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Personal Debt

Volume 450: debated on Thursday 19 October 2006

Although most people use credit productively, some end up with huge problems. The Department is most concerned to help such people, and there is much that we are doing.

We are giving grants totalling £45 million over the two years until April 2008 for advice agencies to hire and train 450 new debt advisers, who will help more than 100,000 of those with the highest levels of personal debt. That is part of a package to combat financial exclusion under the Treasury’s £120 million financial inclusion fund.

We are also giving more than £24 million to Citizens Advice and Citizens Advice Scotland to help support citizens advice bureaux, which, among other things, provide help and advice to those in debt.

We have recently funded loan shark pilots in Birmingham and Glasgow with a grant of £835,000 this year. We will assess the pilots, which have helped combat illegal activities.

We have given another grant of £l million this year to National Debtline, which will help tens of thousands of the indebted. We are doing as much as we can to try to help those with the highest levels of debt.

Let me say without qualification that the interest and initiatives of the Department of Trade and Industry and the Treasury in this respect are welcome. Given that there is now a record £1.3 trillion of personal debt in this country, however, will the Minister ensure that his Department conducts a review of credit card charges? Two years ago, both the Trade and Industry Select Committee and the Treasury Select Committee, as well as the DTI, said that although good steps had been taken, much more needed to be done to protect people from being ripped off by small print that they do not understand or by charges that they have not been alerted to.

I thank the hon. Gentleman for his very fair comments. I will write to him on this matter, because I have taken up this issue with representatives of the industry and I am having discussions with them now. I will come back to the hon. Gentleman and the House with further information, following the conclusion of those discussions.

My right hon. Friend will be aware that the voucher company Farepak, which is based in my constituency, collapsed this week, robbing thousands of people on low incomes of their Christmas savings. My constituents use Farepak to avoid falling into debt, and many have lost hundreds of pounds. As one Swindon mum said:

“For so many people, Farepak has been a lifeline because it means we don’t have to get into debt at Christmas, so we want to know why we might all get into debt now, trying to make this Christmas like any other.”

Does the Minister agree that this stinks, especially as Farepak made a £1.2 million profit 18 months ago? Will he meet the administrator, and get the Insolvency Service to look into the matter thoroughly and take action against the directors if needed?

Like my hon. Friend, I understand why those people are hurt, angry and frightened about being fleeced and so badly let down. I have already discussed a way forward with the administrator earlier today. Furthermore, this morning my officials and I contacted the British Retail Consortium, which represents the retail sector. It has no legal obligations, but this is a very successful sector, and the overwhelming majority of the BRC members are socially responsible employers and companies. Its representatives immediately agreed to meet me this weekend at the DTI, with the administrator, to see what the industry can do. They cannot take on the legal obligations of this shocking company, but they will see what they can do in the lead-up to Christmas as a good-will gesture to help the most needy people who have lost out completely.

I have also asked the administrator to report as soon as he can, under the terms of the Company Directors Disqualification Act 1986, on the fitness of the directors, on how they have run the company, and on the extent of their responsibility for any failure by the company to supply goods or services that have been paid for in full or in part. I have also asked my officials this morning to take full advice from the Insolvency Service. I have been in touch with the Hamper Industry Trade Association, and I shall be meeting its representatives in a few days’ time. I shall also be meeting the executive director of the Office of Fair Trading, Mr. John Fingleton, to discuss how we can take this issue forward to avoid such failures again.

The Minister will be aware that a principal cause of personal debt is gambling, including, increasingly, online gambling. Will he therefore comment on recent press reports that the Government are seeking to turn this country into a world leader in the online gambling industry, to the extent of relaxing the regulatory and fiscal regimes? Does he really believe that this country should aspire to become a world leader in an activity that consigns so many of its citizens to misery?

Despite my background as a politician, I am not much of a gambler myself. The industry employs tens of thousands of people in this country, and is well regulated. I recognise, however, that some individuals have gambling problems, and that the consequences for them and their families are indeed great. We will certainly keep a close eye on the industry, as the hon. Gentleman requests, to ensure that it not only operates effectively but provides services to give support and assistance to those who have gambling problems.

To return to credit card debt, although I welcome the activities that the Minister has outlined as attempts to give people who are already in difficulty guidance to get out of it, does he agree that the way the different credit cards are advertised—often in a misleading manner—makes it much harder for consumers who are inexperienced in relation to the existing 30,000 credit cards to make rational decisions? They often get ripped off and end up paying high interest for borrowing small amounts of money. Will he outline his views on how that could be dealt with?

There is no answer to that.

I assure my hon. Friend the Member for Wallasey (Angela Eagle) that I am in discussions with APACS—the UK payments association—as are my officials, about the best-practice guidelines. Then we can take the matter forward. Indeed, in only the last few days I met the vice-chair of Barclays bank, who is, on behalf of the industry, keen to work with the Government to bring forward such proposals.

Those guidelines will give security through an understanding across the industry of what best practice is and ensure that competition does not lead to overly complex and difficult situations for the consumer of those products. Therefore, I am quite confident that, along with the industry itself, the best-practice guidelines can be amended in such a way that, for example, the appropriate checks on a customer’s ability to pay and checks between the industries will lead to us not having credit limits that are difficult to meet due to their complexity for the consumer who wants to have a credit card limit increased, or indeed wants to have a credit card in the first place.

The debts of students and young people are especially concerning. Indeed, outstanding student loans are now at more than £19 billion. Given that, and the importance of data-sharing between lenders, why is the Student Loan Company not sharing its data? It is almost a year since Ministers promised us that they would resolve this issue. When can we expect action, not just yet another consultation paper?

The hon. Gentleman makes a fair point about the promise and I can say that, as consumer Minister, I am actively engaged with the issue, so watch this space. We want to resolve the issue in an effective way, as my predecessors said. That will be done.

What advice will my right hon. Friend give to the family sheltering under that green tree, who propose to get £21 billion in debt and do not have the money to finance it?

My hon. Friend alludes to the shadow Chancellor’s banana republic report on public expenditure cuts and massive tax incentives for the very rich in society. Indeed it is a recipe for economic disaster, but what do you expect? This is just another Tory leader with the same old Tory policies.