain how the Government intend to deal with that?

Miss Begg : The hon. Gentleman must live in a different world. The Government measure that has helped to alleviate poverty more than any other is family tax credits. Many of my constituents have benefited greatly from making work pay for the first time and are far better off. The remit of the debate is how rapacious loan sharks take money from such families. That is where the problem lies, not with the Government giving families extra money, which is what tax credits do.

Mr. Prisk : The hon. Lady ignores the fact that one third of those entitled to the benefit are not helped and are still stuck in the trap.

The third problem with tax credits is their effect on the self-employed and their families because the system is inflexible and does not deal with income fluctuations. The average income of the self-employed is only two thirds of that of the rest of the work force. One example is farming, where the average income has dropped 70 per cent. in recent years, to just £10,000 per year. No one would suggest that farmers are not in need of help, but because their income fluctuates throughout the year and between years, farmers and farm workers—many of whom are also self-employed—find that the tax credit system does not work for them. Debates on poverty and low incomes often focus on the inner city but I hope that the Minister will

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take the opportunity to respond on rural poverty. It is not right that people who live in generally affluent areas in the countryside but who are on low incomes should be excluded. I am sure that the Financial Secretary will wish to refer to that point in her reply.

Many hon. Members have rightly mentioned debt and the link between low incomes and rising indebtedness. The figures on indebtedness make worrying reading. According to the Government's figures, UK consumers owe £151 billion in outstanding unsecured debt. The Bank of England has reported that household debt stands at 110 per cent. of annual disposable income and the Institute for Fiscal Studies has highlighted that a third of those on the lowest incomes are in debt, with the average amount owed being £3,337. Debt is rising in value, and drawing in many thousands more families. It is most acute for those struggling to make ends meet. The stories that the hon. Member for Tyne Bridge mentioned closely underline the problem.

In my constituency, we have some excellent citizens advice bureaux that provide a caring and professional service in tackling debt problems, and I echo the comments made by hon. Members about their excellent work. Nationally, the citizens advice bureaux reckon that they have seen new cases of problem debt worth more than £1.2 billion in the last 12 months. Of course, as hon. Members have pointed out, most people with debt problems are on below-average incomes.

One aspect of the problem—it has not yet been mentioned, but I would be interested to hear the Financial Secretary's view—is that half of all people on income support are trying to pay off loans not only to loan sharks but to the Government, in the form of the social fund. Indeed, some pressure groups have called for a reform of that fund. Perhaps in her reply, the Financial Secretary could tell us what plans the Government have to respond to those calls.

There is a clear need to provide improved consumer information and financial education. Can the Financial Secretary tell us what plans she has to improve financial information and advice for those on low incomes? What resources have the Government provided to assist the citizens advice bureaux with their role and does she envisage that that will increase? Will the resources provided by the Government target both urban and rural centres? Given that the Financial Services Authority, for which she is personally responsible, has an important part to play in consumer financial information, what discussions has she had with it to encourage it to form greater links with the citizens advice bureaux, nationally or locally?

The challenge of helping those who earn the least is one that has vexed Governments of all persuasions. Our shared aim must be to provide a genuine hand-up out of poverty to enable people to be independent and help them to avoid the traps of benefit dependency and prowling loan sharks. The Government's tax credit system is, sadly, too complicated and inhibiting to help many people; as I said, at least a third of the poorest families fail to claim the money to which they are entitled. Equally, the burden of debt is growing and it hurts the poorest most.

There is an urgent need for a comprehensive approach to helping people to tackle debts, while at the same time deterring millions of others from making the

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same mistakes. The Government have made great claims about their commitment to tackling those problems and I look forward to the Financial Secretary setting out her vision for the future and the Government's plans for answering the vital questions raised in this debate.

10.44 am

The Financial Secretary to the Treasury (Ruth Kelly) : I congratulate my hon. Friend the Member for Tyne Bridge (Mr. Clelland) on securing this important debate. He spoke with passion about the plight of his constituents and their experience of debt and poverty. I also pay tribute to my hon. Friend the Member for Leeds, West (Mr. Battle), who has long campaigned on these issues. I know that he was closely involved with Church Action on Poverty and I am pleased to see that his campaigning continues, so that we all remain aware of the issues faced by those who suffer from debt and low income.

I firmly believe that the approach that we take to low income, debt and poverty defines us as a society. It also says a lot about the Government themselves and the approach that they take. We inherited an extremely difficult situation, but we recognise that the problem needs to be tackled on many fronts.

First, we believe that high levels of employment are essential to combat poverty, and helping to secure decent family income is an essential part of our strategy. Secondly, we have to deliver excellent public services. Thirdly, we support parents so that they, in turn, can provide better support for their children. Fourthly, we have to harness the power and expertise of the voluntary and community sector so that people are enabled and empowered to help themselves. Finally, as many hon. Members have said today, we have to work to combat the problems of financial exclusion, debt, the associated menace of loan sharks and the threat that borrowing at exorbitant rates of interest presents to our most disadvantaged communities.

Before examining that issue in greater depth, as it has been raised most in the debate, let me say in response to the hon. Member for Hertford and Stortford (Mr. Prisk), who speaks for the Conservative party, that the key to the Government's strategy for reducing poverty is to ensure decent family incomes. Tax credits have played an enormous role in boosting family incomes, and it is disingenuous to say that, because take-up has not been 100 per cent., the Government have made no real effort to tackle poverty and that tax credits have not been immensely beneficial to those who claim them.

Mr. Prisk : Is not the fact that 600,000 people are not taking up those tax credits a serious problem?

Ruth Kelly : If the hon. Gentleman is specifically talking about the data on take-up so far in the public domain, I should point out that the only take-up data that we have relate to the first fiscal year for tax credits and show a take-up of 62 to 65 per cent., but that has risen steadily in the past six months to almost 70 per cent. The amount that is being claimed, rather than the number claiming, is higher still and has risen to up to 83 per cent. in the past six months. In fact, tax credits are having an impact and helping those who need it most.

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In the remaining time allowed to me, I want to concentrate on the points about debt and loan sharks that have been made by many hon. Members today. All hon. Members will sympathise with the problems that have been experienced. Indeed, we have been disturbed by the stories that we have heard. Those problems often result from unforeseen circumstances—unemployment, a new baby arriving or, perhaps, family break-up—that cause huge strains on individuals and families in certain neighbourhoods.

Part of the answer must lie in the work on loan sharks being undertaken by the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Welwyn Hatfield (Miss Johnson), and I shall convey to her directly the views that have been expressed today. She is determined to ensure that action is taken in a number of areas where vulnerable consumers may be at risk. To that end, on 30 January this year, she published her response to the second report of the taskforce on tackling over-indebtedness, which was set up to examine what measures are necessary to ensure responsible lending across the full range of products and lenders.

In her response, my hon. Friend identified her concern that the industry should follow the principles of responsible lending that have been set out. She outlined a number of ways in which that could be encouraged, including the importance of carrying out appropriate checks prior to making a loan. She and officials at the Department of Trade and Industry are talking to the industry about those measures.

In addition, the DTI is undertaking a major review of consumer credit legislation. The review is intended to deliver on the Government's manifesto commitment to improve protection against loan sharks, delivering a consumer credit regime that is relevant to the modern market. There have already been consultations on the Consumer Credit Act's financial limit, and on proposals for new rules on the early settlement of credit agreements, to achieve a fairer balance between lenders and borrowers. The hon. Member for North Norfolk (Norman Lamb) specifically mentioned the difficulty of comparing interest rates being charged on store cards and credit cards. The DTI review will specifically consider how such comparisons can be made much easier to understand, and how more clarity can be introduced.

Mr. Battle : Will my hon. Friend assure me that the Government have not ruled out capping interest rates? That has happened in Europe—in France, Germany and elsewhere—where the Crazy Georges have been driven out.

Ruth Kelly : On 30 January, the DTI launched a consultation specifically on strengthening the consumer credit licensing regime, and it will issue a consultation on extortionate credit later in spring. One of the issues that will be considered in that consultation is whether there should be a cap on the interest rate charged. I encourage hon. Members to feed their views directly into the DTI during that consultation period, as, clearly, that will be important in influencing the outcome of the reviews.

My hon. Friend the Member for Tyne Bridge raised the sale of payment protection insurance and how that is marketed by banks, sometimes in inappropriate

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circumstances, adding to the financial difficulty that some people have in servicing their loans. That is another issue that the DTI has looked at. I believe that it has already approached the FSA to ask it to consider that issue as part of its consultation on insurance selling and administration. If my hon. Friend wants to contact the FSA directly to make his case again, I suggest that that would be very valuable.

Part of the answer to all these questions must lie in much better financial education, as well as working directly with the financial services industry to end financial exclusion. Many hon. Members referred to the role that credit unions can play in that regard. As not-for-profit organisations, credit unions are run for the benefit of their members, with their lending interest rates set by statute at no more than 1 per cent. a month. Their ability to offer savings and affordable credit have made them particularly attractive to those on low or variable incomes. In particular, their ethos of thrift and self-reliance, together with their aims of member education and training, means that they are well placed to extend the availability of basic financial services to parts of our society that are often ignored by other financial providers.

I am pleased that the credit union movement has been growing although it remains much smaller than those in some other countries, such as Ireland. In the five years from 1995 to 2000, the number of credit unions grew by about 30 per cent. The Government are very keen to support the growth of the credit union movement, and we have worked hard to encourage an environment in which it is easier for credit unions to grow. The Financial Services Authority is now the authority that is legally responsible for regulation of credit unions. Moving regulation to the FSA and the new regime have produced clear benefits for credit union members, giving them greater financial independence and access to prescribed complaints arrangements, including, for example, the financial ombudsman service. That should help to build confidence among prospective savers with credit unions.

The new regulatory regime is one of a number of changes that we have introduced that will benefit the credit union movement. We are also close to implementing further changes to credit union legislation, which we have introduced through a regulatory reform order. The changes should enable credit unions to compete more effectively with other credit institutions for deposits, and facilitate the further growth of the movement. Those and other legislative reforms will improve the value of the services that credit unions can offer their members and will help to protect some of the most vulnerable members of society from the problems of debt, exorbitant interest and financial exclusion.

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We never shut our door to suggestions on how to encourage the growth of credit unions or other alternative sources of financial services. We keep an open mind on how we can encourage diversity in the sector and work to combat financial exclusion more effectively.

An initiative that has so far been successful has been our work with the banks on the introduction of basic bank accounts. That issue was raised today. I am pleased to say that every high street bank now offers a basic bank account. When the universal bank is launched with the Post Office later in the spring, all benefit recipients will have the opportunity of using a basic bank account. That will offer them the advantage of no longer incurring a penalty, or a higher charge, because they do not pay utility bills, for example, by direct debit. Such accounts are also attractive to people on low incomes because they protect savers from falling into an overdraft. They are attractive to people who have not had access to financial services before.

The social fund was mentioned. It clearly has a role in helping people to overcome especially difficult financial circumstances. We listen to concerns about the social fund and the way in which it operates. That is why, from April, £90 million will be added to the budget of the discretionary social fund over the three years to 2005–06. The maximum payment for the fixed element of the funeral grant will rise from £600 to £700. Combined with other administrative improvements, the investment will enhance the fund's ability to help those on low incomes to manage their finances. However, the door to suggestions is not closed. The Government are considering, and will continue to consider, the case for future reform of the social fund, to improve its ability to help those on low incomes.

Like other hon. Members, I pay tribute to the work of citizens advice bureaux in providing debt advice. The hon. Member for Hertford and Stortford asked what action the Government were taking to build on that work. The Treasury is working closely with the FSA to see whether we can build on the debt advice service in citizens advice bureaux and other voluntary and commercial institutions and offer a broader financial advice service that is especially accessible to those on low and middle incomes. That work continues and I hope that it will be successful.

The Treasury is also working specifically on financial education and advice, joining up the work that is being done across Government Departments, to ensure that we have appropriately expressed and clearly defined objectives, and that we bring all the work of financial education and literacy together. We must have a joined-up approach to these issues, which are central to our objectives.

Mr. Deputy Speaker : Order. We must now turn our attention to the next topic.

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