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David Taylor: As life president of outsourcing watch and privatisation watch, could the hon. Gentleman comment on the suggestion made by his Front-Bench colleague, the hon. Member for Hertford and Stortford (Mr. Prisk), that amendment No. 4, which seeks to insert section 36F into the 1974 Act, would in some way catalyse outsourcing, privatisation or contestability, all of which are concepts dear to the hearts of people close to the power centres in the Government?
James Brokenshire: I do not disagree with what my hon. Friend said in the context of clause 50 and amendment No. 4, although if he wishes to clarify his comments I am sure he will use the opportunity afforded to him this evening.
Amendment No. 4 is largely technical. It also clarifies the role of the OFT. Without it, there would have been a problem if a criminal action had been launched against the OFT as to the responsibility and actions of persons to whom powers had been subcontracted or delegated. I welcome the clarification that the amendment provides.
Finally, I welcome amendment No. 5, which ensures that the affirmative procedure applies to the Bill. I echo the sentiments of the hon. Member for Kingston and Surbiton (Mr. Davey) with reference to the Legislative and Regulatory Reform Bill. Hon. Members are concerned about the meaning of legislation, and the Bill seems to drive a coach and horses through large amounts of legislation by means of statutory instruments. Although I welcome the more positive way of making regulations under the Consumer Credit Bill, I remained concerned about other aspects, but that is not a matter for the Minister in the present context.
I hope that when the Bill is enacted, it brings about a regulated market that offers diversity, flexibility and a range of credit facilities to everyone in a more responsible way, so that there will be fewer of the cases that many of us continue to see in our constituency caseload, where there has been an unfair relationship test or irresponsible lending. I remain somewhat sceptical, but I note that the Minister has undertaken to review the legislation in due course. During that review, I hope that we will have a further opportunity to see whether it has achieved the ends that it is intended to achieve.
Mr. Liddell-Grainger: I wish to respond to the comments made by my hon. Friend the Member for Hornchurch (James Brokenshire) and the hon. Member for North-West Leicestershire (David Taylor) about credit unions. Credit unions were set up to bridge the gap between loan sharks and genuine lenders. The growth of credit unions reflects the failure to regulate the industry properly in this country.
I put two questions to the Minister about credit unions. If a new credit union is set up, will a new licence be needed? All credit unions, as the Minister knows, are individual credit unions. They are not part of one group. They are set up by local people and therefore use local resources. If each has to apply to the Office of Fair
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Trading for a licence and the applicant, under amendment No. 3, is deemed not to be worthy, how would the credit union continue to survive? One of the problems that credit unions face is that people can give 50p a week. No doubt the Minister will correct me if that is wrong. They therefore receive and give out tiny amounts, but they stop people falling into the hands of loan sharks.
I am sure that all hon. Members have had a chance to visit credit unions. If they have not, they should. Credit unions give people an opportunity. I would hate to see enforcement, regulation or any form of licensing that could affect them. The OFT is being given sweeping powers to carry out the functions set out in the Bill. It is a statutory body dealing with an organisation run by local people, who have neither the ability nor the expertise, unlike my hon. Friend the Member for Hornchurch, who is a solicitor—
9.15 pm
Mr. Sutcliffe: I am grateful to the hon. Gentleman for giving way. I should point out that credit unions will not be regulated under the Consumer Credit Bill. They are regulated under the Financial Services and Markets Act 2000, so they will not be subject to the tests that the OFT will apply.
Mr. Liddell-Grainger: I am grateful to the Minister. I am sure that credit unions throughout the United Kingdom and all the people who depend on them will be grateful too.
Mr. Devine: The hon. Gentleman clearly knows a great deal about credit unions, as I do. Does he agree not only that individuals and their partners should join credit unions, but that organisations such as local bowling clubs, cricket clubs and so on should be allowed to do so?
Mr. Liddell-Grainger: The hon. Gentleman's proposal has great merit. Perhaps the Minister will consider it and in due course table an amendment to that effect. He will have to revisit the subject when the OFT wants more powers.
My next point is about citizens advice bureaux, to which people turn when they have problems. In their surgeries many hon. Members will have dealt with cases of people desperate to get out of debt as a result of irresponsible lending.
Mr. Bone: Is my hon. Friend aware that the CABs are dealing with so many cases of debt that they can hardly cope? In my constituency, the Rushden branch is desperate for extra funding just to deal with debt work.
Mr. Liddell-Grainger:
I could not agree more with my hon. Friend, and neither, no doubt, could the House. Most people who approach the CAB are struggling with debt upon debt, not one set of debt. They have taken out too many credit cards—too many lines of credit. The Minister will be interested to know that that is the major part of the CAB's job, and the problem is getting worse. I hope that the Bill will address it, otherwise I suspect that the Minister will be back before the House making sweeping amendments to the Bill. He shakes his head. I hope he is right.
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There is another aspect of licences that may require further attention. I refer to the ability of international companies to trade. They can be based in any country and their subsidiaries can legitimately be based in the United Kingdom, as with many banks and other organisations. One of the problems is their ability to lend money in the United Kingdom. Regulation has been difficult enough through the Financial Services Authority and other organisations, let alone the OFT. The Minister will understand that international law enforcement to bring to book companies that have lent in the UK from an international base is almost impossible. The OFT has no power to do that.
Steve McCabe (Birmingham, Hall Green) (Lab): I do not doubt that international situations are difficult, as the hon. Gentleman says, but surely that is no reason not to proceed with the measures tonight.
Mr. Liddell-Grainger: I entirely agree. That is not what I am seeking to do. I am trying to clarify the position. I can see nothing in the Bill that addresses that. My concern is that people will take out loans, thinking that they are dealing with a British company that is administered in Britain, pays its taxes in Britain and comes under British company law. When something goes wrong and a company goes into insolvency or has its licence revoked, one has no recourse if it turns out that it is based in another country, which will probably not be in the European Union.
Mr. Bone: I hope that I am not about to steal my hon. Friend's thunder, but he has mentioned the European Union. Is there a European Union perspective to the matter, and should we take it into account?
Mr. Liddell-Grainger: I always hesitate to mention Europe in this place—but luckily, certain hon. Members are not in their places. I do not have a problem with people trading out of Europe—most of our companies have European subsidiaries—but I am thinking about a situation in which a European company has a subsidiary in this country.
Mr. Sutcliffe: I think that I shall have some sport: there is going to be a European consumer credit directive, and I hope that the hon. Gentleman will support it.
Mr. Liddell-Grainger: I was just about to come to that. Never mind my hon. Friend the Member for Wellingborough (Mr. Bone); the Minister has stolen my thunder—it is nice to have one's thunder stolen by the Minister, I suppose.
If we are to have responsible lending throughout the nations of Europe—in other words, through the European Union—and if the OFT is to give out licences, will we have to return to this place to invoke a European directive on a European credit Bill to police those licences? And will the subsidiaries be policed or licensed? My concern is that one cannot control subsidiaries. Consider how many credit cards the big five clearing banks issue through subsidiary companies—how many companies does a bank such as the Halifax own?
I defy anyone to know which company has actually issued a credit card. If one looks on the back of the piece of paper, there is a spiel, and right at the bottom it will
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say, for example, National Westminster bank or bank of Scotland. Let us consider the case of Barings bank—a disaster of epic proportions. If there had been lines of credit cards and lines of loans, what would have happened? How could the legislation have been enforced in this country, because Barings bank was taken over by the Dutch post office, ING? I do not know whether that is still the case, and whether an overseas company could now be pursued in similar circumstances.
Company law is unclear on enforcement. If a licence is given, what checks will the OFT make on whether that company is solvent? The matter rests outside company law. If a new bank were to come in, credit checks would have to be conducted, which could be difficult. What powers does the OFT have to enable it to do that? I am not sure whether such cases are provided for in the Bill. As the Minister knows, the worst legislation leads to the Minister having to come back to this House to amend it. The Bill contains sweeping powers, but this matter is complicated. If there is a European consumer Bill, and if we face the complication of overseas lending, it will be difficult for this place to regulate it.
The success or failure of the Bill may lie not in what the OFT can do, but in its manpower, which is not enormous. I hope that we do not see Capita or some other organisation creeping in to control such matters, because: first, it is not regulated; secondly, it is not part of government; thirdly, it will be appointed to do a job on a contract; and fourthly, we will have no say whatsoever in the long term as to its actual operations. Will the Minister tell us whether there is a safeguard to stop the OFT subcontracting such work? Lords amendment No. 4 mentions:
An officer could be anybody, presumably, providing that they are given the power to do the job. There is no reason why such work could not be given to one of those very large companies that do an enormous amount of work within government. Will the Minister confirm that that is not the case? If it is the case, what are the safeguards? If there are safeguards, will they be included in an amendment, so the OFT cannot use them as an excuse to stop people lending, to make people worried about lending or to make companies that might want to lend think that they will not touch such things, because they involve outside influences?
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