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Mr. David Amess (Southend, West) (Con): Ridiculous!

James Duddridge: Absolutely. My hon. Friend is entirely right. To be frank, people in Southend laugh at that suggestion. Southend has new build and infill building, alongside the many houses that have been converted into flats.

There are arguably too many people coming to Southend because it is such a great place. The lack of recognition of the real population figure has lead to lower funding based on an artificially low population figure. I was extremely impressed by the Minister's attitude to this largely non-party political matter. It is clear that when there is a genuine problem, that Minister in particular is ready to listen, and I believe that he will be ready to act if the case is proven. I am looking forward to the more detailed discussions on the matter that are planned for the next few weeks.

I would hate to let my maiden speech descend into a shopping list for funding, but there is also a real problem with the cliff slipping into the sea. This is not an aesthetic problem; it could threaten large numbers of houses, as well as our main commercial and tourist centres. The cost of resolving this problem is some £40 million, although we have been unable to find the appropriate funding. While money seems to be available for high profile capital projects across the country, there appears to be insufficient money either for large scale repair works or to support revenue expenditure.

I come now to the Consumer Credit Bill. I welcome the Bill from the broad consumer protection perspective, but I wish to raise two points of concern, both of which have already been mentioned today. My first is the excessive burden being placed on the financial services industry. My second, which has been raised by many hon. Members, especially when the Bill was last in Committee, is the lack of definition of an unfair relationship between a creditor and a debtor, which has caused all kinds of problems and will continue to do so unless we do something about it in Committee.
 
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I have seen at first hand the effects of regulation on the financial services industry, both in the UK and overseas. I spent 10 years of my life working for a British bank. I also worked in the unit trust industry at the time of the abolition of personal equity plans and tax exempt special savings accounts and the introduction of individual savings accounts. I was also responsible for regulatory changes in another country. In both cases, the legislative changes and the projects that followed prevented us from concentrating on our customers' needs, which is fundamental, and from providing value for shareholders, which is in the long-term interest.

It was with that in mind that I read the full regulatory impact assessment referred to in the explanatory notes to the Bill. No one can criticise the document for its lack of detail, but I found that it fell well short of the mark in business reality. Furthermore, I was concerned, when speaking to some in the industry, about the speed at which the consultation was done. Numbers have been placed on the regulatory costs, but I do not believe that those figures are a fair reflection.

My second point involves an example of where the costs of the regulation cannot be accounted for because the regulation itself is unclear. I am referring to the impact of the lack of a clear definition in the unfair relationships test. I trust that the House will forgive my bluntness, but it appears to me that the definition has been fudged. The buck has been passed to the courts, and in my view that is very dangerous. The Bill adds the following to the definition of something that is unfair:

"any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement)."

It strikes me that that could cover just about anything.

The right hon. Member for Leeds, West (John Battle) spoke, in his very thoughtful speech, about whether we should go for openness or narrowness. I would go for narrowness, but the difference between openness and narrowness is not the point. The point is clarity of definition, and I do not believe that that should be for the courts to decide.

If we leave it to the court, that is particularly invidious given that the Bill states that that test will be retrospective. It seems wrong to me, as a new Member of Parliament, that new legislation will cover old contractual relationships. Certainly, the problems of retrospective legislation will increase the cost of syndicated loans. Purchasers of a syndicated loan book will not know whether they are purchasing an unfair loan book, which has a number of implications: it would increase legal costs, reduce the value of the loan book, and ultimately and perhaps most importantly, make the cost of lending to the average consumer higher, which is not an intended consequence of this legislation.

Finally, in my maiden speech, may I say that it is a privilege and an honour to serve in this great House?

4 pm

Adam Price (Carmarthen, East and Dinefwr) (PC): May I also pay tribute to the hon. Members for Tunbridge Wells (Greg Clark), for Basingstoke (Mrs. Miller) and for Rochford and Southend, East (James Duddridge) for their beautifully delivered paeans to their respective constituencies, parts of England of which, I must admit, I was hitherto deficiently
 
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knowledgeable. My only regret is that I am unlikely to get an invitation to address a branch meeting of my party in those areas, although I will take up the kind offer of the hon. Member for Rochford and Southend, East of possibly hosting Plaid Cymru's annual conference—I am not sure what the steering committee will say, but hope springs eternal.

Most of us would agree that the Bill is long overdue and much needed, and we would all pay tribute to the Minister, to whose enormous personal credit it is that the Bill has returned to the House at such an early stage. Millions of families are living on the edge of a financial precipice, and more and more fail to keep up with their debt repayments, driving them further into difficulty. We heard the hon. Member for North Norfolk (Norman Lamb) referring to the data from some of the clearing banks about bad debts. It was reported yesterday that London Scottish bank, which specialises in lending to customers with weak credit ratings, has nearly doubled its provision for bad and doubtful debts. Clearly, the phenomenon is widespread.

As other Members have mentioned, it is important to understand the wider context, as the problem of over-indebtedness has deep social roots. It is a cultural as much as a social and economic phenomenon, and is an element of the competitive consumption and hyper-consumption which is part of modern culture and society, which exists at all levels of income, and which percolates down to those on lower incomes. That is why it is right and proper for Government to intervene. Such an endemic problem, with such deep social and cultural roots, needs to have a societal response, and only a Government can provide the framework to get to grips with that. It is therefore absolutely right to introduce this Bill, whatever the Monetary Policy Committee has done with regard to interest rates this afternoon. I do not know whether it has added further to the pain that we all suffer from time to time. Clearly, however, the problem of debt is deeply rooted, and it is right for the Government to address it.

Other Members have referred to some of the figures, and the National Association of Citizens Advice Bureaux has reported a 74 per cent. increase during the past seven years in the number of debt cases with which it deals. Yesterday, the Department published its own survey, conducted by MORI, on over-indebtedness. The Minister said that it provided some comfort because it    showed that the percentage who find debts unmanageable is still relatively small, although that is subjective, as people were reporting their own feelings—the objective view of their indebtedness might be somewhat different.

Nine per cent. said that they spent more than half their incomes on total credit repayments—almost one in 10. That is an incredible figure. Other parts of the survey also struck me as worrying, such as the finding that 8 per cent.—a different 8 per cent.—spent more than a quarter of their incomes on unsecured credit repayments. Those are historic, unheard of levels. We are talking about a small proportion of people, but a proportion that is spending serious quantities of disposable income on credit repayment.

The most recent family spending report from the Office for National Statistics reveals that the problem extends across the board. The average British household now spends £592 a week. Its income is £570. So the average
 
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British family are living beyond their means—admittedly by only about £20 a week, but of course that is itself an average. At one end of the spectrum, there are serious problems with unsustainable consumer borrowing.

It is obviously right for the Government to act quickly. The key problem with their proposals relates to the issue of rights and responsibilities, that mantra to which the Prime Minister likes to refer. The Bill gives consumers important new rights to apply to the courts or the Financial Ombudsman Service, or use the alternative disputes procedure, and to ask those authorities to consider whether a lender has acted unfairly. It does not, however, place any new duty on lenders to consider borrowers' means properly before granting loans. Some of us feel that the Government have not got the balance entirely right at this stage.

A wonderful parallel is the Consumer Credit Bill tabled yesterday in the South African Parliament by the South African Department of Trade and Industry. I am sure that there are very good relationships between the two Parliaments; if there are not, no doubt the former Chief Secretary to the Treasury will be able to facilitate them. The Bill, which was preceded by a draft version, proposes a maximum rate of interest and fees. Almost every country in the world with an interest rate cap is aware of the difficulty—the lender could get around it by introducing charges through the back door—and allows for it in legislation by rolling together interest rates and other charges. The South African Bill also imposes a maximum limit on consumer liability to prevent lenders from getting around an interest rate cap by extending the term of a loan.

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