asked Her Majesty’s Government:

Whether they will restore controls on the terms of consumer credit.

My Lords, we have no plans to place controls on access to consumer credit. However, the changes brought in with the Consumer Credit Act 2006 contain important new consumer protections and stronger powers for the Office of Fair Trading to take action against lenders that engage in irresponsible lending practices.

My Lords, I thank the Minister for that Answer. If the interest rate mechanism is not sufficient to stop the excesses in markets that we have seen recently with the bad debt mountain getting out of control and more and more people in financial distress—not only with the collapse of mortgages but also because of personal loans for consumption on hire purchase and credit sales—is it right that we, unlike some other countries, should have got rid of other controls such as the minimum deposit rate and maximum repayment period many years ago? Should not the Government look at this again?

My Lords, I would rebut at least four or five of the points that the noble Lord makes but, on the specific Question, we believe that term control or interest rate caps, which were introduced in World War II and used intermittently in the 1950s and 1960s, are not appropriate for a liberalised market economy. They also lead to unintended consequences. In particular, they restrict access to essential credit for the poor and the vulnerable and therefore do not help the people that we are seeking to help. There is evidence from, for example, Germany and France, where these restrictions sometimes apply, of an increased resort to illegal lending with very inappropriate levels of interest rates. In states of the United States where there are caps there is evidence of decreased products for the poor and the vulnerable relative to states which do not have caps.

My Lords, when we had term controls in this country, were they not often readily evaded? For example, when a trader was selling a new car on credit he would artificially inflate the value of the old car that was being traded in. Such controls are really too easy to evade to make them worth while. Is it not much better, as the Minister implied in her first Answer, to use the increased powers under the Consumer Credit Act 2006 so that irresponsible lending is treated as an unfair or improper practice—I forget the appropriate word—and the licence is then at risk?

My Lords, my noble friend is right: the real issue is the lack of transparency that arises out of these controls with increases in premiums elsewhere. In the 1950s and 1960s they were not really used for consumer credit but for controlling inflation and the balance of payments, and we simply do not live in that kind of economy right now. However, the Consumer Credit Act 2006 brought in a large number of powers, now in the process of being embedded in regulation, which will help with responsible lending and ensure that the licensing regime helps consumers.

My Lords, the Minister referred to the effects that this would have on the poor. Is the reality not that the poorest people in society, living on vast estates throughout the United Kingdom, are paying often the highest interest rates in a totally unregulated market? Is there not a requirement for the Government to intervene in that area to protect the very groups that we in Parliament are supposed to represent?

My Lords, the Government have intervened exactly when it comes to home credit, which a large part of the market that my noble friend refers to is dependent on. There was a Competition Commission inquiry in 2006 and some of the measures which resulted from it are currently being embedded. That includes increasing transparency and allowing for portable credit that will enable poor and vulnerable consumers to access other forms of finance. We have also provided significant funding for debt advice and financial capability advice, which is the best way to help the poor and vulnerable.

My Lords, is the Minister aware that while I endorse pretty well everything she has said, there is nevertheless a further dimension: to ensure that those institutions that lend imprudently are not bailed out by the taxpayer for the consequences of their mistakes?

My Lords, if the noble Lord is referring to Northern Rock, I think he will find that we “bailed out” depositors and the public, not Northern Rock’s shareholders. It is important to note that in the current climate we face a very different environment from the one we faced in the early 1990s: inflation is low at 2.5 per cent, compared with 7.5 per cent then; interest rates are at less than 6 per cent, compared with 15 per cent; and we have had 64 consecutive quarters of growth and a record level of employment. So we are not in a position of having to bail anyone out.

My Lords, the Minister says that inflation is at only 2.5 per cent. Why is it that fuel, mortgages and a range of other things have increased by perhaps 20 per cent or 25 per cent? It is just not consistent with saying that the rate of inflation is only 2.5 per cent.

My Lords, those are independent figures provided by independent forecasters and by the Bank of England. Nevertheless, the noble Lord is correct to point out that we face a difficult time ahead. We must not underestimate that, particularly when it comes to fuel, commodity and food prices, as well as the small number of people who are having to remortgage at a time when there is disruption in the financial markets.

My Lords, does my noble friend agree that if Members opposite want to start nit-picking on certain details of the economy, you could easily take them for a trip down memory lane and remind the noble Lord, Lord Lawson, of the chaos over which he presided in the days of 3 million unemployed and double-digit inflation? Most Members on this side of the House would congratulate the Government on the work they are doing.

My Lords, I thought I had just taken a trip down memory lane. I thank the noble Lord.