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Mr. O'Brien: I am pleased that the hon. Gentleman asked that question, as I take a close interest in that matter and shall deal with it almost immediately. Financial literacy education, as against numeracy, is vital not only as a safeguard against debt but also for the competitiveness, enterprise and entrepreneurial culture of our country.
Why was the Bill not included in the 2003 Queen's speech? There is real concern that the savings ratio has fallen by nearly half since 1997, and now compares unfavourably with those of other advanced countries. While our savings ratio is 5.5 per cent., according to the OECD the EU average is 12 per cent. The Chancellor has seen it fit to take £5 billion a year out of pension funds, supported by Parliament with its Labour majority. Labour's first Minister with responsibility for social security, the right hon. Member for Birkenhead (Mr. Field), said:
: If the hon. Gentleman accepts that total household consumer indebtedness has reached £1 trillionhe seems to make something of thatwill he acknowledge that total household assets have exceeded £6 trillion under this Government?
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Mr. O'Brien: I am happy to acknowledge the balance of the asset calculation, but that does not relate to cash. Savings are what matter, so I was making my arguments in the context of the savings ratio, which has suffered such a dire collapse. That is especially important when we consider its relationship with debt.
According to the Bank of England, consumer credit is running at about £1.5 billion a month. Borrowing increases by 15 per cent. every year and the average household borrows 140 per cent. more than its combined income. The Bank of England goes on to state:
The Conservative party takes the issue of consumer debt seriously, because unmanageable debt robs people of their security in the future and their independence from the state. That explains why we have set up a commission chaired by Lord Griffiths of Fforestfach to investigate all aspects of household debt. On Tuesday, the shadow Chancellor published six options to restore the savings culture, which is essential if people are to have security for the future and independence from the state.
We shall support the Bill, so it will not be we who prevent its safe passage through the House. Nevertheless, we are committed to giving it proper parliamentary scrutiny because it lacks adequate detail at present, which may, as a result, have unintended and adverse consequences for the industry and, ultimately, for consumers. The problems of indebtedness, which relate to a sophisticated and complex credit market and, increasingly, equally sophisticated and complex consumer demand, place a duty on the Government to supply citizens with adequate information, protection and education. That addresses the point made by the hon. Member for Rhondda.
Gregory Barker (Bexhill and Battle) (Con): Is my hon. Friend aware that such is the rate of spiralling household debt that in the time he has been addressing the House, household debt in Great Britain will have risen by about £10 million?
Mr. O'Brien: Quite clearly, the sooner I sit down the better. I am grateful to my hon. Friend because that brings home to us how real the problem is. A proportion of that £10 millionsomething in the order of 10 per cent.will be debt that it would have been wiser not to incur, which will inevitably put people in stressful circumstances. Some £1 million of debt will have been raised in the past half hour and that will cause untold stress, mayhem and perhaps tragedy, as we heard from the Minister. We should not lose sight of the gravity of the debate.
I return to my point about education, because we could make a positive contribution to financial literacy. Supply and demand are sophisticated concepts. The 2004 "Fair, Clear and Competitive" White Paper noted that
MBNA is a significant employer of my constituents as its UK headquarters is based in the city of Chester. I am visiting it next week to discuss with it all aspects of the Bill. Additionally and importantly, I shall discuss its ongoing commitment over several years to a big issue that is markedly absentperhaps understandablyfrom the Bill: the provision of expert people, time and resources for the education of children in our schools in financial literacy to give them the basic levels of understanding to equip them to go out into the world and handle money. Of course, student debt is now heaped on people at a young age, so such a scheme will enable them to handle that responsibly and with understanding. I pay tribute to MBNA for the exemplary work that it already does to lead that field in Cheshire.
Anyone who has been in business knows that any investment in the education of a business's consumer market and those who will enter that market is a proper investment. The industry thus has a real responsibility to make such provision. Any hon. Member who has been a teacher will know that a teacher seldom wakes up in the morning and dashes to school to teach children about money. Teachers want to teach history, English and maths, so we need the extended resources to come from the industry itself. I suggest that we could add value to the Bill by considering such a programme, so I urge the Government to consider that seriously.
The Government's attitude to excessive and irresponsible borrowing is not an example that the citizens of this country should follow, especially the young. I hope that they have not left it too late to do too little. However, the Bill is well intentioned and I hope that the detail will prove that my last statement was not justified. We shall have to wait for the Committee to see that detail, but it would have been helpful to see it now.
Mr. John McFall (Dumbarton) (Lab/Co-op): I give a warm welcome to a long overdue Bill, because the current legislation on the statute book is not fit for purpose. I thank the Minister for his welcome appearances before the Select Committee on the Treasury over the past few years in which we have investigated the matter.
I hope for unanimity in the House on the Bill today because surely there can be little dispute about the key issues. The Bill will enhance consumer rights and redress, and ensure that the test of extortionate credit is replaced with an unfairness test. The need for alternative dispute resolution has been mentioned in the context of the Meadows case in Liverpool, but given that a case that started with a £5,000 debt rising to £385,000 took 14 years to go through the courts, we need a mechanism to take the matter away from the courts so that such cases can be settled speedily. The Bill will improve the regulation of the consumer credit business because the licensing scheme will be strengthened. I think that all hon. Members hope that the Bill will allow us to tackle the problem of loan sharks, which we have all been banging on about for many years. The Bill will ensure that there is more appropriate regulation when there is an extension of protection to all consumer credit by abolishing the financial limit.
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The discussions that members of the Treasury Committee have held with witnesses showed that there was a general welcome for the Bill. For example, Ian Mullen of the British Bankers Association told me through correspondence that the timing was right and the Bill was drafted sensibly. Sandra Quinn of the Association for Payment Clearing Services said that the Bill would make transparency and marketing much better. John Vickers of the Office of Fair Trading, who has appeared before the Committee to give evidence about the matter, said that the Bill would ensure that credit regulations were relevant to today's growing market.
The Treasury Committee started its inquiry on the matter several years ago with twin objectives: transparency and a desire to ensure that the market was competitive. Those have been recurring themes since we first read Don Cruickshank's report on banking services. The Committee has been unanimous on that and, indeed, an official Opposition member of it recommended the Cruickshank report so that we could examine the matter in greater detail. We found a market in which the consumer was confronted by complex credit agreements, charging methods, credit cards and other unsecured loan products that often had opaque and ambiguous terms and conditions. We concluded that only when the consumer information is transparent and there are good, fair products will the market be truly competitive.
The Treasury Committee's concerns were aroused when we had a group of chief executives before us a number of years ago. When we asked how to calculate interest rates, one of them replied, "You need a bit of calculus." So we went to the university of Cambridge, to the deputy director of the Isaac Newton Institute for Mathematical Sciences. We gave him a Barclaycard with a £1,000 debt on it. After a whole afternoon's work, this esteemed mathematician sent us back a six-page document on how to calculate interest rates. It was beyond me, and I am sure that it would be beyond everyone in the House to understand how the interest rates were calculated.
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