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Sarah McCarthy-Fry (Portsmouth, North) (Lab): I congratulate the right hon. and learned Member for Kensington and Chelsea (Sir Malcolm Rifkind) on his success in the ballot. I sympathise with his discomfort in speaking from the Back Benches. I too am speaking from the Back Benches, but then I know no different.

Perhaps the right hon. and learned Gentleman should ask himself why he was so summarily deprived of the comfort of the Front Bench, and why he spent eight years out of Parliament. The reason is the Conservative Government's mismanagement of the economy, the shocking poverty in which our poorest pensioners were left after 18 years of Tory government and the perception that the Conservatives were interested only in the better off, not the lower paid, the disabled or pensioners who had only the state pension to live on. The Bill is laudable for his supposed aim of introducing flexibility and simplicity, but I fear that while its flexibility may assist those who are financially literate, it does not address the needs of those who face financial exclusion.

Mr. Tobias Ellwood (Bournemouth, East) (Con): Is the hon. Lady suggesting that the current state of our pension systems is due to the actions of the last Tory Government? That is preposterous. The system has been ruined because of the present Government, not the last Tory Government. We handed over a very good system in 1997; it is now in an utter mess.

Sarah McCarthy-Fry: The pensioners who were living in poverty after 18 years—the poorest pensioners, having to live on the state pension—would not agree with the hon. Gentleman.

Mr. Mark Harper (Forest of Dean) (Con): May I support my hon. Friend the Member for Bournemouth, East (Mr. Ellwood)? The right hon. Member for Birkenhead (Mr. Field) said

Sarah McCarthy-Fry: We need to return to the point about who the pension provisions were for. Let me repeat that the millions of pensioners living in poverty, having to live on just £69 a week, would not consider themselves to have a very strong pension provision.

Ms Angela C. Smith (Sheffield, Hillsborough) (Lab): Many retired steelworkers in my constituency are now
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in the awful position of being spiritually broken by the destruction of 30 years of pension savings by employers who raided pension funds. Does my hon. Friend agree that it was this Government who did something about that awful situation?

Sarah McCarthy-Fry: Of course I entirely agree with my hon. Friend.

Andrew Gwynne (Denton and Reddish) (Lab): Did not many people find that they have been mis-sold private pensions? That too is something that this Government have started to tackle.

Sarah McCarthy-Fry: Again, I entirely agree.

Mr. Brian Binley (Northampton, South) (Con): Will the hon. Lady give way?

Sarah McCarthy-Fry: Yes.

Mr. Deputy Speaker: Order. If we are to retain some order in the debate, the hon. Member for Portsmouth, North (Sarah McCarthy-Fry) should be given a chance to finish her reply to the last intervention before another tumbles in upon it.

Mr. Binley: My sincere apologies, Mr. Deputy Speaker.

Sarah McCarthy-Fry: Thank you, Mr Deputy Speaker.

I agree with my hon. Friend the Member for Denton and Reddish (Andrew Gwynne). Many people were mid-sold pensions and are having to find their way through their difficulties, and it is this Labour Government who have helped them to do that.

I have been accepting interventions because I was advised, as a new Member, that it was very bad form not to accept them. I now give way to the hon. Member for Northampton, South (Mr. Binley).

Mr. Binley: I thank the hon. Lady for her kindness. I had hoped, however, that the debate would not descend into party-political point-scoring. I honestly feel that it is not helpful.

Speaking as a secondary modern school boy who left school at 15 and has all the classical working-class attributes, I consider the hon. Lady's remarks to be particularly unhelpful to those who did work for a living. If she wants to get into point scoring, will she tell me what good levying £5 billion-worth of tax for the last eight years has done for any pensioner in this country?

Sarah McCarthy-Fry: Pensioners have benefited greatly from the strong economy that our Chancellor has delivered in the past eight years, and which certainly was not delivered under 18 years of Tory rule. I want now to address the Bill.

My concern is that although the flexibility described in the Bill assists those who are financially literate, it does not address the needs of those facing financial exclusion. Some 1.5 million households lack even the
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most basic of financial products, and these people are heavily concentrated in communities with high overall levels of deprivation.

Justine Greening : I thank the hon. Lady for giving way. It is clear from my constituency experience that one reason why many people have poor personal financial provision is that they do not understand the products on offer. However, does she not accept that the simplicity that the Bill would introduce to saving through the SaRA is at least a step forward compared with the current system? Perhaps it is just part of a wider solution to the pensions and savings crisis that we face, but surely it is a step forward, rather than back.

Sarah McCarthy-Fry: As I have already said, the Bill's aim of bringing simplicity is laudable, but the simplicity that it offers is not relevant to many of my constituents. There are areas of severe deprivation in my constituency, where between 14 and 17 per cent. of residents are seriously in debt, and between 38 and 50 per cent. experience stress in paying household bills. Financial exclusion—the lack of access to mainstream financial services—often affects the most vulnerable residents, such as the unemployed, single parents and people with disabilities. Inadequate access to appropriate financial services has forced many residents in my constituency to resort to high-cost lenders such as loan sharks.

The authors of a 2001 study on tackling social exclusion worked with residents of a community similar to the Portsmouth community that I have just described, in order to identify their most pressing needs and the most appropriate ways of meeting them. They found that such people welcomed being consulted and had a clear idea of what would best meet their need. They welcomed, for example, the development of basic bank accounts that cannot be overdrawn. They aspired to save but frequently needed to borrow, and they were attracted to schemes that linked saving and borrowing, such as credit unions, to which I shall return.

The SaRA, or "Sarah"—I am very flattered, but I am sure that the right hon. and learned Member for Kensington and Chelsea did not mean to name it after me—appears to offer flexibility, but for people facing financial exclusion such flexibility is in the realm of dreams. They could not commit to the sums that they are required to save every month, and the options for the drawdown are absurd. People facing financial exclusion need to withdraw funds—

Sir Malcolm Rifkind: The hon. Lady says that such people would be unable to afford the sums that they are committed to contributing, but there is no commitment at all. They can pay as little or as much—or, indeed, nothing at all—in a given month, if their financial circumstances point in that direction. So there is total flexibility to adapt not just once and for all, but each month throughout their working lives.

Sarah McCarthy-Fry: The right hon. and learned Gentleman and I are talking about different worlds. I am talking about people who will save small change and who may not be in regular work.
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Returning to the drawdown, such people need funds to buy a child a pair of shoes, not a house. They do not earn enough to buy a property themselves, let alone to help a child purchase their first house. People facing financial exclusion have often been caught by loan sharks, and they have to be able to break the cycle of borrowing before they can even start saving.

The 2001 study also noted that among people facing financial exclusion, there was a widespread mistrust of banks and insurance and credit companies, and a very high level of disengagement from financial services. Levels of knowledge were low. However, although people had little money to save, saving was considered a high priority. Saving was an almost universal aspiration—for the sense of security that it gives, and because it can reduce dependence on high-cost credit. But as I have said, those facing financial exclusion can afford to save only very small amounts, and they often do so informally. In the main, banks and building societies are not interested in small sums, particularly if they come in the form of loose change. These people are looking not for a savings and retirement account, but for a simple and secure savings account into which they can pay small sums.

A further study was undertaken in 2002 by National Energy Action, the New Economics Foundation and the Personal Finance Research Centre. This research linked fuel poverty with financial exclusion, and sought ways to help financially disadvantaged groups to use financial products to enable them to take advantage of cheaper, electronic methods of bill paying. Focus groups in three cities, including my own constituency, featured in the study. The profile of households paying their bills in cash revealed that more than half were tenants in the social rented sector; that almost half were single adults, a large proportion of whom were single parents; and that a disproportionate number were non-pensioner households with no one in paid employment.

The report concluded that financial exclusion imposes costs on everyone. The excluded are denied access to essential services, and providers of those services can incur enormous costs in pursuing and recovering debt. The consequences of debt go further than simply not being able to pay a bill. They can lead to desperate and chronic debt problems, resulting in people incurring further debt at exorbitant cost. This becomes a vicious circle, leading to further impoverishment.

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