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Economy: Personal Debt

Volume 727: debated on Tuesday 3 May 2011


Asked By

To ask Her Majesty’s Government what action they intend to take regarding levels of personal debt.

My Lords, it is unsustainable debt coupled with irresponsible lending that most concerns this Government. We will take action where necessary, which is why we launched our review of consumer credit and personal insolvency. We will make an announcement on the next steps before the Summer Recess.

Did the Minister see today’s report that household income is set to fall yet again? With personal debt at an all-time high, inflation at more than 4 per cent and no growth in the economy, does the Minister share my concern that the steps that the Government are taking to reduce public debt will simply transfer the public debt to the personal debt as people are forced to borrow more money just to keep afloat?

My Lords, we can thank the Labour Government for allowing public borrowing to spiral out of control. This Government are facing some very difficult decisions in order to bring us back into line. No one likes the idea of putting our people in debt any more than they absolutely have to be. The noble Lord can be assured that we are looking at every possible way to stop interest rates spiralling out of control, otherwise we will find ourselves exactly where the Labour Government found themselves: out of control.

My Lords, in the light of the OBR’s forecast on household debt, which it states will have increased substantially by 2015, how will the Government ensure that debt advice which is both free and independent continues to be accessible to the people who most need it? I declare an interest as president of the Money Advice Trust.

On 12 February, the Government announced continued funding of £27 million this year to maintain the service for debt advice in citizens advice bureaux and other independent advice agencies in England and Wales. We are working to put the future provision of debt advice on to a more sustainable footing, ensuring that consumers can access the support they need easily, and that the debt-advice services deliver the best possible value for money. Good advice is worth every penny we can possibly spend on it.

My Lords, following the comment from the noble Baroness, Lady Coussins, the noble Baroness will be aware that, because of workload and financial pressures, many citizens advice bureaux are no longer giving face-to-face advice, other than on an exceptional basis, and are directing people to what is euphemistically called a self-help system of publications and websites. Is her department monitoring how many people switch from talking to the CAB to the commercial websites which, frankly, are frequently honey pots that get them into a worse financial mess? If there is a major switch, will she consider providing additional resources to enhance face-to-face advice?

My noble friend is reflecting worries that we must always have when changing from one system to another. We are of course protecting the core funding for Citizens Advice and Citizens Advice Scotland, and we have directed £470 million over the spending review to support the voluntary sector. As my noble friend knows, we propose to streamline the consumer landscape, but during this time we are obviously keeping a weather eye on what is happening. I am grateful to my noble friend for bringing this to the attention of the House.

My Lords, when a similar Question was recently put, I asked the Minister whether the Government were aware of the Commission on Personal Debt that was chaired by the noble Lord, Lord Griffiths of Fforestfach. The noble Lord, Lord Sassoon, responded by saying that he would look at that commission report. Can the Minister say whether the Government have now read the report and whether they are prepared to implement some of its recommendations?

The right reverend Prelate the Bishop of Liverpool is right to remind us that he did ask that question of, I believe, my noble friend Lord Sassoon. I think he is referring to the report published by the noble Lord, Lord Griffiths of Fforestfach, which I have read. At the moment we are doing the consumer credit review. I will check this with my colleague, but I think that that report has gone in as evidence to the consumer credit review. When that review reports in the summer, no doubt it will refer to the report of the noble Lord, Lord Griffiths of Fforestfach.

My Lords, will the Minister comment on fears that a number of provisions in the Welfare Reform Bill could increase the level of personal debt? I am thinking of, for example, the effective abolition of the Social Fund and the suggestion that universal credit might be paid on a monthly basis, making even more difficult the juggling act of trying to get by on a low income.

I am afraid that I cannot answer the noble Baroness’s question because it is not my department, but I will come back to her in writing.

My Lords, setting aside the Minister’s comments that the Government seek to influence interest rates, can she explain how a reduction of the public deficit over the next five years of 6.9 per cent of cyclically adjusted GDP makes sense when private sector debt, which is already at a high level, as the noble Lord, Lord Haskel, pointed out, is due to increase to 9.1 per cent? Where is the logic about unsustainable debt, to which the Minister spoke?

I am not inclined to be able to answer that question right now, off the cuff. However, I remind the noble Lord, who is sitting on the Labour Benches, that it is his party which got us into this mess in the first place.