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Mr. Sutcliffe: I am interested in what the hon. Gentleman is saying about the South African experience. Our worry is that a cap will prevent those at the lower end from being able to borrow. I realise that they will have to pay higher charges, but that is connected with their credit rating. What has the effect been in South Africa? We should bear in mind that the UK market is one of the most complex in the world.

Adam Price: At this stage it is only a proposal, so there has been no experience in the South African market. I think it fair to say, though, that the South African financial services sector is slightly more dysfunctional than that in the UK. I must be careful about what I say, but I think that part of the problem is due to the devolving of financial service regulation to the provinces. Each province takes a slightly different approach, so the situation in South Africa is slightly complex. But in the light of the experience of most other countries in which an interest rate cap has been introduced, I challenge the research that suggests that doing so deepens financial exclusion.

For example, research from Germany suggests that the opposite is true. There is a statutory responsibility in Germany to measure financial exclusion, which was introduced when the interest rate cap was introduced precisely because of the fear of financial exclusion. However, such exclusion has not happened; indeed, the opposite has occurred.

Mike Penning (Hemel Hempstead) (Con): I used to live in Germany, and the problem with capping is that it
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pushes the problem underground; such people cannot get credit because interest rates are set according to the liability—to the risk. I understand the hon. Gentleman's argument, but setting a cap risks pushing such people into the black market, which is much more dangerous than the Minister's proposal.

Adam Price: I have some difficultly with that argument, although I am sure that that will happen to some extent. But if extortionate lending exists, it surely does not really matter whether it is legal or illegal. Are we really saying, "Such people are going to be exploited anyway, so they might as well be exploited where we can see them"? Surely the point is to try to minimise any exploitative or extortionate lending. By extension, one could advance the same argument in respect of the unfairness test, which, if it works, prevents the instances of very short-term loans with APRs of 1000 per cent. that we have witnessed in the sub-optimum market. We should respond by trying to introduce positive measures—by providing other means for people on very low incomes to access short-term credit, including credit unions and a reformed social fund. The hon. Gentleman is doubtless right to say that such things will happen, but we need to introduce other measures to prevent them from doing so.

The other interesting aspect of the South African Bill is the prohibition of reckless lending. The South African DTI is essentially placing a duty on the lender to meet his responsibilities, and to secure information about the borrower's current financial situation in advance of making a decision on the loan. Of course, "recklessness" has a well-rehearsed meaning in English common law, which the South African Bill sets out. It also introduces a new definition of over-indebtedness, and enables a new regulator to set the terms of repayment when a borrower has got into difficulty and needs some help getting out of it. So there are a number of interesting ideas in that Bill that the Minister might want to have a word with his South African colleagues about.

In modern politics, consensus is meant to be a universal good, but I must admit that when Front Benchers of all three main parties speak with one voice, a shiver goes down my spine. The more heretical voices that we have, the better. I am glad to hear that there are one or two such voices on the Labour Benches, and I certainly join them. There are three things that I will certainly push for during the later stages of the Bill's consideration. The first is the introduction of a responsible lending test, or at least the placing of a duty on the lender to take account of the borrower's ability to repay. That also gives rise to the question of data sharing, which the hon. Member for North Norfolk (Norman Lamb) discussed.

Secondly, I should particularly like the Bill to address default charges. I am not completely clear about the current legal position of default charges. I was under the impression that it was already illegal, or certainly against the banking code, for default charges to include any profit margin.

Norman Lamb: That very point is being investigated by the OFT and referred to the Competition Commission.
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Adam Price: It is certainly important to consider that issue because of the possibility of a perverse incentive for lenders to drive their customers further and further into debt, as we have heard—provided, of course, that they can make some repayment. Figures produced by Debt on our Doorstep suggest that banks made £3 billion last year from default charges, and we have all been on the receiving end of them from time to time. Certainly, enshrining the principle in law that a default charge can only represent the additional cost involved to the bank and ensuring that such things are transparent is worth considering.

Thirdly, the Bill should cover my much-cherished interest rate cap. The Minister very charitably said last time that he would look at that again, and now is a perfect opportunity for him to do so. Despite his assurances, we do not want to wait another 30 years to deal with the problem. Of course, we have taken six years to get from when the OFT pointed out the failings of the existing legislation on extortionate lending—as far back as 1999—to where we are now. Surely, it would be better to introduce an enabling clause to allow the Minister to provide interest rate caps through secondary legislation, as he proposed to do with other measures under the Bill, if only because, as has been suggested, such caps would constitute draconian measures to focus the attention of those people in the industry who perhaps need to be educated about their corporate social responsibility.

I was surprised to hear the Liberal Democrats citing Government evidence. After the dodgy dossiers that we have had from the Government, I would be careful about believing every unqualified thing that they produce in support of their policies. There is certainly fairly good reason to doubt some of the conclusions and data in the Policis report, and we have discussed that previously. Perhaps it would be possible for the Government to look again at some of the shortcomings of that research, certainly in relation to Germany.

Mr. Sutcliffe: The hon. Gentleman may remember that I said that, if any other evidence was produced in addition to ours, we would consider it. I am still waiting for it.

Adam Price: I shall review my staffing budget to find out whether it is possible to look into that, but there certainly seems to be some support among Labour Members for the idea of creating a reserve power—a Henry VIII clause—to introduce secondary legislation whereby the Minister could provide interest rate caps. Frankly, I have my doubts about some of the problems that have been raised by the Government, principally because such caps seem to work perfectly well in a wide range of consumer credit markets across the world. Interest rate caps are not the only answer to the problems and challenges that we face, but the Government should have them in reserve, as part of their armoury.

4.19 pm

Mr. David Gauke (South-West Hertfordshire) (Con): Thank you, Mr. Deputy Speaker, for allowing me the opportunity to make my maiden speech. First, may I congratulate my colleagues who have already spoken so well earlier in the debate? My hon. Friend the Member
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for Rochford and Southend, East (James Duddridge) spoke with passion and eloquence worthy of his distinguished predecessor, and I am sure that he will continue in that fine tradition. My hon. Friend the Member for Basingstoke (Mrs. Miller) spoke extremely eloquently. Indeed, another of my hon. Friends referred to her inner steel. I wonder, in fact, whether we have another "Iron Lady" on our hands. As could be expected, my hon. Friend the Member for Tunbridge Wells (Greg Clark) spoke with great intelligence and passion. He is widely seen as one of the brightest minds within the Conservative party—indeed, something of an intellectual—and I hope that it is not an impediment to his career.

It is a great pleasure to pay tribute to my predecessor, Richard Page, who represented my constituency of South-West Hertfordshire for more than 25 years. He was renowned within South-West Hertfordshire for his diligence, energy, enthusiasm and good humour. He was a very effective and popular constituency MP. Indeed, on a personal note, I can say that he has helped me enormously over the past 18 months or so since I was selected to fight this seat. He has the rare but not unique distinction of having been elected to the House for two different seats both in by-elections—in Workington in 1976 and Hertfordshire, South-West in 1979. A hit rate of two by-election victories in three years is rather impressive for one individual and compares rather favourably with the aggregate total for my party over a number of years. We will not dwell on that.

Richard brought to the House his enormous business experience. He was a very successful business man in his own right and this was perhaps put to best use as a Minister responsible for small businesses in the 1990s. His success as a business man also permitted him to be in the position to enjoy his hobby of horse racing to a much greater extent in his capacity as a racehorse owner. Indeed, his knowledge of horse racing was also valuable to the House in one or two capacities.

I am aware, however, of one occasion when rather unexpectedly and uncharacteristically Richard missed a vote. He was subsequently asked to explain the reason for this, and he said that one of his horses had fallen into his swimming pool. Whatever happens in my career and whatever problems I may cause my hon. Friends in the Whips Office, I assure them that I will not miss any votes due to one of my racehorses falling into my swimming pool. However, Richard will be an enormously hard act to follow. Certainly, over the past few months, I have met many, many people in South-West Hertfordshire who have been very grateful for all that he has done for them as their MP.

The constituency of South-West Hertfordshire has changed greatly since Richard was first elected in 1979. It has retreated from its eastern boundaries, but advanced to the north, taking in the fine market towns of Berkhamsted and Tring. With all due respect to those areas no longer in the constituency of South-West Hertfordshire and that are now in the constituencies of Hertsmere and Watford, the changes have done much for both the beauty and diversity of my constituency, if not its compactness.

The north of the constituency falls within the splendidly named borough of Dacorum, which is the Latin translation of the Anglo-Saxon word for Danish. The borough contains Tring and Berkhamsted and the
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villages of Wiggington, Aldbury, Long Marston and Wilstone, as well as the town of Bovingdon and the villages of Chipperfield and Flaunden. They are all splendid places and I am delighted to represent them.

Perhaps the most significant historical event to fall within the area took place at Berkhamsted in 1066 when, following his victory at the battle of Hastings, William the Conqueror continued to advance through the country until the Anglo-Saxon nobles finally sued for peace at the site that is now Berkhamsted castle and surrendered to him, perhaps establishing the tradition of diplomatic surrender to the French that some might say continues to this day.

Towards the south of the constituency we fall within the Three Rivers district, the rivers being the Colne and its two tributaries, the Gade and the Chess, all of which meet in Rickmansworth. The area contains what could be described as the Metroland so beloved by John Betjeman. It includes the town of Rickmansworth, the village of Croxley Green, the area of the Moor Park estate and Chorleywood, where I am lucky to live. It also contains beautiful countryside, again on the edge of the Chilterns, and the pretty village of Sarratt. The area also contains, by way of diversity, the ex-Greater London council overspill estate of South Oxhey. We have heard from my hon. Friend the Member for Tunbridge Wells how otherwise affluent areas have pockets of poverty. That is certainly the case in my constituency and South Oxhey is one such pocket in which there are real problems with poverty.

Politically, South-West Hertfordshire has been somewhat monotonous because, during its 55 years of existence, I am delighted to say that it has returned Conservative Members—first, Sir Gilbert Longden, then Geoffrey Dodsworth and then Richard Page. However, Labour Members might be interested to know about the area's contribution to this country's history of radicalism. In the 1840s, the Chartist, Feargus O'Connor, established a community in the area of Heronsgate, near Chorleywood, which he rather immodestly renamed O'Connorsville. The community contained 35 workers' cottages and there was an enormous lottery in which about 100,000 people participated, with the lucky 35 families moving to O'Connorsville. The community was supposed to be a workers' paradise based on the principles of socialism and temperance, but my hon. Friends will not be surprised to learn that as so often happens with utopian ideals, it unfortunately all ended rather badly and the 35 families left rather desolate and hungry five years later. It should be pointed out that during those five years, a public house was established, which was splendidly named "The Land of Liberty, Peace and Plenty", to which inmates could escape for a glass or two. I am glad to say that that still stands and is an excellent public house.

There is much that is good about South-West Hertfordshire and I am pleased and deeply honoured to represent it, but it has its problems. It has problems with crime and antisocial behaviour and I know of serious incidents over the past few weeks in South Oxhey, Croxley and Chorleywood. We have high-value houses, but that means that we have a worrying problem with affordable homes. However, we would strongly resist the proposal made by some of building all over the green
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belt. My hon. Friend the Member for Basingstoke rightly pointed out the importance of protecting our communities and the green belt.

We have good and popular schools, but they are consequently often over-subscribed, which means that local children are unable to attend local schools. I shall certainly campaign to represent their interests strongly. There is a threat of cuts to our hospital services and in the past few days we have learned more about the financial position of our local hospital trust. I know that I speak for several colleagues when I say that I have great concern about the future of health service provision in Hertfordshire—we certainly have our worries in South-West Hertfordshire.

I shall turn briefly to the Bill. Several hon. Members have spoken passionately and eloquently about the worries that we all have about loan sharks and the exploitation of the weak and vulnerable. There is cross-party agreement on the basic thrust of the Bill, which I certainly share. Much has been said today about lawyers. I, too, was a lawyer, although thankfully I never advised a great deal on the detail of the Consumer Credit Act 1974. I use the word "thankfully" because that Act is notoriously complex and difficult to get one's head round. However, I occasionally advised on the one simple aspect of the Act: the £25,000 limit, which means that most of the Act's provisions do not apply to loans greater than that amount on the grounds that the principles of caveat emptor should apply to anyone who enters into such a loan.

I am conscious that that £25,000 limit is going in principle, although I note that there are two important exemptions. The first is loans to individuals for business purposes. That is a highly valuable service. I have on a number of occasions advised firms that want to perform that task and they would not want to go through the process of licensing. That is an important consideration. The second exemption relates to high net worth individuals, which I understand is a new concept with regard to consumer credit. I am sceptical about how well that provision will work. Having given advice many times on the Financial Services and Markets Act 2000 and its financial promotions regime, which has a similar exemption for high net worth individuals, I know that the exemption has not worked well over the past three years. In certain limited circumstances, it is being reformed in the context of the 2000 Act, and I shall be interested to see how that works out.

Although I accept the reason why the £25,000 limit is going, it is a pity, if only for the sake of the poor lawyer who does not have a detailed understanding of the 1974 Act, because it will make it even more complex for us to advise on. However, I appreciate that claiming sympathy for lawyers is not a particularly useful activity in the House. [Hon. Members: "Hear, hear."]

On a broader point, much though I appreciate the direction that the Bill takes and although there is much agreement between parties, we must always be careful about overregulating. The Prime Minister made a similar point when he referred to the Financial Services Authority in a speech only last week. Regulation can take us so far, but only so far. To outline a personal philosophy, which broadens the point even more, Governments cannot solve every problem. What can solve problems—what is good for society—is giving more power to individuals who have the energy and
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enterprise to go back to the name of the public house from the mid-19th century to obtain a land of liberty, peace and plenty.

I thank you, Madam Deputy Speaker, for allowing me to speak, and I thank the House for its indulgence in listening.

4.33 pm

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