Report (3rd Day)
47: After Clause 86, insert the following new Clause—
“High-cost short-term consumer credit market regulations
(1) Within six months of the passing of this Act, the Secretary of State must by regulations made by statutory instrument direct a designated body to prohibit public communications, including promotional material and any promotional activities, which concern a high cost consumer credit service from targeting people below the age of 18, including by regulating the content and timing of such communications with a view to protecting children and other vulnerable persons from harm or exploitation.
(2) In subsection (1), “designated body” means a body specified by the Secretary of State in regulations made under that subsection.
(3) A statutory instrument containing regulations under subsection (1) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
My Lords, I am speaking today to the amendment to the Consumer Rights Bill in the name of the Bishop of Truro. He sends his deep regrets that he cannot be in his place today. I extend my and his thanks to the noble Lords, Lord Mitchell and Lord Alton, and the noble Baroness, Lady Bakewell, for supporting the amendment in Committee. Peers from all sides of the House spoke in favour of the amendment.
In recent years, we have seen a massive increase in the use of payday loans and therefore in the advertising of them. As we know, in Birmingham and other parts of the country, access to affordable credit is extremely difficult for vulnerable families. In September this year, the Children’s Society published a report on the effect of advertising and telemarketing of payday loans. The report had a number of findings on which noble Lords spoke in Committee and I would like to remind your Lordships of four of those.
More than half of children aged 10 to 17 are seeing payday loan advertisements “often” or “all the time”. A third of teenagers would describe payday loan adverts as fun, tempting or exciting. These teenagers are significantly more likely than their counterparts to say that they would consider taking out a payday loan in the future. Three-quarters of parents back a ban on payday loan advertisements before the watershed. Parents aged 18 to 24 are twice as likely as those aged 25 to 34 to have taken out a payday loan. This amendment proposes the watershed as the sensible cut-off point to protect children best. The 9 pm watershed is a well known, well rehearsed and established tool for parents, who are able to have some control over how much television their children watch. Even if in the real world we are all aware that some children will watch television after this point, banning adverts of this kind before the watershed would prevent them seeing the majority of them.
In the government response to the amendment in Committee, the noble Baroness the Minister described how new rules on payday loans advertisements with regard to signposting and risk warnings would be significant enough to protect vulnerable families. The rules are welcome but regrettably, warnings, although important in protecting adults, do not always protect children from detrimental impact on their long-term attitudes to debt and money management. In that debate, the noble Baroness also outlined the recent changes to the curriculum which made financial education a statutory requirement. That is another welcome change to help combat the inappropriate marketing practices of lenders. Now we need to make sure that that work is not being undone when children go home from school and sit in front of the television.
The amendment has gained support both in the House and outside. Major organisations have added their names in support of this change. Organisations such as StepChange, the Money Advice Trust and MoneySavingExpert have all seen the point of using the watershed cut-off. I hope that the Government will respect that widespread support and take the opportunity not only to give your Lordships a firm commitment to look at the issues in depth but to consider changing the regulations on scheduling of payday loan adverts.
My Lords, in returning to this issue, which I spoke to at Second Reading and in Committee, I first thank the noble Baronesses, Lady Neville-Rolfe and Lady Jolly, for the time that they and their officials have given to it. The meeting that they held with me, the right reverend Prelate the Bishop of Birmingham and the noble Lord, Lord Mitchell, earlier today was certainly helpful.
As the right reverend Prelate just said, this issue has not just exercised Members on all sides of your Lordships’ House at all stages of the Bill but it has also engaged the public outside. I am glad to speak today to Amendment 47, to which I have added my name as a cosignatory. Our amendments are a composite of the amendments which the right reverend Prelate the Bishop of Truro and I moved in Committee and build on that momentum. I hope that they become part of the Bill. However, I recognise that although legislative moments come and are the most important point for parliamentarians to insist on provisions, it is not always possible to achieve legislative outcomes. If that is the case today, I hope that when the Minister comes to reply to the debate, she will be able to say, if the Government agree, as I think they do, with the principles contained in the amendments, how they will be rigorous in ensuring that the advertising industry, the licensing authorities and, above all, the payday loan industry will act in accordance with the amendments, and how we as a House will have the opportunity in due course to hold all those bodies to account.
The issue that the noble Lord rightly raises would be covered in the regulations to be laid before the House under proposed new subsection (1). There is a difference between being able to advertise to and target young people, which is the main thrust of the amendment, and the second part, which is about whether there can be regulation after the watershed. It is true that the advertising industry and payday loan lenders recognise that there is an issue about targeting young people, but up until this point, we have not heard enough from them about what they would do about advertising that might appear after the watershed. If I may, I shall return to that in a moment or two.
I am very much in favour of the amendment, but the right reverend Prelate referred to the watershed as if it were in the amendment. Am I right in thinking that in fact it does not appear in the amendment, only in a statutory instrument intended under the amendment?
It is certainly true that it could appear in an instrument or regulations. However, subsection (1) of the proposed new clause refers to the content as well as the timing with regard to people below the age of 18. What that part of the amendment recognises is that some young people are bound to be watching television after the watershed and that would certainly need to be addressed.
Payday loan advertising is a significant factor which contributes to the social context in which people make their financial decisions. People are endlessly blitzed by messages encouraging them to spend and to borrow, whereas there is minimal knowledge about money advice and debt help services. Our failure to develop a nationwide network of credit unions has always been a major disappointment to me and a contributory factor to the ability of these payday loan lenders to walk into that space.
With the prevalence of payday loan advertising increasing by more than 20 times from 2009 to 2012, according to Ofcom research published in December 2013, far outstripping the advertising of sound financial management or general financial education—although there is commendable and wonderful work, as the right reverend Prelate referred to, by organisations such as Christians Against Poverty, StepChange, the Children’s Society and CARE—it is hardly surprising that payday loans are increasingly being seen as a normal and responsible means of personal financial organisation. What today’s children see, hear and understand from what they are taught today, and from the advertisements that they see, will impact hugely on their future.
What is particularly concerning about the normalisation of payday loans as a means of borrowing is that it particularly manifests itself among young people, specifically, in younger parents. According to Playday not Payday, a report produced earlier this year by the Children’s Society, 39% of parents aged 18 to 24 are likely to have used payday loans at some point, compared to 18% of 25 to 34 year-olds and just 8% of 35 to 44 year-old parents. It is interesting that the same report concluded that 30% of 18 to 24 year-old parents describe payday loans as an acceptable means of managing day-to-day expenses. Perhaps we can take some encouragement in that 9% of 18 to 24 year-old parents recognise that although they have used payday loans, they do not see them as an acceptable means of managing day-to-day expenses—but that is scant encouragement.
This week, Ofcom, the regulator and competition authority for the United Kingdom’s communications industry, published results concerning children from its Digital Day 2014 research. The study found that just over three-quarters—78%—of children aged 11 to 15 and 90% of six to 11 year-olds watched live TV every day over the course of a week. With so many children consuming so much television, it is important that we ensure that they consume what is appropriate.
In our earlier debates on the Bill it was said that there is a logical inconsistency in the current approach to the advertising of payday loans. I agree with that. We properly accept certain limitations on advertising, even in a free-market economy, where it is recognised that normalising potentially harmful behaviours should be avoided, as is the case, for example, with alcohol or gambling advertisements. Payday loans should be treated in the same way. I have yet to hear a cogent argument against that.
Critics of closing the loophole note that payday loan advertising is not targeted at children and that restricting adverts until after the 9 pm watershed—the point made by the noble Lord, Lord Higgins, earlier on—is therefore unnecessary. I must say that I find that argument unconvincing, although I note that the noble Lord is not one of those who advance it. An advert can appeal to someone without being targeted at them. Although payday loans may not be advertised specifically around children’s programming, children do not only see programmes designed for them. They see a range of content.
In a poll conducted by YouGov and commissioned by the Children’s Society, 74% of parents across the country backed a ban on payday loan adverts from airing on TV and radio before the 9 pm watershed. We should listen to them. Parents also tell us that they feel under pressure from their children with regard to payday loans. Research conducted by the award-winning MoneySavingExpert.com website revealed that more than one in three parents with children under the age of 10 have heard their children repeat slogans from payday loan TV advertisements. In the same poll, 14% of parents said that when they refused to purchase something for their under-10 year-olds, they were nagged to take out a payday loan for it. All of us who have children know all too well the almost irresistible gut-wrenching pull of the plea of a child—especially on a sleep-deprived parent. We may reminisce with rose-tinted spectacles about this now, but the reality is that for some families this is what is called “pester power”. It is the beginning of a slippery slope, often towards indebtedness and poverty.
If there are steps we can take to avoid families slipping unnoticed into indebtedness, we must surely take them. These amendments do not represent a magic bullet. I do not think that the right reverend Prelate, the noble Lord, Lord Mitchell, or the noble Baroness, Lady Bakewell, would argue that. I accept that there is no single solution or quick fix. Whole-person financial care is vital. Financial education is crucial to prepare children for financial independence. Equipping children and young people to make financially capable choices will also help to break the sort of cycles of deprivation that many of us have seen, especially in urban areas—places like the city of Liverpool, which I represented for 18 years in another place. But preventing seductive, alluring, irresponsible advertisements can also play its part.
These amendments will therefore make a difference. They will ensure that children are less familiar with high-cost consumer credit products such as payday loans. They will ensure that adults are protected from overt pressure in the form of overbearing and intrusive unsolicited marketing. They will help families and insulate children from the subtle pressure and normalisation of payday loans as an appropriate form of financial management.
For all those reasons, I am very happy to support the amendment so ably moved by the right reverend Prelate the Bishop of Birmingham.
My Lords, two years ago, the payday loan sector in this country was completely unregulated. Payday lenders from around the world opened up in the UK. For them, it was the new frontier: you could get away with anything—and they did. These companies enjoyed very rapid growth, to the extent that Wonga, as just one example, was considering a public listing that would have valued it at more than £1 billion. These people would stop at nothing. Their success, of course, was built upon the misfortune of the millions of people who had no other option but to take out these loans, and of the tens of thousands who suffered, and continue to suffer, acute distress as the value of their loans ratcheted up at 5,000% per annum.
However, things have changed—and very much for the better. It took a superhuman effort, and we encountered a great deal of initial resistance from the Government. But today legislation is in place which has already started to contain the activities of the payday lending companies. In five weeks’ time, the Financial Conduct Authority will introduce interest rate caps that will remove many of the excesses. I congratulate the Financial Conduct Authority for grabbing this bull by the horns, and making life very tough for the cowboys who had reigned supreme. It is estimated by the FCA that in 2015 most of the lending companies will leave the industry and that only four serious payday lending companies will remain in business. It is not often in politics that one can say, “Job well done”. But it is job well done—or at least, nearly done.
This afternoon we are addressing some of the outstanding abuses that the payday lending companies still employ—none more so than the part of their advertising that is targeted at children. Yet again, the government are holding out against legislative action, and yet again they claim that sufficient powers already exist for the FCA, Ofcom and the Advertising Standards Authority to restrict such advertisements; even though there is overwhelming evidence to show that children are influenced, and continue to be influenced, by these advertisements.
In Committee, the noble Baroness, Lady Jolly, made an argument that, in my view, missed the point. She based it on the fact that advertisements are not targeted directly at children. She said that Wonga, as one example, has specific policies not to advertise on children’s TV. I will resist the temptation to comment on the value of any of Wonga’s ethical stands.
Does my noble friend agree that Wonga’s policy of sponsoring my beloved Newcastle United, with their shirt-front logo, is one of the most pernicious and insidious ways in which Wonga and other payday loan companies seek to brand their company among young people watching their heroes on football pitches and on live TV—with repeats on Sunday mornings and so on—and that that area should also be covered by legislation?
I absolutely agree, my Lords, but one step at a time. Not just Newcastle United but Blackpool have a kit with “Wonga” on the front. I am told that one can even buy babygros from Blackpool with “Wonga” on them. It is just awful.
I was about to say that I will resist the temptation to comment on the value of Wonga’s ethical stance on anything; noble Lords will know what I am alluding to.
Perhaps I may be so bold as to say that the Government have been totally been taken in by these payday lending companies’ public relations campaigns and lobbying efforts. These people are not stupid. They do not advertise on children’s TV programmes because they know that this is unacceptable, even for them. Instead, they advertise on TV when children just happen to be watching. The average British family watches more than four hours of television per day; some programmes are children’s programmes and some are not, but one thing we know for sure is that the kids all know the jingles. They laugh at the puppets and are well aware that money is easily available and fun. The children know this, yet the ASA has trivialised their exposure to this marketing. The payday lending companies are very sophisticated; their marketing is brilliant. They have spent tens of millions of pounds trying to persuade us all, very successfully, that payday lending is a good thing—that it is cool, fun and gives you a wonderful lifestyle, free from worry.
However, as we know, because we have seen it at first hand, unaffordable debt is a blight on our society. We have seen vulnerable and desperate people succumb to the seduction of payday lending advertising. As the noble Lord, Lord Alton, has said, “pester power” has now entered the lexicon of advertising—using children to nag and persuade their parents to take out payday loans. Who could resist their appeal, particularly with Christmas coming up?
The Children’s Society, in its excellent survey on the debt trap, has come up with a series of statistics that have already been mentioned in this debate and which I will not mention again. However, they are pretty damning and show that payday lending advertisements are seen by children. As I say, the payday lending companies at this very moment are spending millions of pounds on daytime advertising and are directing much of it at our children. In introducing the amendment, we aim to restrict this pernicious advertising.
My Lords, I have not spoken previously on the Bill, but I spoke at considerable length on the banking Bill—now an Act. In the concluding stages we discussed payday loans at considerable length. I was anxious, right at the end of the proceedings, that we should not simply encourage the Government to impose a limit on the charges paid on payday loans but also on the rate of interest. This was resisted by the Government at the time. Therefore, I am as happy as the noble Lord who has just spoken that the Financial Conduct Authority has, in fact, come out with a series of proposals that considerably improve the environment in which we are discussing payday loans and this amendment. In particular, it has imposed an initial cost of 0.8% per day rate of interest, a fixed default fee which is capped at £15, and a total cost cap of 100%. All these are very welcome.
None the less, in the context of this amendment, the situation is far from satisfactory. I looked at the supporting papers, which the Financial Conduct Authority is putting forward. It calculates the APR equivalent to what I just said as 1,270%. I think we have to consider very carefully whether it is right in saying that the limits it has set will be in danger of eliminating short-term loans if one compares that APR with the cost of capital to the companies which we are discussing.
I will speak a little on the amendment because, as I indicated earlier, I am very sympathetic to some of the arguments that have been put forward. My problem is with the drafting of the amendment. As I sought to point out earlier, although the right reverend Prelate suggests that the amendment is to deal with the watershed, it does not refer—I think I am right in saying—to the watershed as such. My problem is that I suspect that the Government will be reluctant to accept the amendment in its present form. Perhaps my noble friend, in replying to the debate, will indicate whether that is so or whether they are sufficiently sympathetic to the objectives of the amendment that they will come back at Third Reading, or will encourage us to come back at Third Reading, with a more specific form of amendment than that which we are asked to debate, and that many Members have suggested we ought to vote on today. I think that there are some problems. It is not entirely clear, for example, how one is going to demonstrate that a particular advertisement is deliberately targeted at the people we are trying to protect by this amendment.
Overall, I hope my noble friend can reply sympathetically and that we can come back, if not today then at a later stage, with an amendment which is acceptable and which will achieve the objectives that I think are right. It is quite wrong that these adverts should be targeted—as I believe they are, but it is difficult to prove—at children. The Children’s Society rightly points out the extraordinary extent to which the adverts appear to be having an impact on young children, who in turn will be having an impact on the attitude of their parents. Therefore, I think that this is something on which clearly we need to take action—but it is not very simple, and we need to get the legislation right.
My Lords, I support what my noble friend Lord Higgins has been saying on the precise nature of this amendment, but I will also share the underlying feelings on this issue that have been expressed by the right reverend Prelate and by the noble Lord, Lord Mitchell, who has played such an important role in getting fundamental changes in the conduct of payday lending. I think it is also fair to say that the Government have listened. The Government also have worked through the Financial Conduct Authority to make sure that these payday loan companies are now in retreat.
As somebody who has worked in the media, I am always very cautious about structural intervention in advertising, because there are always arguments for restricting advertising in certain circumstances. I think that this issue is not just about young people but about all vulnerable people being taken in by this advertising. We have seen the complications. It is not just children’s television or even daytime television; it is the use of branding to appeal to a particular audience. It is a very complex issue. Two bodies deal in this area: the Advertising Standards Authority and the Financial Conduct Authority. Both those bodies should now look at this and come forward with their recommendations before we consider detailed legislation. I hope very much that the Minister will agree to initiate that.
My Lords, I support Amendment 47. The findings of the different charitable organisations about the prevalence and impact of payday loans are rather chilling and depressing. I will not deploy all the statistics referred to by noble Lords today and in Committee other than to re-stress that Ofcom’s findings show that 80% of payday loan adverts are shown before the watershed. The Children’s Society has found that 55% of children aged 13 to 17 recognise the name of at least three payday lenders—I would have been distressed if my children had known that information at that age—and that parents aged 18 to 24 years increasingly see payday loans as a normal means of money management: almost 40% of them have used payday loans at some point. That is all illustrative of a serious problem.
As many noble Lords have articulated, the characteristics often revealed by people who take out payday loans are all too familiar. A high proportion of borrowers experience financial distress, many come from less well off socioeconomic groups, and few have assets. A significant number of borrowers have two or more loans, which exposes them to unsustainable and spiralling debt. Many borrowers get these payday loans to cover basic needs, including the needs of their children, yet many are in acute repayment difficulties. According to the CMA, more than one-third of loans were not repaid on time or at all, which often brings considerable consumer harm relative to the amounts that were borrowed in the first instance.
Successfully addressing the problem of high-cost credit requires a multifaceted approach and, as my noble friend Lord Mitchell acknowledged, much action has already been taken by organisations such as the FCA. However, taking steps to protect children from exposure to advertising for high-cost loans, which is both ill suited for the children and corrosive in its impact upon parents and families as a whole, is an essential ingredient of that multifaceted approach.
Children exposed to particularly suggestive loan adverts pressurise their parents to take out those loans to buy things. Yet we know that families trapped in problem debt are more than twice as likely to argue about money problems, which leads to stress on family relationships and causes emotional distress to the children. Many noble Lords have referred to pester power, which arises from children’s exposure to payday loan advertising. However, the potency of that power is so great because people love their children. If you are on a low or modest income, it is very hard to say no to your children if they are missing out on social activity or feel disadvantaged in comparison to their school friends. How much harder it is at Christmas to say no to the children you love, when you have no money and your children do not understand why they cannot have something in their stocking when you just need to respond to those funny furry grannies who are offering you some money.
Pester power has a powerful emotional pull on parents, and the advertising has such a powerful impact on the children. This advertising masks a business model that is based on exercising great persuasive power on low-income households and their children. There is a continuing need to address the behaviour of firms in this high-cost consumer credit market. These companies have substantial funds for marketing and advertising. That allows them to have great persuasive power over vulnerable people and their children. The prevalence of the advertising has an impact on many people’s choices. In the short term, there are the effects of pester power and increased debt; in the longer term, people see credit as the normative solution to managing their finances.
Even on the FCA’s own analysis, after the cap is introduced the proportion of borrowers who experience financial distress as a direct result of taking out payday loans is expected to remain as high as 40%. Notwithstanding the positive actions taken to date by bodies such as the FCA and the Advertising Standards Authority, there is still a clear and compelling need to send a strong and clear message by placing in statute the responsibility of high-cost lenders to run their advertising appropriately. If the advertising of alcohol and gambling can be heavily regulated to help prevent the normalisation of alcohol abuse, why on earth would one not want to take the fullest action to prevent the normalisation of the potentially harmful behaviour of taking out loans that are unaffordable and get you and your family into debt?
As the noble Lord, Lord Alton, referenced, the sheer quantity of adverts for payday loans seen by and impacting on children, young people and their parents made me shudder when I saw the figures. In 2012, 596 million adverts were seen by children compared to 3 million in 2008. If that is not an aggressive business plan, I do not know what is. That is 200 times more adverts over four years. Some organisations will quote aggregate statistics to seek to state more modestly the level of payday loan advertising, but we should remember that the charitable organisations are so concerned about this because they see and measure the concentration of risk from these adverts on vulnerable families. Never mind the aggregate figures: my children and I are not vulnerable to payday loans, because I have a good income. It is the concentration of risk from these adverts on these children and these families that poses the great risk. We need to remember that what may be a small amount taken out in a loan that is borrowed for a pressing purpose becomes a much bigger debt if the loan is not repaid.
The current advertisements, which other noble Lords have referred to, contain jolly characters. They can appear funny or appealing; they have catchy jingles. In fact, they have lots of characteristics but usually not the obvious characteristic, which is to make absolutely clear that they are presenting a very serious form of credit with high risk. An advert can have a cuddly granny, but it will not spell out the risk to your family if you pester your parents to take out such a loan.
Of course, children watch programmes and adverts in other ways and at other times. People are changing their viewing habits and watching programmes on laptops, tablets and iPads. That, too, needs to be addressed. Protection for children needs to be modernised, but that is not an argument against the watershed period remaining sacrosanct for as long as possible and keeping those adverts away from children before the watershed. This really is a compelling amendment.
My Lords, I rise very briefly to support the amendment, as in the past I have spoken in support of this issue in the House. I am also supportive of the Children’s Society “The Debt Trap” campaign, which seeks to protect children from payday loan adverts by banning payday loan advertising before the 9 pm watershed.
As we have heard, Children’s Society research reveals that too many children are frequently seeing irresponsible payday loan adverts, which in the long term can have an influence on their financial education and attitudes towards debt. I believe that children should learn about borrowing and money in a responsible way—and also about the consequences that borrowing can bring—not from the irresponsible way in which payday loan adverts on television are performed. They can often be very funny animations with seductive, very popular, “can’t wait to see again” adverts.
It is crucial that we protect children from unsuitable advertising before the watershed, in the same way that we have legal restrictions to protect children from gambling, alcohol and junk food advertising. I believe that that will put a stop to the damage that debt does to children’s lives and beyond—long into their adult lives. I very much look forward to a positive response from my noble friend the Minister on this very important amendment.
My Lords, I spoke on this subject in Committee. I will briefly speak to support the amendment before us and in particular acknowledge the work of my noble friend Lord Mitchell, who has done a tremendous amount in this vexed area of payday loans.
I said in Committee that I believe that the language of children’s protection has to be modernised. As the noble Baroness just said, we rightly rail against violence, pornography and other aspects of our society when there is abuse of its exposure to children and young people. However, the insidious manipulation of children, when it comes to payday lending and the payday lending industry, can no longer be overlooked or seen as a lesser evil than those of violence and pornography. We all know that the misuse of money can lead to terrible family misery. We harm children, often for the rest of their lives, if we make the notion popular for them that procuring money cheaply can be dressed up and sound like fun, or can be a solution to family pain.
When speaking about advertising rules, the Advertising Standards Authority states:
“The protection of young people is at the heart of the rules; they already prohibit payday loan ads from encouraging under-18s to either take out a loan or pester others to do so for them”.
It goes on:
“The rules also require that ads must be socially responsible, which we can apply to any ad that appears to target children directly”.
However, as other noble Lords have said, the ASA overstates its case. It is hard to see how anyone can recognise the term “socially responsible” when it comes to payday loans at, as the most reverend Primate the Archbishop of Canterbury said, “usurious rates”. The European Union directive on this—the audiovisual media services directive—states that content which might “seriously impair” minors should not be included in any programme. It goes on to state that content which is “likely to impair” minors must be restricted,
“by selecting the time of the broadcast or by any technical measure”
necessary. I suggest to the Minister, the noble Baroness, Lady Jolly, that including the amendment before us in the Bill would be an appropriate measure, as the European directive states.
I read recently that the world’s top 10 PR companies, including UK ones, have pledged not to represent clients that deny manmade climate change. That was a huge step for these companies to take. What a powerful signal it would send if those same PR companies and their advertisers took a similar course of action when it comes to their industry producing payday loan adverts.
My Lords, I thank all noble Lords for speaking in the debate, and give special thanks to the right reverend Prelate the Bishop of Birmingham for taking on the amendment tabled by the right reverend Prelate the Bishop of Truro. He spoke extremely well—in borrowed shoes, perhaps, but he obviously felt the same as the right reverend Prelate did in his introductory remarks earlier. I declare my interest as the retiring chair of StepChange, the debt charity, which has a lot of experience in this area.
As we found in Committee, there is clearly an all-party consensus for action. It all boils down to the question of why, if it is right to have advertising restrictions on certain items viewed as harmful or inappropriate for children such as violence, junk food, gambling and alcohol, it is not right to do the same to prevent the harm caused by payday loans. We have clear evidence that there is significant pressure from parents and many campaign groups to place payday loans in the same category as the items that are already restricted, and we need to listen to that.
It is up to the Government to defend their position and explain why on earth they feel that they can resist this amendment. When it was debated in Grand Committee the noble Baroness, Lady Jolly, said:
“The Government share the concerns of noble Lords that this market has caused serious problems for consumers, with unscrupulous lenders taking advantage of vulnerable consumers”.
I could not have put it better myself. She added that the Government were,
“committed to tackling abuse in the payday market wherever it occurs, including in the marketing of these loans. The Government strongly agree with noble Lords that it is unacceptable for payday lenders deliberately to target vulnerable consumers with their advertising material”.
Game over, it seems to me. So far, so good—but it went downhill from there. The Minister’s argument boiled down to the tired old saw that regulation, not legislation was the right answer, and that,
“a robust set of measures are now in place to protect the vulnerable from such practices”.—[Official Report, 3/11/14, col. GC 618.]
But they do not.
What do we want? We want legislation now. What are we being offered? Wishy-washy regulations that do not stop children seeing payday lenders’ advertisements, causing irreparable harm. The Government accept that these products, like alcohol and gambling, which I have already mentioned, are unsuitable for children. They agree that advertisements for those should not be targeted at children, but they are happy to let this go forward for payday lenders. This is not good policy-making.
The Government have a chance today to give the noble Lord, Lord Mitchell, an early Christmas present and allow him to say that the job on payday lenders has been well done. This is a good thing to do. The time for reviews and evidence gathering is surely over, and I hope that the right reverend Prelate will not be dissuaded from testing the opinion of the House at the end of this debate. The noble Lord, Lord Higgins, may be right that that wording of the amendment is not exact enough, but that, of course, can be tidied up at Third Reading. We should not desist from testing the principle here simply because of difficulties with the wording. Sometimes you just have to do the right thing—and I hope we will.
My Lords, I am grateful to noble Lords for raising the important issue of the payday lending industry again. I repeat what I said in Committee—that the strong feeling in the House on this matter is clear, and the Government share the concern that payday lenders’ advertising can encourage irresponsible borrowing and cause consumers real harm.
The Government have worked hard on this issue to listen to as many views as possible, both within this House and beyond. As was noted earlier, I have met and spoken to the right reverend Prelate the Bishop of Truro several times, and just this morning the Minister and I met the right reverend Prelate the Bishop of Birmingham—who is an excellent understudy in this matter—and other noble Lords, to discuss their concerns.
It is worth reiterating all the action the Government have taken to protect consumers in this industry, because in Committee we were a very select bunch whereas on Report there is a wider audience. First, the Government have fundamentally reformed the regulation of the payday market. The Financial Conduct Authority’s new, more robust regulatory system is already having a significant impact: the FCA has found that the volume of payday loans has fallen by 35% since it took over regulation in April; that has happened in just seven months.
The Government have also legislated to require the FCA to introduce a cap on the cost of payday loans, to protect consumers from unfair costs. This cap, which will be in place from the turn of the year, will ensure that no customer ever has to pay back more than double the amount they have borrowed. The FCA has estimated that as a result of the cap, perhaps as few as three or four firms will be able to continue in the market. The Government remain committed to tackling abuse in the payday loan market wherever it occurs, including in the marketing of these loans.
Noble Lords raised specific concerns about the potential for payday loan advertising to target children. Members of the Consumer Finance Association, the main payday loan trade body, and Wonga, which is represented separately, all have explicit policies not to advertise on children’s TV. Ofcom has found that payday loan adverts comprise a relatively small 0.6% of TV adverts seen by children aged between four and 15, which is just over one a week. This is across all channels and time slots. Ofcom has also found that over a quarter of TV watched by four to 15 year-olds is after 9 pm, after the watershed. Therefore the key to protecting children must be to ensure that all adverts seen at any time of day—and this is the point that the noble Lord was making earlier—have appropriate content and are not targeted at children in any way.
Let me be clear. There are already robust content rules in place to protect children from payday loan advertisements. The Advertising Standards Authority enforces the rules set out in the UK Code of Broadcast Advertising, or the BCAP code. The BCAP code requires that all adverts are socially responsible and ensure that young people are protected from harm.
I am grateful to the noble Baroness and I apologise for interrupting. If Wonga and other payday loan companies are saying that they do not directly target children, why do they use the creative powers of advertising that are particularly attractive to children, such as the granny and grandpa puppets in one of the ads?
I am not sure that those ads are attractive solely to children. The point is that they perhaps attract us all. I am not sure. I have not seen a Wonga advert for a very long time but I understood that the old grannies disappeared some considerable time ago. I will come back to the noble Baroness on that issue.
I want to proceed because I have a few things I would like to say. The rules specifically prohibit payday loan adverts from encouraging under-18s to either take out a loan or pester others to do so for them. The noble Baroness, Lady Drake, brought up the point about pester power. Existing ASA rules prohibit the payday loan adverts from encouraging under-18s to take out loans. BCAP is undertaking a review to ensure that these rules are effective, and I will come back to that in a moment.
The social responsibility requirement prohibits lenders from deliberately targeting vulnerable people more generally. That was referred to earlier as well. The ASA has powers to ban adverts which do not meet its rules and has a strong track record of so doing. Since May 2014 it has banned 12 payday loan adverts as being inappropriate. In addition to the ASA’s role, the FCA has introduced tough new rules for payday loan adverts, including mandatory risk warnings and a requirement to signpost to free debt advice. To ensure that protections remain effective, the Broadcast Committee of Advertising Practice is currently reviewing how its content rules relating to the protection of children are applied to payday loan advertising on TV.
The Government recognise the strong feeling on the issue in the House, as well as the important research that has been published since the inception of the BCAP review, including that produced by the Children’s Society. Here I pay credit to the society for its tireless work and for bringing this issue very much into our inboxes and to our attention. As a result, I can today announce that Treasury Ministers have asked BCAP to broaden the remit of its review, to ensure that it also considers the appropriateness of its scheduling rules, as well as those around content. Treasury Ministers are writing to BCAP formally to set out this request and this letter will be placed in the Library of the House. BCAP has agreed to this and will expand its review with a view to publication of its findings, in full, in the new year.
During the review, BCAP will of course be very keen to engage with noble Lords on their concerns. When meeting noble Lords at lunchtime today we talked about what might happen within the House. A debate on BCAP’s findings would be more that welcome in the House. I am happy to take the request for a debate back to the business managers. I hope noble Lords will understand that I cannot commit to a timetable for a debate before discussing it with colleagues and with the usual channels.
My Lords, I am grateful to the noble Baroness, not least because of the discussion that some of us were able to take part in earlier about this very issue. However, a debate and a review, of course, are no substitute for legislation, as she will agree. Will she at least commit, not about debates or reviews but about what the Government can commit to themselves, which is legislation if the review does not bring forward the necessary mechanisms to control this disease which has been described by so many noble Lords today as affecting so many people?
But you are a Minister.
I am, indeed, a Minister. However, there are things to which this lowly Minister will not commit. I want to press on. I have a few paragraphs to go.
This rule-making process is consistent with the way that BCAP makes its rules around adverts for gambling and alcohol. The noble Baroness, Lady Drake, made the point that this must be the same as for adverts for gambling and alcohol; and this is the same way that BCAP copes with such adverts.
I repeat that the Government are determined that children are protected from inappropriate advertising by payday lenders. The Government have introduced a wide range of reforms to clean up the payday sector and these are already having a significant impact in protecting consumers. The Government welcome the extended BCAP review to ensure that evidence informs both the content and, indeed, the scheduling rules around payday adverts and continues to deliver a forceful regulatory approach. I hope that noble Lords also welcome these developments and recognise the Government’s efforts to find agreement on this matter. I hope that the right reverend Prelate will see fit to withdraw the amendment.
My Lords, I am grateful for the full, well informed and passionate debate that we have had on this subject. There has been considerable progress. With the noble Lord, Lord Higgins, I was here during the passage of the Financial Services (Banking Reform) Act last year and this area was given a lot of attention. We expected change and change has begun to happen. There is certainly a mood in the House today that further change should take place, change that must happen quickly. Children grow up very quickly and one or two influences at a certain age can make a dramatic difference, not only to them but to the behaviour of their parents, as has been so well illustrated today.
I am grateful to the noble Lord, Lord Alton, for reminding us that we need not only rigour but action in order to pursue proper behaviour by this area of commerce, just as we expect proper responsibility from all our citizens in managing their money, even in extremely difficult circumstances. I am very grateful to the noble Lord for asking the Minister to enable us in this House to hold this business accountable in public, so that further action can not only be monitored but be insisted upon.
I am grateful to the noble Lord, Lord Higgins, for challenging me on my use of the English language and on using back-street “slanguage”, when the language of the Treasury and the legal department—but also the advertising industry, which understands perfectly well when we say “content and timing of … communications”—is what is meant. The noble Lord, Lord Stoneham, brought some of that insight. We have regulators, of whom we expect great things: the Advertising Standards Authority, the Financial Conduct Authority and, of course, the Broadcast Committee of Advertising Practice.
Advertising of this kind, as was said by the noble Baroness, Lady Drake, is unsuitable for children and is corrosive to the family. The approach to this very difficult issue, success though there has been, is multifaceted. A degree of negotiation and persuasion, as well as authoritative legislation, is needed in these powerful institutions that are driven, really, by our consumer society.
I am grateful to all noble Lords who have taken part today and I thank the Minister for taking this issue not only seriously but further by agreeing that the Treasury will write to the Broadcast Committee of Advertising Practice, by broadening the scope of the accountability it must take and by insisting that the content and the timing of adverts must not only be improved but satisfy the points made in this House. The watershed is vital, as is the issue of content. There is a long way to go but I look forward to working with my noble colleagues in this House, with the Minister and with the Children’s Society and the other charities that have been mentioned in ensuring that what has been passionately argued today takes place. I beg leave to withdraw the amendment.
Some Lords objected to the request for leave to withdraw the amendment, and so it was not granted.
48: After Clause 86, insert the following new Clause—
“High-cost short-term credit: unsolicited marketing
(1) Within six months of the passing of this Act, the Secretary of State must make regulations made by statutory instrument to prevent the sale of high-cost short-term credit through unsolicited marketing calls.
(2) A statutory instrument containing regulations under subsection (1) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”
My Lords, I move Amendment 48 in the borrowed shoes of the right reverend Prelate the Bishop of Truro, which are reasonably comfortable—or were, until about 10 minutes ago. The amendment is in his name and that of my noble friend Lord Alton.
The subject is telemarketing, which is in the same vein as payday loans. The discussion of this amendment in Committee made some strong progress with the issue, and I was pleased to see how many of your Lordships spoke in support of it right across the House. I am sure that many noble Lords will have been irritated by cold calling down the telephone. The Department for Culture, Media and Sport’s current consultation on nuisance calls is an important contribution, and an opportunity to tackle the issue of cold calling as a whole, but this amendment is focused on the specific problems caused by cold calling for high-cost credit.
As the right reverend Prelate the Bishop of Truro said in the previous debate in September, the report Playday not Payday, which has already been mentioned by my noble friend Lord Alton, looked into the devastating effect of payday loans on children and particularly at the use of telemarketing. It found that only 7% of those parents who had never taken out a loan were receiving such calls, whereas 42% of those who had taken out loans previously were receiving calls. Again, younger parents, aged 18 to 24, are most likely to have taken out a payday loan, so the bulk of these calls are going to young parents who are already financially vulnerable. This concerns me greatly. According to a poll of clients of StepChange, the debt charity, one-third of them have received an unsolicited marketing call offering them a payday loan. Although unsolicited calling may have some benefit for consumers in some industries, there is no question but that they are unsuitable for high-cost credit.
In Committee, we discussed how a gap in the regulations is allowing payday loan companies to use unsolicited marketing to offer people payday loans through phone calls and texts. For mortgage products, however, this type of unsolicited marketing is banned by the Mortgage Conduct of Business rules. The Financial Conduct Authority, whose efforts have already been mentioned and which regulates payday lenders, is very clear on this issue. It says:
“Cold calling can expose consumers to high pressure sales tactics which mean that they can end up with an inappropriate or over-expensive product or service. Our investment and mortgage financial promotion rules therefore ban cold calling … unless certain conditions are met”.
The noble Baroness agreed in Committee to look into this issue, and I look forward to hearing her response. With the Financial Conduct Authority now taking over regulation of payday loans, it makes perfect sense to protect people from high-pressure selling of what can, even after the new cap on costs, turn out to be very expensive products.
My Lords, I second the amendment and support the right reverend Prelate the Bishop of Birmingham in moving it. My name is on the Marshalled List in support of the right reverend Prelate the Bishop of Truro, who tabled the amendment. I will keep my remarks brief because we exhausted many of the arguments in the previous amendment.
One figure that struck me very much is the £8.3 billion estimate of the social costs of debt problems. Putting aside such staggering figures, which are quite hard sometimes to understand, I think about the families I have met over the years who have seen their family life, community life and whole neighbourhoods broken as a consequence of indebtedness and the debt culture. The time that your Lordships spent when this Parliament was first convened considering the crisis we were facing because of the national debt is being replicated in the area of personal debt. Sometimes we overlook the latter because we are concentrating so much, rightly, on the former. However, many families are deeply immersed in debt, which is incredibly destructive of their family life. I suspect that one of the major factors in the breakdown of family life is people taking out all sorts of commitments and debts that they did not fully understand, when they entered into them, they would not be able to honour and meet. It ultimately leads to friction, disagreement, inability to pay and, then, catastrophic results. Anyone who read the front-page report in the Times newspaper this week about the effects of the breakdown of family life in this country on outcomes, particularly for young people, should surely be troubled by these things.
All of us will have experienced high-pressured, targeting salesmanship. It is incredibly frustrating to pick up the telephone and find people trying to sell you yet something else that you do not need, but many of us can easily be susceptible to it. This is a good amendment and one that I hope the Government will feel able to accept today. I am very happy to support the right reverend Prelate.
My Lords, if noble Lords in this House are already quite fed up with these calls, how much more so it must be for those at home all day, or those without mobile phones, who are almost afraid to answer their landline for fear that it is going to be someone out to con them.
I will broaden this beyond callers offering high-cost credit to all those others who keep phoning us: claims management companies making offers about non-existent car crashes or mis-sold PPI and those making the blatant illegal fishing calls trying to obtain credit card details under the guise of doing marketing. We know that seven in 10 landline customers receive live marketing calls, which add up to 7.8 billion calls a year. These are unwanted calls. The Information Commissioner’s Office receives about 160,000 complaints a year about unsolicited calls and texts. MPs tell us that it fills their postbag. It is the number one complaint for Ofcom, which gets over 3,000 complaints a month. Furthermore, Ofcom’s own research shows—perhaps this is no surprise—that it is vulnerable people who are especially at risk, with a quarter of them getting as many as 10 calls a week that they know to be scams. I am even more worried by those who do not think that they are getting scam calls, because they probably are getting them but think that they are genuine, which really is frightening.
We are wondering how much longer we have to wait for action, but these two amendments are a useful first step. It has taken some time to launch the consultation for the Information Commissioner’s Office to be able to lower the bar before it can take action. Our amendment would allow us to look at who is actually doing the calling and try to stop it at that stage. The first thing that has to happen is for people to know who is calling them. If people can see the telephone number, that will help them to know whether to lift the phone. However, more importantly, in terms of helping to stamp out the practice, having the telephone number would enable complaints to be made and action to be taken. At the moment, more than half of nuisance calls arrive without caller line identification, so you do not know who is phoning you. A large number of those calls, maybe a quarter, may be from abroad. Even if the caller line identification simply said it was an international number, you would probably know that it is one that you do not want to pick up—unless you happen to have a child going round the world and phoning you up from time to time for money, which I gather happens quite a lot. Other calls say simply “number withheld”, which is what we want to put an end to.
Amendment 50A, tabled by my noble friend Lord Stevenson and me, would mandate caller line identification for non-domestic callers, with telephone operators making the facility to read that free to subscribers. When I was young, we used to have to buy a telephone answering machine, but that is now built into our telephones; so should this be, so that we can see who is phoning us. The Culture, Media and Sport Select Committee in the other place supported prohibiting the withholding of numbers for marketing calls and so did the all-party group. In moving a debate on a 10-minute rule Bill in the other House, Alun Cairns said that he supposed that this,
“could be compared to someone knocking at the door wearing a mask or a balaclava. Would we answer the door”,
in those circumstances? He then said:
“Of course we would not. Why, then, do we allow the same thing to happen over the telephone?”.—[Official Report, Commons, 28/2/13; col. 158WH.]
In Committee, the noble Baroness, Lady Neville-Rolfe, said that mandatory caller line identification is not permissible under EU law. Needless to say, we have done a bit of research since then: the German telecommunications law makes it illegal to restrict or withhold the line identity when people are calling for marketing purposes; France also prohibits hidden numbers in telephone canvassing; and in Italy—the translation is a bit dodgy for this but I think we have it right—data processing operators must ensure caller line identification when they call subscribers. So there is no reason why we cannot do it here. Jo Connell, chair of the Communications Consumer Panel, strongly supports our amendment. As she says, caller line identification helps report nuisance calls to regulators as well as enabling people to block or filter calls. I look forward to what the Minister is going to say on this, as it may lift our hearts a little.
My Lords, I am looking for one small piece of clarification on this. I fully support these amendments, as someone who suffers from cold calling. Despite having set up a service that is supposed to stop it, I still suffer from it, both on my mobile phone and on my landline at home. However, there is a particular issue with this place. When someone phones out from here, it comes up as an unrecognisable number. It does not give a telephone number, so of course my wife now waits until the phone has rung about five or six times before she answers it because she is worried that it might be a nuisance call. It may be that this would be covered under proposed new Regulation 10A(5) in my noble friend’s amendment, which says:
“Where OFCOM determines that there are reasonable grounds to exempt a non-domestic caller or group of non-domestic callers”,
then it would give an exemption. However, there is a small problem with this place—there may be other places or other public bodies in a similar position—as it would be wrong to identify that the number comes from the Houses of Parliament. That is obviously for security reasons, but I hope that I can get some sort of assurance on that.
My Lords, I thank the right reverend Prelate the Bishop of Birmingham for presenting the right reverend Prelate the Bishop of Truro’s amendment with such clarity, oratory and, if I may say so, brevity. I also thank the noble Lord, Lord Alton, for his telling contribution and the noble Baroness, Lady Hayter, for her contribution to our debates on unsolicited calls and nuisance calls and for the examples that she has given, which I will not seek to repeat.
Amendment 48 combines two matters which concern us all deeply: payday lenders and nuisance calls. It brings those matters together and I have listened to many eloquent speeches on it, so I hope noble Lords will not mind if I take the time to reassure the House that the Government share their concern, including the impact of cold calling on the vulnerable and on family life. In terms of payday loans, it is worth reiterating that the Government have introduced a wide range of reforms. That includes the Broadcast Committee of Advertising Practice’s review, which will be enhanced following the discussion that we had on the earlier amendment.
The Government’s action also includes the transfer of regulation to the Financial Conduct Authority earlier this year. That independent regulator is already having a dramatic impact on the payday loan market, with tough rules such as the limit on rollovers and more rigorous affordability assessments, and far closer supervision.
The regulator also has a wide-ranging enforcement toolkit to take action where wrongdoing is found. Recent high-profile redress schemes, such as the recent cases involving Wonga, show that payday lenders will not be able to get away with failing to comply with the FCA’s rules. The FCA’s tougher regulatory approach has had an impact, with the volume of payday loans shrinking by over a third since April.
However, the FCA is not standing still; it has a clear plan of action to continue to tidy up this sector. Noble Lords have already mentioned several of the actions. From next week, all payday lenders will be required to start applying for full FCA authorisation, in which the FCA will rigorously assess firms’ compliance and the appropriateness of their business models. Firms which do not meet the FCA’s threshold conditions will not be allowed to operate. As my noble friend Lady Jolly has already described, the FCA’s cap on the cost of payday loans comes into force on 2 January—my birthday—and it will have a dramatic impact.
On the specific issue of payday lenders’ and brokers’ use of unsolicited marketing calls, the FCA shares the concerns of all of us. Payday loan firms are subject to the existing rules under the Information Commissioner’s Office, as well as the measures in the Government’s Nuisance Calls Action Plan. The FCA also has rules in place that require payday loan firms to ensure that calls are made only at an appropriate time of day and to make clear at the outset the identity of the firm and the purpose of the communication.
However, today I can announce new measures. As part of the FCA’s clear and ongoing plan to tackle sources of consumer detriment in the payday loan market, next year it will consult on payday loan firms’ unsolicited marketing calls. This consultation will be undertaken in the early summer, following the closure of the authorisation “landing slot” for payday loan firms. The FCA has written to me committing to this, and I am happy to place its letter in the Library of the House. The consultation will specifically include looking at whether these calls should be banned. The FCA will also take a close look at payday loan firms’ use of other unsolicited communications, including text messages and e-mails.
To conclude on this amendment, the industry is already seeing dramatic changes. We look forward to the continuation of the FCA’s work in the months ahead and to hearing the results of the consultation that I have just announced. As the right reverend Prelate said, it is important to act quickly and to be persuasive in this complex area.
I turn to Amendment 50A. As noble Lords are aware, concerns about unsolicited marketing calls relate not just to payday lending. I doubt that there are any of us who do not suffer regularly from the frustration of receiving nuisance calls, whether they are about PPI insurance or whether it is someone trying to sell you solar panels or double glazing. Some of these calls can be genuinely alarming, particularly for the elderly—people such as my father, aged 93—making them very reluctant to answer the phone.
It is worth reminding the House that there are strict rules in place governing the activities of direct marketing companies. Callers must not call people who have registered with the Telephone Preference Service register. They need to obtain prior consent for automated marketing calls, e-mails and fax messages. Consent to such calls is a point picked up in the amendment. I reassure the noble Baroness that if prior consent is not sought, there are tough penalties—I do not think that everybody knows that the Information Commissioner’s Office can issue a monetary penalty of up to £500,000. However, some firms are ignoring these requirements, leading to many unwanted calls. That is one reason why we are working closely with regulators, consumer groups, communications providers and parliamentarians to find ways to stop this law-breaking. This is starting—but only just starting—to make a difference.
It may help if I briefly set out some of the action that the Government have taken under our Nuisance Calls Action Plan, published in March. We have made it easier for consumers to find out how to complain on regulators’ websites. Also, we have ensured that nuisance calls are treated as a priority by the Information Commissioner’s Office and Ofcom. They are taking enforcement action, including issuing significant penalties to organisations found to be breaking the rules.
We are also tackling issues that have been hampering enforcement. In July this year, we amended the Privacy and Electronic Communications Regulations to allow Ofcom to disclose information to the Information Commissioner about organisations breaching the regulations. We are currently consulting on proposals to make it easier for the Information Commissioner to take enforcement action against organisations breaching those regulations. Enforcement in this area is patently hugely important and must be improved.
Currently, there is a requirement to show that substantial damage or substantial distress has been caused. We are proposing, as the noble Baroness said, to lower—or preferably remove—the legal threshold which the Information Commissioner needs to show when taking action. Which? has done great work in this area and is leading a task force considering consent and onward sales that are believed to be the cause of nuisance calls being made to consumers. It will report to the Government next month.
A further important aspect of the issue is, as the noble Baroness, Lady Hayter, has said, identifying who is making unwanted calls when the caller line identification is withheld. This is one of the main issues behind the noble Baroness’s amendment, which seeks to require non-domestic callers to present CLI for all calls. The noble Baroness knows that I very much share this objective. As she says, it is very difficult to complain to Ofcom or to your provider about a caller if you cannot see who is making the call.
Since this issue was raised in Committee, we have been looking very carefully at whether we can take further legislative action on caller line identification that is consistent with EU law—specifically the e-privacy directive, which allows direct marketing firms to withhold their number. Within some strict limits we do have the ability to derogate from the directive and restrict these rights. We have to demonstrate that this change is a necessary, appropriate and proportionate measure to prevent, detect and prosecute the unauthorised use of electronic communications systems, such as for callers making unsolicited direct marketing calls.
We are aware that Germany has already legislated within this derogation. I note what the noble Baroness said about France and Italy. I am therefore pleased to say that we are now satisfied that we can seek a derogation from the e-privacy directive to impose a requirement to provide CLI on any person making unsolicited calls for direct marketing purposes. The Government will therefore commit today to bring forward secondary legislation to amend the Privacy and Electronic Communications Regulations in the coming months, following an appropriate consultation.
While we will require caller line identification to be provided for marketing calls by committing to such legislation, we do not think it would be right to require caller line identification display services to be free of charge as proposed in the amendment. This service does cost providers money and we think it is a commercial decision as to whether they offer it separately or as part of a package. I am happy to say that TalkTalk already provides free caller line identification display and BT customers can obtain this service for free if they have signed up for a 12-month contract. So consumers can already opt for a free service. I expect others will offer this in view of the legislation we now plan on caller line identification.
As I hope I have shown, the Government take the issue of nuisance calls very seriously, and I have outlined the areas where we are taking action to tackle the problem of payday loans and more generally. We have responded to the specific concern raised in Committee—a very fruitful discussion, I should say, and I thank all those involved, especially the noble Baroness, Lady Hayter—about requiring mandatory caller line identification for marketing calls by committing to bring forward new legislation.
I hope the robust package of protections I have outlined today, and the FCA’s continued commitment to root out the bad practices we have all been discussing, reassures noble Lords, and that the right reverend Prelate will withdraw his amendment.
My Lords, I thank the Minister for her remarks, and particularly for obtaining agreement from the Financial Conduct Authority that in its next stage of consultation it will attend to the presenting issue of telesales in connection with payday loans. I expect that it will attend to that with its usual rigour and in a timely fashion. We heard today that this will be no later than the summer of next year. We have also heard that this will cover not only telephone calls but texts and emails as well.
I am most grateful to those who have contributed to the debate, especially the noble Lord, Lord Alton. I have also been very interested to hear the remarks of the noble Baroness, Lady Hayter, on the wider issue of nuisance calls. She referred to the “bank of mum and dad”, which highlights the underlying issue—the fact that while some people can go to the bank of mum and dad, even if they have to make a nuisance international phone call to do it, the people we are really trying to protect are those who have no other recourse than to go for unaffordable money at exorbitant rates.
In closing, I congratulate the noble Baroness on her forthcoming birthday. I hope that on 2 January, in addition to the present suitable for a public servant, she receives other presents that require no one to take out a loan to provide them. I beg leave to withdraw the amendment.
Amendment 48 withdrawn.
49: After Clause 86, insert the following new Clause—
“Communications services: change of service provider
In section 3 of the Communications Act 2003 (general duties of OFCOM), after subsection (2)(f) insert—“(g) the maintenance of processes that promote the consumer interest and competition, to include a switching regime that is led by the receiving provider”.”
This amendment, which was Amendment 103 in Grand Committee, received solid support from both sides of the House. Like the previous amendment I moved relating to Ofcom’s powers, it needs and deserves a better answer. To that extent it is a probing amendment, but I hope that I shall be using a fairly sharp stick to probe with.
The DCMS seems utterly determined not to give Ofcom any Christmas presents this year. The amendment addresses one of the fundamental rights of consumers—the ability to switch suppliers. It would introduce gaining provider-led switching across the communications sector. This is an opportunity to act in the interests of consumers and competition. Not only is this the Government’s own policy, as set out in Connectivity, Content and Consumers—a document issued last July—but it is supported by every party in this House.
Legislative change is also supported by Ofcom. In a letter written on 13 November to my noble friend Lady Jolly, Ed Richards, the chief executive, made it clear that without the support of legislation it would be difficult, if not impossible, to drive through this vital consumer change. The current evidence threshold to make the case is high and inevitably leads to expensive litigation. The amendment would enable Ofcom to address switching issues more quickly and directly.
In the light of the replies in Grand Committee to my noble friend Lord Stoneham, who ably put forward the argument there, I have retabled the amendment to give the Government a second opportunity to demonstrate that they stand firmly behind consumers and against vested interests and proponents of anti-competitive practices. Whoever replies to the amendment on behalf of the Government will need to address the issues raised so ably by my noble friend Lord Stoneham, such as the consumer harm created by the current complicated regime—witness the 1.2 million mobile customers who are double-billed or experience a total loss of service—and the hassle and confusion for consumers, which ultimately deter them from switching provider. The car insurance market, for instance, has a switching level of 38%, compared with 9% in the mobile and broadband market, and just 3% in digital television. There are also the poor retention practices caused by the current system, which forces customers to contact their original supplier and often leads providers to operate barriers to switching.
The Consumer Rights Bill offers a window to act in the interest of consumers, especially the vulnerable and those who do not know how to game the system. As discussed in Grand Committee, this would bring mobile communications in line with banking and introduce GPL systems across the sector, not only making switching easier for the consumer, but ensuring a more competitive market that works to drive down prices. My noble friend Lady Jolly insisted in Grand Committee that more work needs to be done to consult before the Government could accept a change to Ofcom’s duties such as this, but surely the need for change could not be plainer. That has been evident since 2007.
This is supported further by the recent evidence given to the House of Lords Communications Committee by Ed Richards, the CEO of Ofcom. He said:
“We have to pursue the consumer interest, but if we believe that the consumer interest lies in moving to gaining provider led, we have to demonstrate that at every level. If we had legislation that said Ofcom should start with the presumption that gaining provider led is the right answer, that changes the onus of responsibility quite significantly. In the litigation and the appeals, and the process of stopping us moving in that direction, which people will understandably enter into, that would make, in my judgment, quite a significant difference. If you start by making the case and bringing the evidence to bear with a presumption from Parliament that easy switching based on gaining provider led is where we are guided to begin, then I think the burden of responsibility on us to demonstrate that it is in the consumer interest is significantly easier”.
I thought, as did many of us, that Mr Richards made a very strong case before the committee. The amendment is also supported by the leading consumer rights group Which?. In its A Government for All Consumers, it rates simpler switching as the key policy priority for telecoms. In the Government’s previous response to this amendment it was stated that the Connected Continent package being discussed by the EU may deliver reform. However, Ed Richards’ letter to my noble friend has confirmed that progress is unlikely any time soon in that respect. What is the alternative—years of litigation on every change to GPL switching? It seems extraordinary that the basic case is that we have to wait until the whole EU does anything under the Connected Continent package before acting ourselves in the UK. I beg to move.
My Lords, I shall speak briefly in support of my noble friend Lord Clement-Jones. As I said in Committee, this is a very important change which is needed in this sector and follows what has already been done in banking and utilities. The current practice is anti-competitive because it reserves competitive offers for new and switching customers at the expense of existing customers. I accept that there are problems about how we can actually make the change. Ofcom clearly wants to do it. The complication arises because, as we know, the landline and broadband change applying to BT Openreach, which also affects Sky, TalkTalk, Post Office and EE broadband, is already in place, and now we want the final stage so that all the mobile operators are covered. There is also the issue of bundling as regards the connection with TV, satellite and so on. Ofcom is currently carrying out a consultation on that. We need to hear from the Government when that consultation is likely to be concluded, whether the Government fully support Ofcom in pushing that forward and whether Ofcom now has the power, in the Government’s view, to initiate it once the consultation is over.
My Lords, Amendment 49, which we support, would amend Section 3 of the Communications Act 2003, requiring Ofcom to promote competition and consumers’ interests by introducing a gaining provider led—or GPL—switching regime to the communications market.
It is obviously clear from what we have already heard and what we heard in Grand Committee that simple switching processes are vital to the health and future of all markets. While banking and energy customers are able to switch by contacting their new provider of choice, in mobile, pay TV and broadband customers have to contact their original provider before switching. The current losing provider led process is complicated and slow, works against consumers and distorts fair and open competition.
What is this mystery all about? As outlined by previous speakers, we have a situation where the Minister assured noble Lords, when she responded to this debate in Committee, that the Government have considerable sympathy for GPL switching in the UK. She said:
“In the Connectivity, Content and Consumers paper published last year, we emphasised that we want that across the board”.—[Official Report, 5/11/14; col. GC 692.]
That seems to be a supportive statement. Given that GPL switching already operates for fixed-line voice and broadband services delivered over the BT Openreach network, it is incomprehensible that it does not yet operate for mobile services or for pay TV. In Grand Committee, the Minister said that Ofcom had the power to mandate GPL switching for all communications services. However, as we have just heard, that does not seem to be Ofcom’s view. Indeed, so much does it disagree with what the Minister has said, it had to write to correct her after the debate in Grand Committee. It is worth quoting:
“We have said consistently that legislative reform to support GPL switching would enable us to address switching issues more quickly and directly, and make it easier for consumers to take advantage of the competitive UK communications market. Therefore we were pleased both with the government’s full support for Gaining Provider Led switching”—
in the July 2013 paper—
“and with the subsequent amendment tabled by Lord Clement-Jones … which would give effect to this aspiration by giving Ofcom a clear duty to mandate GPL switching”.
It is clear that Ofcom not only feels it does not have the power, but would welcome the certainty provided by legislation in the Bill. I suspect that that has more to do with the fact that this is a very litigious market within which a number of providers will probably seek judicial review on other issues if there is any doubt at all over whether the powers exist. It seems not so much a Christmas present but a necessary condition for the improvement of our markets that we should go ahead with this. I do not understand why the Government are reluctant to do so. I hope that they will be able to clear this up by supporting the amendment.
My Lords, as someone who has switched provider recently, I have seen at first hand how important it is to make the switching process easier for consumers. I empathise with people who are troubled by this, but I believe that we are close to solving the issue. Obviously the consumer is at the heart of our efforts and I am as keen as other noble Lords to make progress. I hope that I have some good news.
I am aware that Ed Richards has written to support the principle behind the amendment and I have also heard what he said to the parliamentary committee. As a result of that correspondence, we have had subsequent discussions with Ofcom. It has confirmed that it already has sufficient powers to deal with mobile services, on the same basis as it already deals with fixed line and broadband, which I will mention. We will want to see the conclusions of Ofcom’s current call for inputs before deciding what legislation is required for pay TV and bundles, but pay TV is not the issue that we are debating.
While I understand the concerns behind my noble friend’s amendment, I believe that it is not necessary, given Ofcom’s existing functions under the Communications Act 2003. Ofcom announced in December that RPL switching would be mandated for all providers delivering broadband and fixed telephony over the existing copper network. Work has started and full implementation of it will be completed by June 2015. Because many consumers now subscribe to telephony as part of a bundle of services, it does not make sense to focus on telephony alone. In July, Ofcom published a call for inputs to understand better the processes used to switch providers of bundled voice, broadband and pay TV. It will also hold discussions with the industry and consumer organisations, and, to respond to my noble friend Lord Stoneham’s question about the timetable, it will publish a document setting out the results in the first half of 2015. Ofcom will consult further and as appropriate on mobile and bundled services with a view to mandating RPL switching.
I share my noble friend’s concerns about RPL switching, but a short-term partial solution is not the answer. I can assure him that we are fully engaged on this matter with Ofcom and we will continue to be so. Given that progress, and everything that Ofcom is achieving with its existing powers and the ongoing work to move towards a system of RPL switching across the board, I ask my noble friend to withdraw his amendment.
I thank my noble friend for that reply. The one thing that I suppose I really should be grateful for is that—although one would have thought that it was natural in the course of events in Grand Committee and on Report—discussions have clearly taken place between the DCMS and Ofcom, finally, so that there seems to be at least some sort of a meeting of minds. Instead of the chief executive of Ofcom having to write as he did just after Grand Committee to clarify Ofcom’s legal situation and general position on this, discussions have taken place. We are somewhat unsighted by the fact that we do not have chapter and verse as to exactly what Ofcom said in these circumstances. However, it seems extraordinary that, whereas in the letter and in communications before the Communications Committee the CEO of Ofcom said that Ofcom did not have sufficient powers, he now seems to have agreed with the DCMS to roll over and say that it does have them.
I am sure that all sorts of arcane discussions are taking place. I think that there is a big distinction between powers formally to mandate GPL—subject to a merits test, which means that litigation therefore ensues at length about the merits of that decision—and an amendment such as this which makes a presumption that GPL is in the interests of consumers. I am not going to unpick that today; I said that this is a probing amendment. However, I still believe that further answers are required. I very much hope that the Minister will be able to write after this debate to clarify some of the points that I have raised. I hope that that will get us to a more satisfactory way of thinking about this.
Some Lords objected to the request for leave to withdraw the amendment, so it was not granted.
50: After Clause 86, insert the following new Clause—
“Obligations on suppliers of utilities
(1) This section applies to suppliers of electricity, gas, water, sewage systems, telephony (including mobile telephony), internet connections and analogous utilities (“utilities suppliers”) and consumers of those utilities.
(2) At the consumer’s request, which can be done by any means at any time, including at the time of signature of the contract, forthcoming bills shall be sent to that consumer in paper format free of charge instead of the digital version proposed by the utilities suppliers.
(3) If the request is introduced when the contract has already started, it will be taken into account within 10 working days after the date of request.
(4) This section applies equally to those who wish to pay by cheque.
(5) In this section, “cheque” has the meaning given in the Bills of Exchange Act 1882.”
My Lords, I beg to move the amendment standing in my name on the Order Paper, which I will read because the details will reoccur during what I have to say. The amendment would place an obligation on “suppliers of utilities”. I specify utilities because their suppliers are the worst offenders and the easiest to deal with. The amendment,
“applies to suppliers of electricity, gas, water, sewage systems, telephony (including mobile telephony), internet connections and analogous utilities (‘utilities suppliers’) and consumers of those utilities … At the consumer’s request, which can be done by any means at any time, including at the time of signature of the contract, forthcoming bills shall be sent to that consumer in paper format free of charge instead of the digital version proposed by the utilities suppliers”,
currently. The amendment continues:
“If the request is introduced when the contract has already started, it will be taken into account within 10 working days after the date of request … This section applies equally to those who wish to pay by cheque … In this section, ‘cheque’ has the meaning given in the Bills of Exchange Act 1882”.
The most important information to give your Lordships’ House on the need for this amendment is about the people whom it concerns. For the most part, they will be elderly with very limited means. They may have access to digital versions of their bills but, for a variety of reasons, do not or cannot learn how to use it. Many of the elderly people at whom this amendment is directed will have carers and want to hold a piece of paper in their hand. They want to see a bill. They want to see that it has been paid. They want to see how much it has cost them. These people, the vulnerable people, are those with whom I am mostly concerned. However, they are not by any means the only people who are desperate to get these important pieces of information, without having to pay for it, from the utilities, which are, on the whole, the worst offenders. This is very important to a lot of people. Many people can use all sorts of complicated, digital machinery but still want a piece of paper in their hands. I am in both categories. I have a personal interest because I am one of the old fogeys who do not do it, but I also object to paying for getting my piece of paper.
It would be interesting to list the legislation that other countries have passed in this respect. In France, where there is strong support for digital bills, there is a new piece of legislation. Article 3 of its decree stipulates that, at the consumer’s request, which can be done by any means at any time, including at the time the contract was signed, upcoming bills shall be sent to him or her free of charge, instead of the digital version proposed by the operator. If the request is introduced when the contract has already started, it will be taken into account within 10 working days after the request. That is now the law in France. A similar provision has been introduced by the Spanish courts and is now the law in Spain.
There have been exchanges on other issues related to the consumer rights directive, to which I shall refer. Once again, we have a Consumer Rights Bill before your Lordships’ House, and it would seem strange if we did not consider this to be the right place to put that legislation. We have to implement that directive within a limited period; we have roughly six months left in which to do so, and this is therefore an important occasion at which to impress upon the Government the urgency of the matter.
The directive does not refer in particular to the type of case that I am discussing but to information that has to be provided on paper, unless one agrees to take it by some other durable medium, such as e-mail et cetera. It is clear that it relates to contracts. I have clearly put in the amendment that these are contracts which are taking place with the various utilities. It is also convenient to include that provision because it will be in the hands of the regulators, which I believe can be relied upon entirely to represent consumers if this proposal is passed into legislation.
Among the replies in opposition to the amendment is, first, the claim that it applies only to contracts. However, I have carefully made it clear that these contracts are as described in my amendment. Under the directive, delivery of key information—I should make it clear that this is not what has been enacted in France or Spain—should be given on paper unless one agrees to receive it via some other durable medium such as e-mail. Therefore, it is clearly in the directive. It is not related specifically to the type of contracts I am talking about but nevertheless it means them as well.
One of the arguments that has been expressed against the amendment is that consumers who may have financial difficulties—and they are by no means all of the consumers who are interested in this but they are obviously the key ones—often benefit from contracts which are at the lower end of the scale of contracts available in that particular area. I suppose that is some help to them but it still does not cover the costs. Therefore, we come back to the point where these huge utilities say that it is going to be very costly for them to deliver by paper and that they are giving them contracts that are probably better than others in some respects but they really cannot afford to put a stamp on an envelope. The cost, because they have delivery contracts, is 22 pence.
These big industries cannot afford either to give notice that increases are taking place before they have taken place. However, they can afford to put the information online ready to press a button to send it to all the people who have opted for digital communications. When they press that button, they could easily press a button to send the information that their other consumers require on paper. The opposite argument to theirs is that many people who opt for digital communications forget to look. I understand that this happens to a very large proportion of those who receive information digitally. When they forget to look they have to go to a call centre quickly. Dealing with late payment calls to the call centre costs these industries about £5.30. However, we have not heard them striking those out of the contract yet.
Therefore, I feel that this is a very modest amendment. It is well within the Government’s capabilities to introduce it. An equivalent measure has been introduced in other countries. I cannot think of a good reason why it should not be here. No big organisation in the areas I have specified is going to be making a huge loss, or in fact making any loss at all. Often the cost is about £2. In my experience it is as much as £6 and it does not apply to all these regulated companies. Many of them already supply paper bills without charging. I see no reason why we should not accept this part of the directive into our Bill, which is after all the Consumer Rights Bill. For once I think Europe is doing the right thing before us. I am one of the people who voted against joining originally but I do not think Mr Farage will be very happy with what I have just said. Therefore, I will listen with great interest to my noble friend.
My Lords, when this amendment was discussed in Grand Committee, I raised the question of the universal postal service. However, before I mention that, perhaps I may say that I fully support the terms of this amendment and, in particular, the need for people who are not technology-orientated to be able to use their normal method of payment and to receive their bills on paper in the way they always have done without missing out on offers of discounts.
I return to the point made in Grand Committee about the effect on consumers of the universal postal service if something is not done very quickly. When we discussed this matter in Committee, the Minister was kind enough to say that she would write. She did so and was able to reassure me that it was still the Government’s intention to maintain the universal service, as agreed in the Postal Services Act 2011. The problem is that the Ofcom review of the downstream access arrangements, which allow Royal Mail’s competitors to get in on the act and get their mail delivered on the cheap, at a cost to Royal Mail, is due to take place next year.
As I said, I am very grateful to the Minister for the information she supplied following the Committee stage, but will she use her best endeavours to get Ofcom to bring forward the review to allow a proper examination of the tariffs charged under the downstream access arrangements in order that we may save a good universal postal service for the consumer? That depends on whether the Post Office, and Royal Mail in particular, are able to maintain sustainability. A proper pricing method needs to be introduced and Royal Mail really cannot wait. I declare my interest as a former postman. I do not think that we can let Royal Mail stew for several more months. We need the review to start very quickly and we need to introduce proper pricing for this service. I support the amendment.
My Lords, I have considerable sympathy for my noble friend’s amendment and also for what was said by the noble Lord, Lord Clarke, on maintaining the universal postal service. However, I think that other issues are involved here.
If somebody wants a paper bill, they should have the right to receive it, and I would have thought that the appropriate organisation to safeguard that would be the regulator of the appropriate utility. We need that for two reasons. The first is for identification. We know that people use utility bills for identification in credit checks and so on. Secondly, it is needed by people who do not have access to the internet.
However, progress is progress, and if it is cheaper to send out bills via the internet or by e-mail, consumers who opt for that should have the benefit of a discount, because the difference in cost is significant. I am afraid that we want to encourage that. At a time when everybody is very concerned about living standards and the cost of living, we should obviously support anything that reduces utility bills. Similarly, if it is cheaper for people to pay their bills by direct debit or by credit card rather than by cheque, the consumer should have the benefit of doing that. That is not to say that if somebody still wants a paper bill they cannot have it.
The problem with the amendment is that there will be misunderstandings. If the utility companies offer a discount, people will accuse them of charging them more for sending out a paper bill. However, the cost of doing so is higher, and I am afraid that the consumer should pay that if that is what they opt for. Of course, they should still have the right to receive a paper bill if they want it, but those who opt to pay by a cheaper method should clearly benefit. That is progress.
As I said in Committee, 50 years ago my father paid all his bills with cash, although he eventually moved to using a chequebook. My father is not alive but my mother-in-law, who is 93, has gone though exactly the same arrangement. She now gets us to pay by direct debit because that is easier and cheaper for her, and she should be allowed to benefit from that.
That is why I think that the amendment is misguided. There should be some protection, but I also think that consumers who opt for the cheaper method of payment should get the benefit of that.
My Lords, I support my noble friend’s amendment. I have heard what has been said about people who opt for paying their bills online, or whatever, and get a discount; that would be fine if everybody in the country had online access, knew how to work computers and knew exactly what they were doing. The reality is not like that. The most disadvantaged in our country do not have online access, including the elderly and those who live alone. The digital divide is increasing as we speak and it is very difficult—I am sorry, but on things such as utility bills, it is.
Secondly, if any noble Lord has tried to go online to pay a utility bill, particularly electricity and gas together, it is a nightmare. It is not exactly an easy option, and then a page comes up saying, “Do you want to chat?” and, of course, you cannot chat at all, it all has to be typed. I mean, what about people who have problems with their eyesight? It is tiny print. I have done it, but, my goodness, I swore at it. It took me about an hour to set up the thing. I can see people older than me—if there are such—struggling with this. It is not good. I think, for all sorts of reason, that until we have broadband in every house and a computer at everyone’s bedside, so to speak, we should carry on. Otherwise we will increase the digital divide and increase the disparity between those who have and those who have not.
My Lords, I, too, support my noble friend in this. I cannot understand why the utilities feel that they might incur huge costs in sending out paper bills. After all, they tell us how easy it is to use, how much better it is to use. Well, then, their customers will be convinced and they will do it that way. Of course, some will not, because, as my noble friends have said, not everybody at the moment has access to the internet. There are a number of elderly people, in particular, who find it difficult to manage it. Yes, they will move on in due course; why can we not decently wait for them to do so, and be replaced by all these vibrant, young people who can manage such things?
I also have some reservations about how one actually speaks to organisations such as utilities, which have now become terribly efficient, when you want to do something which is not exactly in the line of what they have anticipated. Of course, there is a phone number for you to ring, is there not? You then find you are speaking to a computer and the computer does not understand what you are saying, because what you are asking has not been programmed into it. Why should those of us who do not want to go down this modern route have to pay for those costs?
If I sound a bit edgy about this, it is because I had a problem yesterday with one organisation. I shall not mention which one, out of kindness. I rang the telephone number and, after a while, I could see that all I was doing was increasing my telephone bill. In some irritation I put my coat on and walked to their office in town. I stood in a queue, waiting to meet a human, and eventually I found a human. She was very helpful and said, “Oh, I can deal with that. I can get you a print-off”. She gave me a print-off and I came back quite pleased. I sat down and then realised that the print-off was not for the dates which I had asked for. So I put my coat on again and walked back.
This is a story of our times—dealing with these people. I find it extremely irritating that the programme is always right and the customer is always wrong. For that reason, I shall support my noble friend tonight. As I say, if we are wrong, and if it is such a beautiful system which all the utilities have introduced, it will not be a problem for them, because nobody will want to do it the way that my noble friend has suggested and all will be well—but I suspect that it will not be.
My Lords, I support the noble Baroness in her attempt to get equal rights for consumers who want to have paper bills. It is about consumer rights. The utilities are huge. It is quite right that it is cheaper for them to send the e-mail. It is not cheaper for the very poor and the vulnerable, as the noble Baroness, Lady O’Cathain, pointed out to us. In the work that I do in social welfare, it is the poorer end, people in poverty and the vulnerable elderly who often do not have family who can do the direct debit for them who actually end up paying more of the bill. What I cannot understand is: if it is going to cost the utilities so much more to send these people paper, why do they constantly send me every week a bit of paper that says, “I think you should know that if you change your supplier, you can save two and thruppence a week,” or whatever it is—I am going back a bit and using that to give a picture of how people view these things.
We can remember that, many years ago, there was an attempt to phase out cheques. That was changed because so many older people could not manage their accounts without having a cheque. As the noble Lord said, as we all die out—all those people who are not in this computer age—there will not be a difficulty because all our children and young people are taught computing at school and use computers all the time. But the costs must be minimal, compared to the vast amounts being made by utilities, to enable people who are poor and vulnerable to manage their finances in a visible and transparent way that they can understand. That surely is what we should be looking for in consumer rights.
My Lords, may I interject a word on this amendment, on which I have spoken before, by way of an Oral Question? To insist that everything is online and more expensive if one opts out is to penalise the poorest and oldest in society. We are always talking about the gap between the better off and the worse off. To ensure that the poorest and oldest—who are least likely to have computers and all the expense that attaches to them—should be penalised is quite wrong. In 50 years from now, I am sure that things will be very different, but we have to cope with where we are today. This amendment is eminent good sense.
My Lords, I beg the indulgence of the House first to thank the noble Baroness, Lady Neville-Rolfe, for what she said on caller identification. I was not able to speak at that point, but we are delighted with the movement there.
I also thank the noble Baroness, Lady Oppenheim-Barnes, for focusing attention in a Bill, as has been mentioned, on consumer rights on the basic right to have an invoice on paper and to be able to pay by cheque for utilities without having to pay for the privilege—it ought to be a right, not a privilege. We need to keep at the centre of our debates those customers who still want paper bills for their electricity, their gas and their water, particularly, as others have mentioned, those with no internet access or, indeed, no printers.
As the noble Baroness, Lady O’Cathain, and others have said, the digital exclusion affects some of the most vulnerable in society. More than a third of the digitally excluded are social housing tenants. Seventeen per cent of people earning less than £20,000 have never used the internet, compared with just 2% of those earning £40,000. Moreover, 44% of people without basic digital skills are on low wages or are unemployed. Added to that, 33% of registered disabled people have never used the internet. That is the group that we are talking about, in addition to the elderly.
This is an issue of fairness. Preparing for the debate this morning, I read in the newspaper—as I suppose everyone like me did—that the head of one energy company is about to be paid £14 million a year. I found it slightly hard to think of all those rather low-paid consumers whose money was going to that extravagance. It is not as if the energy companies are on their uppers. Ofgem forecasts that the profit margins for the big six will be about 8% of each of our bills—that is the profit, not their costs. Indeed, Ofgem has warned that consumers need an explanation from suppliers of why, when costs are falling, they are not seeing cuts in energy prices.
I say to the noble Lord, Lord Stoneham, that that is the real cost-of-living issue, not the cost of a bill. The annual Fuel Poverty Statistics Report shows that the fuel poverty gap—the difference between people’s bills and what they can afford—has grown to £480. More than 2 million households in England are defined as being in fuel poverty. These are the ones to which we will also add the cost of a bill, if they want to pay in that way. They are also exactly the people who have to budget most carefully with their utility bills, deciding which one is going to be on top and in which order they are going to pay. They are also the ones most likely to want to pay by cheque, as mentioned by the noble Baroness, Lady Howarth.
Given that the big six supply 92% of homes, there is a lack of competition. You cannot shop around, even for the supplier, let alone for who is going to charge you or not charge you for a bill. I think that the House knows that we have promised that, if we win in May, we will freeze energy bills until January 2017. I would not want anyone getting around that by adding money to the cost of the bill. We also want a tough new energy regulator that could otherwise intervene on exactly these sort of issues and stop energy companies overcharging people in the future.
As has been touched on, we are not talking about just the price of water and energy. This amendment is also about people who have to in some way share bills or responsibility for the bills. They may be flat sharers. They may be, as we heard in Committee, carers or people who are being cared for, who have to pass on their bills for others to pay. It is also about couples divorcing, when, again, there is a lot of splitting bills. It is about the self-employed, who need to put in claims. It is about people away for work or in hospital for a long period who, even if they can normally get online to look after their accounts, cannot on that occasion.
There will be many people in those sorts of situation dealing with bills, but there is also the identity problem, as has been mentioned. Generation Rent reminds us that it is young renters—a different group from the elderly, about whom we have been speaking—who most need printed bills for identity purposes. They need bills especially for landlords, but for many other things as well. They feel discriminated against for having to pay for the privilege of a bill. Indeed, to get a pass to work here you need a utility bill—not for those of us in the House but for any of our staff. If you want to open a bank account or get a parking permit, you need a bill. We think that it was wrong of the Government to get rid of our plans for ID cards, but, as they have gone, the utility bill remains for a lot of people their main source of ID. That is why we think that those who want and need paper bills should have them of right.
We of course favour encouraging people to go digital when they can to save themselves costs and to save paper and trees. As to those consumers who are able to check their expenditure electronically, and as the Government’s research has shown through Better Choices: Better Deals, if they could use price comparison sites more effectively, they could make enormous savings—perhaps as much as £150 million a year. That will drive competition for a lot of people, which is very good. It is why we welcome many of the ideas and intentions behind the midata project to give consumers more access to their information in a portable and accessible format. Indeed, we tabled an amendment in Committee to facilitate that.
We have always argued that people should have the right to receive information about their services in a way that best suits their needs, which ties in with the principle of the amendment in the name of the noble Baroness, Lady Oppenheim-Barnes. Millions of people look carefully at their bank statements and utility bills to check payments in and payments out. Cheques make it easy for people just to put a tick on a bill; later they can throw it away. When you pay an invoice with a cheque, the lovely stubs show you whether and when you have paid it.
It is great that some people can pay electronically. My guess is that they do so for their own convenience rather than for savings. They are likely to be younger and slightly savvier people who have a lot of advantages in life anyway. Do the utility companies have to make life difficult for the rest of us who want paper bills and to use cheques in order to encourage those who can to take up the electronic option? I doubt it. For the moment, we should look at all citizens and ensure that they can receive their utility bills by post and pay them promptly by cheque.
My Lords, we are living in a digital age, and many of us welcome the convenience of receiving and settling bills online. I have had an interesting discussion with my noble friend Lady Oppenheim-Barnes about the many issues she raises, and I certainly understand that many people want a paper bill. As she says, not all people can manage online, and we empathise with them. As the noble Baroness, Lady Howarth of Breckland, said, some people have no relatives to help. I also take the points made by the noble Baroness, Lady Hayter, about the poor and the vulnerable. However, all utility companies will give a paper bill on request. Bills can also be settled by cheque, which was another point made in the amendment, although I accept that certain payment types may attract discounts.
I was glad to hear from the noble Lord, Lord Clarke of Hampstead, about the importance of the universal postal service and that he found our exchange of correspondence helpful. Perhaps I may write to him again on the point that he raised. Some noble Lords referred to identity. Although paper bills are useful for the purpose of establishing identity, that is not their primary function. More reliable forms of identity are available, such as passports and driving licences. Going forward, as regards the transition, the Government Digital Service is leading work on the development of the ID assurance programme which will enable people to prove their identity and access government services in a digital world. That is an important bit of long-term work.
I have mentioned the availability of paper bills and I should summarise the current position in each of the utility areas. In water, companies do not make a charge for paper bills and offer a choice of payment methods including cheques. In telecoms, blind or visually impaired consumers who have requested bills in an accessible format, such as large print and Braille, and consumers on social tariffs, such as BT Basic, are not charged for paper bills. Ofcom requires that if there are charges for paper bills they must be set out in a clear, comprehensive and easily accessible manner and providers must publish clear and up-to-date information on these charges. In energy, paper bills are available and companies are already required under the terms of their licence to ensure that any differences in charges to consumers between different payment methods reflect the cost to the supplier.
I do not want to play party politics but we have reduced energy bills, and of course the energy companies have been referred to the Competition and Markets Authority. I am sure that we will all be very interested to see the progress of its study. As to other communications providers such as broadband, while paper bills might not always be provided, the main suppliers such as BT and Sky make them available and all companies must make a basic level of itemised billing available to all subscribers on request, either at no cost or for a reasonable fee. It is worth noting that the nature of these services is, of course, online.
In my very good meetings with my noble friend Lady Oppenheim-Barnes on various amendments to the Bill we discussed a number of the issues that are before the House in this amendment. I understand my noble friend’s analysis that paper transactions can sometimes cost relatively little, and I can agree that it is sometimes costly for a utility to sort out a problem caused by queries, for example a failure to pay electronic bills. However, these are not many cases compared with the total volume of bills. The reality is that utility companies save money by communicating electronically with consumers. That is a cost saving which is then passed back to consumers. As the noble Lord, Lord Stoneham, said so elegantly, that is occurring at a time when the cost of living is a really important issue. According to the Digital Efficiency Report, transacting online with the government will deliver more than £1.1 billion in savings because the average cost of a digital transaction is 20 times lower than on the phone, 30 times lower than a postal transaction and 50 times lower than face-to-face contact.
I wonder if I could make a helpful suggestion. Perhaps the Minister could suggest to the utility companies that, before they start to charge customers for issuing paper bills, they will guarantee that they will stop pestering customers with letters to “The Occupier” offering their wares. After all, it must be enormously expensive to do that. So they could save some money there, and that would help cover the costs of what my noble friend would like.
I thank my noble friend for his intervention and indeed for that suggestion. The whole business of costs, benefits and so on in this changing world is a very important one and the obvious answers are not always the right ones. I was trying to say that the savings are considerable and, with direct debit in particular, there are savings on both sides. In fact, 50% of those in fuel poverty use direct debit to spread the costs—so there are advantages. I do not want to discourage firms from innovating to protect and empower consumers in different ways. I do not want firms to get the message from this House that we are the enemies of progress. We have to be careful about that.
I agree that broadband is a substantial investment. The Government and the utilities are putting a large amount of investment into a broadband structure, not least—I used to campaign on this when I was on the Back Benches—to ensure that there is proper broadband right across the UK. There are obviously costs to consumers in change but it is extraordinary how the cost of software, smartphones and so on has come down as a result of our innovative industries in the UK demonstrating great progress.
Transparency is also important. If utility providers choose to make a charge for providing a paper bill or for settling bills by a more expensive payment method, the law requires that these additional charges be made clear to customers before they are bound by a contract. We are working on this. We are not standing still. The regulators keep a close eye on charges to customers and on the issue of choice and there is a good deal of work going on in this area. For example, Ofcom has announced that it will be collecting further information on energy suppliers’ approaches to settling price differences between payment methods. When Ofwat approves water companies’ charges each year it makes sure that the companies offer a reasonable range of payment options. Ofcom published research in July which looked at the affordability of essential telecom services. It found that the cost of the itemised bills was not a material concern to its customers.
Turning to the amendment in detail, I shall explain why I cannot accept it. There are legal constraints, particularly from European directives, which would prohibit legislation in the manner proposed. My noble friend Lady Oppenheim-Barnes mentioned the French and Spanish legislation in this area and the excellent staff in the House Library have provided a note on that. It records that the French Minister made an order regulating billing for electronic communications services—that is, calls, text messages and the internet. However, some of the parallels stem not from the consumer rights directive but from French national policy under French law. We have already fully implemented the consumer rights directive in the UK—that is the directive to which my noble friend referred—and that process was completed in June. I should add that the consumer rights directive requires the provision of pre-contractual information on a wide range of matters before the consumer is bound by a contract. However, it does not require bills to be provided to the consumer in paper form. I just wanted to clarify the legal position.
Although I agree that we need to think about the interests of the 7 million people who are not online, what really matters is getting people the best advice and putting them on the right tariff. Citizens Advice is seeking to help people to do that, as are the comparison sites to which the noble Baroness, Lady Hayter, referred, and to save significant sums of money. The key message we should take away from today’s debate is how much you can save by being on the right tariff.
As I have said, the Government cannot support the amendment but I want to take action in this area. I thank the noble Baroness, Lady Oppenheim-Barnes, for promoting the importance of choice for a paper bill and the need to keep a close watch on this important issue. We also need to ensure that the pace of change is not so fast that it is detrimental to consumers, a point well made by several noble Lords.
I announce today two things. My honourable friend the Minister for Consumer Affairs will ask Citizens Advice and Citizens Advice Scotland to develop new guidance on this issue. This means that when a consumer phones Citizens Advice or CAS with a concern, the staff have useful relevant information to help the consumer. The Competition and Markets Authority has agreed to follow up its recent work on problem debt by considering further practices or markets that may generate particular problems for consumers with low incomes. If lack of access to paper bills is highlighted as an issue, the Government would look to act further.
In conclusion, I do not agree with the terms of the noble Baroness’s amendment, although I value all she has done during the passage of this Bill and in her long career as a consumer champion. The world is changing. We cannot and should not try to prevent that. But paper bills and cheque payments are available and we are taking action shortly through the Small Business, Enterprise and Employment Bill to make accepting cheques more attractive to business. I have set out in detail what is being done to protect choice and I have announced some action today as a result of the contributions that have been made by my noble friends and others during the passage of the Bill.
I warmly thank the noble Baroness, Lady Oppenheim-Barnes, for making this debate possible, but I ask her to withdraw her amendment.
My Lords, I thank the noble Baroness for the amount of time that she has spent on this issue with me. I also thank her for not making more public some of the arguments that I put forth when we met privately.
We shall have to do this. The fact that the French have taken one road and the Spanish another does not solve anything. The directive says that when a contract is embarked on its details can be provided in a way appropriate to the means of the person and should be given on paper unless other requests are made. Identity proof by passport or driver’s licence immediately knocks out most of the neediest people in the country: the elderly. They do not drive cars. They do not have passports. They do not go away. Those sorts of helps are not really any good to them. But the number of people in this country who still do not have broadband is about 1.7 million, so there is a big area of exclusion.
I am grateful to everyone who has contributed, and especially to my noble friend Lord Tebbit. His seal of approval is very important to me and to the House. Therefore, I think I really must test the opinion of the House.
Amendment 50A not moved.
50B: After Clause 86, insert the following new Clause—
“Payday lenders levy
The Secretary of State shall produce an annual report on the level at which a levy on lenders in the high cost consumer credit market should be set and bring forward measures to ensure—(a) provision of free debt advice for vulnerable consumers; and(b) provision of affordable alternative credit through credit unions.”
In moving this amendment, which stands in my name and that of my noble friend Lady Hayter, I repeat my declaration of interest as the retiring chair of StepChange, the debt charity. I make it clear at the start that some of the free debt advice available in the United Kingdom is funded directly by creditors and by charitable donations. For example, StepChange Debt Charity receives the funding for all the work it does through this mechanism. Most of the major creditors, including some payday lenders, pay this fair share contribution, as it is called. Although it is not fashionable to do so, I put on record our thanks to the major creditors, including the banks, for their philanthropic activity, which last year allowed StepChange Debt Charity to offer advice and debt solutions to more than 500,000 people with unmanageable unsecured debts.
Other mainly face-to-face free debt advice services, and some of the telephone advice services operated by six other organisations including Citizens Advice, receive funds from the Money Advice Service via a compulsory levy on FCA-authorised lenders and financial institutions. The FCA collects the levy, but the Money Advice Service determines its size. We understand that it is the Government’s intention that payday lenders should pay this levy, but only when they are fully authorised, which will not be until spring 2016. Our amendment asks why we should wait. Why not now? The amendment would bring into scope creditors that do not yet pay the FCA levy, allow the FCA to vary the impact of the levy in relation to the consumer detriment caused on a sort of “polluter pays” principle and, as a result, increase funding for free debt advice and provide funds for the credit union movement.
Payday lenders cause a disproportionate level of consumer harm relative to the amounts that they lend, so they should, as the amendment suggests, contribute to debt advice a higher amount, proportionate to the greater level of detriment they cause. As high-cost credit providers exist only because there is not enough low-cost credit available in society, it is surely right that payday lenders should also be required to make a contribution to the credit unions, which provide exactly the sort of low-cost credit required but lack the resources necessary to reach out to all who need it.
When the Minister responded to the debate in Grand Committee, she said that the Government already put £38 million into credit unions—but that is a drop in the ocean compared to what is required to transform radically credit unions’ ability to supply low-cost credit where it is needed. I think that most people would accept that there is a greatly increased need here to cover the whole country. Where will that funding come from? A payday lender levy would help, and the next Labour Government are committed to introducing one.
In replying to this amendment in Committee, the Minister also said:
“The Government believe in the importance of free debt advice”.
I am relieved to hear that, but she rather spoilt it by adding:
“Free debt advice is funded by a levy on lenders, once they are fully authorised by the FCA … The noble Lord’s proposal would duplicate the existing funding arrangements for debt advice”.—[Official Report, 3/11/2014; col. GC 619.]
I hope that I have explained that the situation is a little more complicated than the noble Baroness said. Our proposals would add to the current level of funding, not duplicate it. Our argument is that the payday lenders that are causing the most consumer detriment should be asked to pay more and to do so now, so as to increase the pot of money available, rather than waiting until spring 2016, when the FCA authorisation will finally take effect.
I will make one further point. When the Minister comes to respond, could she let us know when she expects the Farnish review of the Money Advice Service to be published? One of the problems that we are experiencing in the debt advice and solutions area is that, following a rather trenchant Treasury Select Committee report, the organisation has been dogged by criticism and, not unnaturally, that radiates uncertainty about its future. It is in everyone’s interests that we achieve clarity going forward.
The main issues facing debt advice and solution services at present are as follows. The Money Advice Service’s statutory objectives were put in place before the reconfiguration of the regulatory architecture, which, among other things, has put the FCA in the driving seat for debt advice and solutions. It is difficult to see what role the Money Advice Service should play in terms of quality advice and so on going forward, as it would clearly duplicate what the FCA is doing and, in some senses, confuse lines of accountability. That needs to be resolved.
How can we get more people to seek the best advice in a timely manner and to sign up to debt solutions that best suit their circumstances? Given that there is a problem with not enough people coming forward for the debt advice that they urgently need, how can we incentivise people to take action to resolve their debt problems? In Scotland, there is a system which gives legal protection to people who enter a statutory debt-free payment scheme. It is called the debt arrangement scheme and it protects them from further interest or other charges. It is a really good system and it works well. Could we not have something like this in the rest of the UK? It would provide an incentive for those with problem debt to take responsible action.
We need to get more people using telephone and online services, with the latter having the great advantage of being scalable at negligible additional cost. We estimate that the cost ratio of offering a face-to-face service compared to telephone and online services is of the order of 50:5:1—in other words, a very large factor if you go for face-to-face services as opposed to interaction through the internet. We do not believe that the need to channel change is being effectively addressed within the sector at present.
How do we make the best use of the limited funding available to support people dealing with personal debt problems? The Government need to come up with an overall strategy to ensure the optimum use of such funds and to incentivise collaboration between the agencies in the interests of reaching more people in need, making the optimum use of the available resources. This does not need overcomplicated regulatory structures or duplication of co-ordination.
In fact, funding for debt advice and solutions has dwindled under this Government and, indeed, may be cut further if rumours are to be believed. According to recent research on this, the level of personal debt across the economy amounts to £8.3 billion per annum, as mentioned in an earlier debate. Some debt solutions, such as the debt relief order, are run by government but the costs fall to the charity sector. For example, it costs StepChange Debt Charity more than £2 million a year to support clients through this process.
I believe that it is time for a root and branch review of how we deal with personal debt and to integrate the current arrangements better. We need to have statutory insolvency provision, and we need that to be linked to insolvency services so as to provide efficiency and to cut the cost of services to the sector and the public. It is important to help people back on to their feet. It is also important to make sure that it does not impact on our overall economy. If we had a long-term strategy for the delivery of debt advice and debt solutions, we would be in a better place. I look forward to the Farnish report setting out sustainable principles which will encourage the free debt advice sector to have responsibility and a strategy for the future. I beg to move.
My Lords, I support Amendment 50B. The evidence available on the use of payday loans heightens fears that credit is increasingly seen as the new safety net for many citizens. StepChange found, for instance, that its clients with payday loans often have other forms of debt, such as a much greater likelihood of being behind with their rent.
The FCA has taken some strong and definitive action against the payday loan companies, and is suggesting that within a year or so perhaps 95% of these payday lending companies will be withdrawing their services. However, on its own admission, even after the cap on charges is introduced, the proportion of borrowers experiencing financial distress as a result of such borrowing will remain at about 40%. But whatever the action taken by the FCA to regulate a particular market, the demand for credit among low-income households will remain, as will the problem of rising debt and the need for help and advice.
Even after addressing the business models of the payday loan companies, the systemic problem will still need to be resolved: how can people get access to affordable credit and get access to, and use of, a free debt advice service? Only the Government can drive the policy needed to secure sufficient capital liquidity for not-for-profit affordable lenders to provide an alternative source of credit. This amendment captures the need for the Secretary of State to bring forward measures to address those twin needs of free debt advice for vulnerable consumers and the provision of affordable credit.
As a comparator, for those who have assets rather than debts, the new freedom and choice agenda for pensions due in April 2015 comes with a guaranteed guidance service, captured in legislation—on the assumption, quite rightly, that the position of pension savers and consumers in the marketplace will be more vulnerable to poor decision-taking without such guaranteed guidance. How greater is the case, then, for those who have debts rather than assets?
No doubt the argument will be made that significant numbers who would benefit do not seek debt advice and that the allocation of funding to a debt advice service is proportionate to the demand. My response is to say that the Government should take the lead in creating the demand and the take-up for that debt advice service. My noble friend Lord Stevenson suggested examples based on the Scottish system. Maybe we should see the introduction of some conditionalities into the credit market on taking debt counselling in association with the giving of loans. There are lots of initiatives that the Government could take, not only to provide debt advice services but to ensure that users or takers of loans use that service.
We also need to see how structural changes in the labour market interface with the social security system to understand whether this is reinforcing the use of credit as a systemic solution to low-income families’ financial management, demonstrating the need for free debt advice services. I will take a few moments to explain what I mean. The casualisation of employment contracts, along with variable and zero-hours contracts, can result in significant volatility around hours worked and income received in any one week, let alone between weeks. In such situations, where people do not have a smooth income flow, if you have to pay your rent, buy food for your children or repair a much needed broken washing machine, you probably cannot wait until a week where you have more hours and higher wages. You need the credit to tide you over.
However, the welfare system cannot provide a real-time response. Under the current system, if you work less than 16 hours in a week, you do not qualify for the working tax credit in that week. If you are tied into an exclusive contract with an employer and provided with very few hours of work that week, and are not available for other work because of that exclusivity, then you cannot get JSA. Universal credit, when it is rolled out, may overcome the barrier of the 16 hours but it will replace it with another hurdle that will increase the need for credit. Universal credit is paid monthly in arrears, so you would struggle to catch up with your debt even under universal credit.
If you face such volatility in your hours and income and have more than 16 hours of work, you deal with the HMRC, but if you have worked under 16 hours in that week, you deal with the DWP for JSA and with the local authority for housing benefit. You also have to manage your debts. As my noble friend Lady Hollis frequently comments, being poor can be a full-time job—even more so with the changing nature of the labour market and, potentially, the greater need for credit.
The point that I am making is that for lower-income households, given what is happening in the labour market and how the welfare system operates, even under universal credit, the need for short-term credit for families—particularly vulnerable, low-income ones—to manage their finances will increase, not decline, and with it the desperate need for debt advice services. The examples that I have given illustrate the real evidence why low-income people will persist in being vulnerable to high-cost loans and in need of debt advice services.
The problems are compounded by the insufficiency of low-cost sources of credit and the absence of public policies promoting savings strategies for low-income people to provide a savings buffer. Most do not have such a thing or the means to acquire it. Tax incentives are targeted at the better off. One has to earn enough in the first instance to get the benefit of incentivised tax relief. The need for low-cost loans and debt counselling will remain very important for the foreseeable future for many on low incomes. Whatever the FCA does to the business model of payday loan companies, the systemic problem of how low-income people manage their finances, their dependency on loans and their need for assistance in managing debt will, when one looks at what is happening in the world of work, increase and not decrease.
This amendment would put a responsibility on the Secretary of State to bring forward measures to ensure,
“free debt advice for vulnerable consumers; and … provision of affordable alternative credit through credit unions”.
Much is said by politicians, including in both Houses, about protecting people in the face of the realities of today’s labour and financial markets. Helping them manage their finances, which will protect the well-being of their families though the provision of affordable credit and debt counselling, has to rank very high.
Thinking of a comment to conclude my speech, I remembered being at a discussion dinner a while ago on the duties of care of providers in the wholesale and retail asset management industry, an issue on which I engage a great deal. There was a mixed group of people there from different sides of the industry and of different political persuasions. Someone asked why the management of consumers’ assets and savings receives so much more political attention than the management of debt. There was a pause around the room. I replied that it is because unmanageable debt is concentrated among the poor.
We have to raise that issue and say that there is nothing, looking at the horizon of the labour market and at how the welfare system will operate, that provides an easy solution for families caught in this need to manage their finances. That is why this amendment is so helpful. We have to sustain the debate. Governments and the Secretary of State must take on, as a core societal issue, how they address providing or delivering debt advice and low-cost access to credit to so many people who need them.
My Lords, those were really interesting contributions from noble Lords who know—not at the coal face but at the advice centre—what the issues are.
Turning to the noble Lord’s proposal for a levy on payday lenders, I commend his work in the area of debt advice as he stands down. I am sure that he will find something else to do with his time. The Government believe that the key to tackling problem payday lenders is tougher and better regulation. This is already set out. I have spoken at some length today about the way that the Government have reformed regulation of the payday market with the introduction of the FCA’s new regime.
FCA regulation is already having a dramatic impact on the payday market. Indeed, the FCA has found that the volume of payday loans has fallen by 35% since it took over regulation in April. Further changes are expected to follow the introduction of the cap on the cost of payday loans in January. The FCA has estimated that as few as three or four lenders may remain in the market. Consumers are better protected under the FCA regime. It has introduced binding rules and a rigorous authorisation process where it assesses payday lenders’ business models and compliance, which will begin next month. Firms that do not meet the FCA’s threshold conditions will not be authorised.
The amendment specifically proposes imposing a levy on payday lenders to support free debt advice and credit unions. The Government share the view of the importance of free debt advice and acknowledge the points made by the noble Baroness, Lady Drake, that people in debt have problems around well-being. The well-being of families has to be critical and core to all of these issues. The Government have put the provision of free debt advice on a sustainable footing through the Money Advice Service, but it is clearly supplemented by organisations such as StepChange and Citizens Advice.
Free debt advice is funded by a levy on lenders: once they are fully authorised by the FCA, payday lenders will contribute to this levy. The noble Lord’s proposal would therefore duplicate existing funding arrangements for debt advice. It is important to note that the FCA is also taking steps to ensure that vulnerable consumers are aware of the free debt advice available to them. The FCA requires all payday lenders to signpost free debt advice at the point a loan is rolled over, and all payday lending adverts must include a risk warning and information about where to get advice.
The Government also place great emphasis on the role of credit unions—I note the comments from the noble Lord, Lord Stevenson. Credit unions provide an invaluable service to a growing number of members, many of whom are on lower incomes. The Government have already taken a number of steps to support them, including investing £38 million to support the credit union expansion project to ensure sustainable growth of credit unions. This is not going to be a quick fix but a slow burn.
The Government have also raised the interest rate that credit unions can charge. It used to be capped at 2%; it is now 3%. That sounds like a small difference, but it should make quite a sizeable difference to a credit union’s bottom line, month by month, to support its financial strength through their savers’ interest.
As the noble Lord, Lord Stevenson of Balmacara, will know, the Government issued a call for evidence in June to seek views from interested parties about the future of credit unions and how the Government can do more to support the development of the credit union movement in Great Britain. The Government want to see the credit union movement go from strength to strength and the call for evidence is the first step in developing an environment of co-operation and mutual self-reliance.
The noble Lord, Lord Stevenson, asked several questions. One was whether payday lenders would be authorised by the FCA in spring 2016. The FCA authorisation period for payday lenders begins next week, as I suspect the noble Lord knew. His second point was on the Farnish review. The Government commissioned an independent review into the effectiveness of the Money Advice Service. It will report to the Government by the end of this year.
The call for evidence has been successful in allowing all credit unions, regardless of size, to contribute their vision for the future of the sector to the wider debate. The Government’s response to the call for evidence will be published shortly. We believe firmly that consumers will best be served by the tough regulatory regime for payday lenders and the Government’s ongoing support for free debt advice and credit unions. Therefore I ask the noble Lord to withdraw this amendment.
My Lords, I thank the Minister for her remarks, which were broadly in support of the approach I was taking. I understand her difficulty in accepting the amendment, although I am sad that she will not be able to do so. I also thank my noble friend Lady Drake for her very interesting and wide-ranging comments. I thought she was right to pick up on the possibility of more work being done at the point of transaction in relation to personal debt. The idea of conditionality is a good one and perhaps we should think again. She was right to warn us that things are going to get much worse, particularly in relation to those at the low-pay end of the labour market because of the interaction between welfare and tax and the need for some sort of savings vehicle to help with the problems we encounter there. The truth is that we are going to have problems with problem debt for a long time. I think that she, like me, is arguing that we need to think very hard not so much about having a financial capacity strategy, which is very often prayed in aid at this time on these issues, but actually focusing a bit more on debt.
Debt is a necessary component of growth in the economy and yet it is the one we understand least about and about which we have very little statutory or other measures in place. Most of it is done by the charitable sector and the Government’s arrangements are being reviewed by the Farnish review—which I mentioned, although unfortunately a coughing fit may have covered my best lines. I wonder if I might just sharpen them up at the end so noble Lords can get a sense of them. Perhaps the noble Baroness might write to me about some of them. It is really important that the Farnish review, if it is coming out by the end of the year, focuses on what the structural changes have been in this area because they are not helping at present. It is really important to find a role for the Money Advice Service. It needs to be a facilitator, not a service deliverer. When it tries to do service delivery it just bumps into the existing structures and is not working.
We need—as I think I managed to get out before I was caught by my coughing fit—a statutory backing for personal debt. The arrangements in Scotland work; they are very effective and we should learn from them. We need to tie any new statutory interventions here into a thoroughgoing review of the Insolvency Service which offers too many not very well organised and not cognate solutions. For instance, if you do the decent thing by your debts and go and see a free advice service and talk about what you can do to get your debts paid off, you come off worse in terms of what your credit rating will be at the end of that process than if you had gone bankrupt. In other words, if you try hard, save money every month, repay all your debts and after six years emerge cleansed of those debts, you cannot get credit for six years. If you go bankrupt, you immediately lose your debts—and you certainly lose your credit rating—but you are back in business in three years. If you do a debt relief order, it is four years. What logic is there behind that? I would have said all that earlier. I could not say it. I say it now and I would like a response to it. I beg leave to withdraw the amendment.
Amendment 50B withdrawn.
Amendment 50C not moved.
50D: After Clause 86, insert the following new Clause—
“Duty to provide an internet service that protects children from digital content
(1) Internet service providers must provide to subscribers an internet access service which excludes adult content unless all the conditions of subsection (3) have been fulfilled.
(2) Where mobile telephone operators provide a telephone service to subscribers which includes an internet access service, they must ensure this service excludes adult content unless all the conditions of subsection (3) have been fulfilled.
(3) The conditions are—
(a) the subscriber “opts-in” to subscribe to a service that includes adult content;(b) the subscriber is aged 18 or over; and(c) the provider of the service has an age verification policy which meets the standards set out by OFCOM in subsection (4) and which has been used to confirm that the subscriber is aged 18 or over before a user is able to access adult content.(4) It shall be the duty of OFCOM, to set, and from time to time to review and revise, standards for the—
(a) filtering of adult content in line with the standards set out in section 319 of the Communications Act 2003 (OFCOM’s standards code);(b) age verification policies to be used under subsection (3) before a user is able to access adult content; and(c) filtering of content by age or subject category by providers of internet access services and mobile phone operators.(5) The standards set out by OFCOM under subsection (4) must be contained in one or more codes.
(6) Before setting standards under subsection (5), OFCOM must publish, in such a manner as they think fit, a draft of the proposed code containing those standards.
(7) After publishing the draft code and before setting the standards, OFCOM must consult relevant persons and organisations.
(8) It shall be the duty of OFCOM to establish procedures for the handling and resolution of complaints in a timely manner about the observance of standards set under subsection (4), including complaints about incorrect filtering of content.
(9) OFCOM may designate any body corporate to carry out its duties under this section in whole or in part.
(10) OFCOM may not designate a body under subsection (9) unless, as respects that designation, they are satisfied that the body—
(a) is a fit and proper body to be designated;(b) has consented to being designated;(c) has access to financial resources that are adequate to ensure the effective performance of its functions under this section; and(d) is sufficiently independent of providers of internet access services and mobile phone operators.(11) In this section, internet service providers and mobile telephone operators shall at all times be held harmless of any claims or proceedings, whether civil or criminal, providing that at the relevant time, the internet access provider or the mobile telephone operator—
(a) was following the standards and code set out by OFCOM in subsection (4); and(b) acting in good faith. (12) For the avoidance of doubt, nothing in subsections (1) and (2) prevents providers of internet access services and mobile phone operators from providing additional levels of filtering content.
(13) In this section—
“adult content” means an internet access service that contains harmful and offensive materials from which persons under the age of eighteen are protected;
“harmful and offensive materials” has the same meaning as in section 3 of the Communications Act 2003 (general duties of OFCOM);
“material from which persons under the age of eighteen are protected” means material specified in the OFCOM standards under section 319(2)(a) of the Communications Act 2003 (OFCOM’s standards code);
“opts-in” means a subscriber notifies the service provider of his or her consent to subscribe to a service that includes adult content.”
I am very pleased to move this amendment, which requires internet service providers and mobile phone operators to provide default adult content filtering that can be removed if the service user opts in to adult content, demonstrating, as indeed they must, that they are aged 18 years or over. I am very grateful to my cosignatories from all sides of the House—the noble Baronesses, Lady King and Lady Benjamin, and the noble Lord, Lord Cormack.
The Government have taken an important step forward in negotiating the self-regulatory default-on filtering arrangement with the big four ISPs. However, while this progress is welcome it cannot be seen as anything other than a single, momentary step towards a proper solution because of the significant problems that are central to the self-regulatory arrangements, of which there are at least three. First, the self-regulatory arrangements fail to cover more than 10% of the home broadband market, leaving a significant number of children outside its scope. Logically, it makes no sense for the Government to fight for a default-on arrangement, arguing that it is very important—as the Prime Minister has done—but then to stop short of applying it generally. To say that it is very important but then settle for delivering it to only some children ultimately amounts to saying that some children are worthy of more protection than others. That is not a sustainable long-term position.
Of course, I listened carefully to what the Minister had to say about this matter when I raised it in Committee. She made the point that because the other ISPs are not party to the agreement with the big four does not mean that they are not also providing the default-on system that the Prime Minister announced in his NSPCC speech in July, 2013. I have never suggested that only the big four ISPs do this; I have said simply that I am aware of a good number that do not and at least one that boasts of not doing so. Indeed, since Committee stage some research has been conducted and of the 14 smaller ISPs that service homes rather than businesses, four were found to offer something comparable to default-on, but 10 did not. Of those 10, two made it clear that they did provide filtering, but that it had to be applied by the customer separately; it was not an unavoidable choice at the set-up. Seven ISPs could not provide any information about filtering. One boasted that it deliberately did not filter. Amendment 50D would address that problem by requiring the provision of default-on in all households for all children.
Secondly, age verification is of pivotal importance. If you introduce a default-on arrangement that is not properly age-verified, the credibility of the whole system is completely called into question at two points: the initial set-up phase and in the event of any subsequent attempt to change the settings. The truth is that often it is the more technologically literate children who handle the set-up process on behalf of their parents. Where that happens, it is children, not adults, who will make the decision whether to opt in to access adult content. However, if an adult does the set-up and decides to have adult content filters to protect their children, there is nothing to stop their children subsequently changing the settings when their parents are out and opting in to access adult content. Without age verification of the person seeking to opt in to access adult content before the removal of filters, the credibility of the whole self-regulatory system breaks down. When pressed, the Government and industry say that if someone opts in to access adult content, the ISP will send an e-mail to the account holder, who must, by definition, be an adult. Even if a parent responds quickly, reads the e-mail the same day and acts on it, the children, unavoidably, still would have some hours of accessing harmful adult content from which we should be protecting them. The truth, however, is that we do not all process e-mails from ISPs quite so expeditiously.
Polling conducted by ComRes for the charity Care demonstrates that a total of 34% of British adults—that is, 16.3 million people—say that they would not read an e-mail from their ISP immediately. Eleven people said that they probably would leave the e-mail unread for up to a week, and nine people would be likely to leave it for more than a week. A staggering 14% said that they were unlikely to read an e-mail from their ISP. That figure rises to 18% when we look at the parents of children between five and 10 years old.
At the end of the day, the question is not: is it technologically possible to age verify before allowing someone to opting to access adult content? We know that it is entirely possible. It is already required by law if you want to place a bet online. The question is: how high a priority is child protection in Britain in 2014 and are our children worth it? The amendment, crucially, provides for statutory age verification before opening the door to someone opting to access adult content.
Thirdly, there are no common standards regarding what is and what is not adult content. Moreover, the way in which the standards are set is in no way publicly accountable. Different companies make those decisions on their own, generating complete inconsistency and uncertainty. For example, BT deems gambling to constitute adult content and blocks it, while Virgin does not. Amendment 50D addresses the problem by giving the responsibility for setting standards to a single, publicly accountable body, Ofcom. In the first instance, it means that the standard selected will be common to all filtering. Parents will be able to depend on consistency. In the second instance, it means that the standard selected will be accountable. As a public body, Ofcom is accountable and will indeed be required to consult on standards.
Having considered some of the problems with self-regulation and how Amendment 50D addresses them, I want briefly to set out how I see it delivering alongside other provisions, before homing in on the reasons why it is so important. I want to be exceptionally clear that I am not saying that the amendment is the only thing we need to keep children safe online. Education, for example, is vital. It is one of the two central pillars of my Online Safety Bill. The amendment is not an alternative to education, any more than education is an alternative to the amendment. Education is vital to help children to deal with online behavioural challenges. It is also good at helping children to avoid content that they want to avoid. It is, however, not effective at protecting children from content that they may want to access but from which they should be protected, as some sad stories that we shall now consider show all too clearly.
There are now multiple examples of children committing criminal acts which act out the sadistic, hardcore pornography that they have seen online. Consider the following. In Committee, I mentioned a case in Shropshire in August where the judge recognised that the 14 year-old boy in question, who raped a 10 year-old girl, was acting out what he had seen online. However, there are many more cases. I would like to go through a list, but there is clearly not time. They all, however, comprise the same ingredients: a child watches pornography online and then commits a criminal act by acting out what he has seen on another child.
I shall mention just one other case, that of a 12 year-old boy who raped his seven year-old sister. That came before the Blackburn youth court earlier this year. District Judge James Prowse readily acknowledged that the boy had been moved to act out pornography that he had watched online via his Xbox. He said:
“Society's view on pornography covers a wide spectrum from complete condemnation on the one side to being laissez faire on the other but even the most liberal-minded share society’s profound unease that children of your age can and do access the internet and watch graphic images of sexual intercourse”.
These, then, are the facts and we must not hide from them. They require a response. As William Wilberforce famously once said:
“You may choose to look the other way but you can never again say that you did not know”.
Children are freely accessing hardcore porn online and then looking for opportunities to act it out, with disastrous consequences. They are also freely accessing other forms of adult content that are harming their development. I have not had time to consider violence: a recent Centre for Public Innovation report concluded that children are increasingly being exposed to violence online.
We cannot brush this off and seriously suggest that a flawed self-regulatory system that misses out hundreds of thousands of children and does not, in any event, bother to age-verify people before allowing them to opt in to access content is a credible arrangement. It clearly is not. I very much hope that the Government will not seek to oppose the amendment but recognise that it is vital if we are serious about helping children to stay safe online. I beg to move.
My Lords, the noble Baroness, Lady Howe, raises once again the really important issue of the protection of our children from the dangers of the internet, and specifically the pornography and violence that can be accessed too easily.
However, there are problems with opting in to internet content filters, which remain crude, even though there has been some improvement in recent years. The problems of the opt-in system proposed by the noble Baroness are twofold. The first is that it is possible for too much to be filtered out. Imagine a young person who is not sure about their sexuality. The words “homosexual”, “lesbian” and “transgender” would be filtered out, and organisations such as Stonewall, which does excellent work with confused young people, will find that their websites are banned by these filters. More sophisticated versions can filter out skin. Here there is an attempt to filter out pornographic images, but these filters have also banned the Daily Mail, which had a photograph of a woman in a bikini on the front page. The second problem is that internet-knowledgeable young people find mechanisms to work their way round filters, through murky rings round the usual internet. Most parents do not understand or know about these and will assume that their child is protected, whereas the reality is that they are not.
I am also concerned about the proposals in subsection (4) of the proposed new clause, which say that Ofcom has a duty to filter content,
“by age or subject category by providers of internet access services and mobile phone operators”;
and, in subsection (9), that,
“OFCOM may designate any body corporate to carry out its duties under this section”.
Is Ofcom now going to start classifying content? Even if it designates the British Board of Film Classification, that is fine for the areas that the BBFC covers—film, video, video games, mobile phone content that you can buy—but it does not cover other material, especially private, and we know from the revenge porn debate in your Lordships’ House recently that this is one of the first areas of porn that young people see. It will always be impossible to cover private material, so there will always be a way in.
There is also a further issue about young people who work their way round filters, usually in a ridiculously short time. Would that young person, often under 18, be committing a crime, or would their parents be committing one for not supervising their internet use? The Child Exploitation and Online Protection Centre website for parents, children and teachers, called “Thinkuknow”, advocates the best way forward. It talks about parental involvement with their children, and for parents, teachers and friends to alert young people to the dangers of the web. Sex and relationship education in schools is increasingly including teaching about the dangers and problems with porn. The website states:
“Parental controls will never make the internet 100% ‘safe’. They should not be used as a substitute for communicating safety messages to your child. Make sure that you talk to your child about their behaviour online and remember, your home is not the only place they will be accessing the internet!”.
An opt-out, rather than an opt-in, system leaves the control with the parents. They cannot relax and assume their children are safe—nor should they—and they are more likely to have sensible conversations with their children than parents who believe they are covered by an opt-in system.
My Lords, the noble Lord, Lord Stoneham of Droxford, has just made one of the most extraordinary series of arguments against the amendment of the noble Baroness, Lady Howe. He seems to suggest that because filtering systems are imperfect it would be better not to require filtering systems to be in place in the first instance. We all recognise—the noble Baroness, Lady Howe, made this clear when she introduced her amendment—that this was just one of a number of things that need to be done. However, the concept that because there is not perfection in the art of filtering out pornographic, violent or dangerous images, therefore you should not attempt to do it, seems a particularly bizarre position to take.
The noble Lord also suggested—and I have read carefully the amendment of the noble Baroness, Lady Howe—that if we were not careful we would criminalise children who found their way past these filters and their parents for not adequately protecting them. However, there is nothing in the amendment which creates a criminal offence for a child to try to get past a filter.
The amendment is about creating a sensible framework so that the internet service providers have an obligation to put the filters on as a default—that is essentially what this means—and that there should then be a series of hurdles that have to be passed before that default filter is removed. It also requires Ofcom to promote best practice, to set standards in the way in which the filter operates and to develop an age verification policy. This is long overdue not only in this area but also in other areas where children need to be protected or adults need to be prevented from accessing material which is only for children, which is the other side of the same coin. All of this is eminently sensible material.
The Government think that this is not necessary because self-regulation operates so wonderfully. The problem with self-regulation in this instance is that although the three or four most responsible internet service providers may take these steps and do what is necessary, the others will not. The noble Baroness, Lady Howe, cited the example of the internet service provider that, in its promotion material, makes a positive virtue of the fact that it does none of these things. It is essentially saying, “Come to us because there are no safeguards whatever”.
I hope the Minister will either accept the amendment or agree to have urgent discussions with the noble Baroness, Lady Howe, and those who are advising her on this issue to see whether it is possible to develop something that meets these requirements. It is quite clear that we are not taking seriously the fact that children are accessing extremely nasty and dangerous material. The noble Baroness, Lady Howe, gave some sad, tragic and awful examples of where children have acted on such material. We know that children and teenagers act impulsively. The brain development has not yet occurred which enables them to give proper consideration to and have understanding of the consequences of their actions and what that means.
Under those circumstances, not trying to create the safest possible environment for them, and not trying to create a situation in which the default starting position is that filtering systems are in place, even if some of them are not as good as they might be, is completely irresponsible. I hope the Minister will tell us either that the Government are prepared to accept this principle or, if they have some difficulties with the way in which this is presented, agree to have urgent discussions with the noble Baroness to try to put this matter on track.
My Lords, I have put my name to Amendment 50D because I am concerned about the easy accessibility of adult material to children online. It is that simple. Recently, a parent contacted me to inform me about their eight year-old son who was, quite innocently, led into accessing many pornographic images, unknown to them. They have now activated a block which bars such material, but, like so many other parents in this country, they wish it had been on by default. Their son now has unwanted memories of what he saw popping into his mind. Childhood lasts a lifetime and those early memories will lay the foundation that stays with that child for ever. They cannot be erased. How can we sit back and let that happen?
This year, the Authority for Television on Demand published a report entitled For Adults Only? which revealed that, in the space of just one month, at least 44,000 primary school children and more than 200,000 under-16s accessed adult content, including hardcore pornography. If we are serious about caring for our children, we must do far more to protect them online before more tragic, heartbreaking, life-damaging sexual, mental and emotional abuse takes place. There is a series of problems with the current voluntary approach deployed to keep children safe online. These are all addressed by Amendment 50D.
I congratulate the Government on all the progress they have made on this issue but, as has been said before, more needs to be done. In terms of internet service providers, the current voluntary approach to default adult content filters is inadequate and does not constitute a credible, long-term solution, for several reasons. It leaves 10% of the market uncovered. This represents several thousand children. It fails to provide any form of age verification before someone seeks to opt in to access adult content. You have to do this before you access gambling and other online activities, why not for accessing online pornography? It involves different companies applying different standards about what does and does not constitute adult content, so there is no consistency. Children like consistency. It helps with their development. There is no central mechanism for efficiently addressing the problem of overblocking. No one wants to block unnecessarily.
There have been two high-profile cases, as we have heard, of mobile phone operators not abiding by their code: BlackBerry and Tesco Mobile. The operator Three does not even claim to be compliant with the code. This is what self regulation allows. All these problems are addressed by Amendment 50D. I hope that my noble friend the Minister will give careful consideration to this amendment and I look forward to her response, in the hope that it will show that the Government truly care about our children’s holistic, long-term well-being.
My Lords, I will be very brief. I put my name to this amendment. I am also speaking later in the debate secured by the noble Baroness, Lady Boothroyd, which I do not wish to delay unduly. I put my name to this amendment because there is no greater crime than the destruction of childhood innocence—and we are in danger of doing that on a very large scale indeed.
I believe that the day will come when we make the provision of pornographic services online a criminal offence. No one benefits from watching them, whatever his or her age, and I think that they tend to deprave—but I am absolutely convinced that our children must be protected. Speaking as a grandfather and as one who has many friends who have younger children, I do not like to think of the future into which they are growing up, in which they are led to believe that it is better to have 100 virtual friends than one real one and that whatever they watch does not really matter because it cannot change their character. It can, as the noble Baroness indicated in her speech. It is for that reason that I support the amendment.
My Lords, I strongly support the amendment in the name of the noble Baroness, Lady Howe. I assume that all Members of your Lordships’ House are of the view that children should be protected from hardcore pornography. I hope that that assumption is justified. My second point is that there is ample evidence that children can currently access hardcore pornography. The noble Baroness, Lady Howe of Idlicote, has given some examples. There are court cases in which judges said that children’s motivations for committing very serious crimes were that they had seen it done on television or online. It is most important that that should be stopped.
Do the Government agree that it is highly important that children should be protected from hardcore pornography, which is included in the idea of “adult content”? Secondly, do they agree that there is evidence that the present system is not working, with very serious results in cases that have already reached the courts? Thirdly, can they advise that there is any better system to cure this problem than that contained in Amendment 50D?
When I say what is contained in Amendment 50D, I mean the principle of the amendment: they may be able to improve the detailed wording of Amendment 50D if they wish to, but it is the principle of the amendment that I strongly support. I do not know of any better system than that at the moment. If the Government can come forward with a better system that they are prepared to put into the Bill instead, I would welcome it. Until that happens, Amendment 50D seems to be the best protection that we can afford our children from a devastating influence that can, as my noble friend said, devastate them for life, whether they get themselves in the criminal courts or not—and it certainly devastates their lives when they do. I do not wish to be party to a system where there is a possible solution that we do not take.
My Lords, I must say, from my position in government, that the Government take the issue of child safety online very seriously. My role is to engage with industry to solve this problem. A lot of information has been put forward this evening that is heartbreaking and shocking. That is why the Government chose to act in July 2013. They very bravely and boldly chose to take on this issue and to work with industry to solve the problem.
The work that has been done by the ISPs, on behalf of the country, to put forward the safe internet provisions has now been brought to bear. A lot of the cases that have been discussed this evening relate to a time when these internet filters were not active and functioning for all ISPs. However, over the course of the past year all the major ISPs have installed the internet filters as default-on. They have also reached out to all their clients and customers to advise them that the filters are available, and given them an option to turn them on again. This process has been under way for the past 18 months.
The same is true of the mobile operators, and Minister Vaizey has written to them all this past month to make sure that they are complying with age-related content filters. The points that have been made here are absolutely vital, but to add additional regulation when we are getting voluntary compliance from the industry is just not necessary.
We are working hard, and if there are cases which this is not addressing—the 10% that has been referenced from other parts of the country—we will take that on board and work with the service providers that address those markets and make sure that their customers have a safe internet situation.
Education is vital to ensuring that parents and teachers are involved. There is a big campaign, funded to the tune of £25 million, called Internet Matters. It is led by the major ISPs and my noble friend Lady Harding. The process of educating parents takes time. Most parents are very intimidated by the internet, and their kids are more savvy than they are. We must take this on; the education process has to continue because, as one of my noble friends said, kids are very smart and will find a way round it. The important thing is the education that has to take place with parents and teachers. We must all stay engaged in the process, because the moment we come up with a way of solving the problem, the children find a way round it.
I understand the reasons for the amendment moved by the noble Baroness, Lady Howe, to which the noble Baroness, Lady Benjamin, spoke so eloquently, and I appreciate it. We all believe that children need to be protected online. But I believe that the way to do that is to continue the work that we have been doing. The voluntary co-operation that we have had has been phenomenal. We can continue the process by identifying the areas where we still need to do work, and we make a commitment to do so.
My Lords, I shall support the amendment if the noble Baroness, Lady Howe, decides to divide the House. I am grateful to her for so ably moving it and explaining it to us all. I am normally a loyal government supporter, but only a few days ago in this Chamber I expressed my deep and growing concern about the serious damage being done to the young minds of our children by what they are seeing and hearing online. I said then that I found the statistics relating to the problem alarming and horrifying. Your Lordships have heard one statistic this evening, but I am going to repeat it, because I also mentioned it in my speech the other day. In just one month, 44,000 children aged between six and 11 visited an adult website. I know that time is short, but I am going to say that again: in one month, 44,000 children aged between six and 11 visited an adult website.
I also said that we speak so often in this Chamber about the welfare of the child being paramount—I have heard that again today. I then asked what we were actually doing about it. Now is the chance for us to show that we mean it, and to actually do something. There may perhaps be some imperfections in the amendment moved by the noble Baroness, Lady Howe; it would be surprising if there were not. But it is an important step in the right direction—a step that surely we must take tonight. I repeat my support for the amendment, and I urge every Member of your Lordships’ House who really cares for the welfare of our youngest and most vulnerable children to do the same.
My Lords, I will summarise where we are as regards this important Amendment 50D, as I spoke to it in greater detail in Committee; today I will make an additional comment on mobile phone operators.
I will quickly address some of the points made by the noble Lord, Lord Stoneham, who clearly was not keen on filtering. However, we have moved beyond that discussion, because we have to recognise that the Government have already supported and encouraged filtering to cover 90% of the marketplace. Therefore, with all due respect, that is not the issue, as the argument has been superseded. The issue is how you make blocking consistent and avoid some of the problems that the noble Lord, Lord Stoneham, raised. You do that by having a central mechanism to deal with over-blocking, which is what Amendment 50D provides for but self-regulation does not.
I welcomed the comments made by the noble Baroness, Lady Shields, and welcome her to the House. I commend her work and her great expertise in this area. I suggest that the key point here is not about the expertise that noble Lords may have in the area of technology but about how we think we should close the gap of clear and present dangers to children. Given those dangers present, I argue that we should do it the other way round. In other words, we need to give children safety through that statutory protection, and if in one, two or five years’ there is a voluntary approach, that would be fantastic. However, the noble Lord, Lord Framlingham, just made clear the amount of damage that can be done in just short periods of time when he quoted the statistic that 44,000 children between the ages of six and 11 view inappropriate adult content. That will damage our children, affect their adult behaviour for a lifetime and increase levels of violence in our society, and we should not accept that.
In a nutshell, therefore, the situation is the following. The Government think that default-on internet filtering is the best way to protect children from inappropriate adult content online. The Government are right. It is funny—how often do you hear Front-Bench spokesmen standing here and saying that? However, they are wrong to limit that to the big four ISPs by using a voluntary approach, which leaves more than 10% of the broadband market uncovered, as we have heard. Government policy, therefore, leaves a significant number of children uncovered and unprotected from adult content. As the noble Baroness, Lady Howe, outlined in another powerful intervention, that results in the following problems.
In the most extreme cases, children act out, in the real world, sadistic hardcore porn that they saw in the online world. That is not just a matter of opinion; as we heard, it is a matter of fact in our courts today. The noble Baroness, Lady Howe, referenced the 12 year-old boy who raped his seven year-old sister after he saw pornography online via Xbox. I would think that that one statement alone merits us taking urgent action on this. This is horrific, and we need to deal with it urgently. Even the self-regulatory system that is now in place does not use age verification, so it can easily be evaded by tech-savvy children. I take the point that they will get around these things, but we should not leave them an open goal, which it seems we are doing at the moment in some instances.
Therefore, not only is there no consistency but there is no logic. Amendment 50D would bring both consistency and logic to the Government’s approach to this problem. The lack of consistency is very clear when we look at mobile phone operators. I will not speak in any detail on that, because the noble Baroness, Lady Benjamin, did a very good job. Let it suffice to say that mobile operators have been flouting the provision in the code that they should provide adult default filters. Indeed, the Prime Minister himself—as the noble Baroness, Lady Shields, knows better than anyone else in this House—said in July that all mobile phones were already subject to default filters. However, at the time they were not. In the past 12 months, Tesco Mobile has been exposed, and so on.
I therefore say to Conservative Peers, and indeed to coalition Peers, that if they want to support not just the spirit of what their Prime Minister said but also the letter, they need to support this amendment. If there was ever a case for contravening your Whips and voting for what is right, it is surely on this amendment, which would extend greater protection to all children. I grant that you will be choosing between your Whips and your PM, but if I were you, I would stick with the PM. I quoted him in Committee on this. He said that this was about “protecting childhood itself” and he added that,
“I will do whatever it takes to keep our children safe”.
That is what the Prime Minister said. Well, the minimum it takes—the absolute minimum—is supporting Amendment 50D, which is tabled by a Cross-Bench Peer, a Conservative Peer, a Labour Peer and a Lib Dem Peer. This is not a party-political issue; this is a child protection issue.
I realise that my appeal will fall on deaf ears, but as the mother of four young children, I am one of the 82% of British mums surveyed who want the Government to tackle child protection online more urgently than they are doing at the moment. For that reason, I urge all Peers in this House to support Amendment 50D.
My Lords, this has been an excellent debate. I thank the noble Baroness, Lady Howe, for the opportunity to talk about this issue on Report in the Chamber—it is something that we will not forget in a hurry. I reassure noble Lords that we share a common goal to ensure that our children are safe online. Given the huge importance of the interest in children’s safety—and the complexity of the issue, because it is very multi-faceted; it is not straightforward or cut-and-dried—I ask for the indulgence of the House to speak at some length.
The 21st century has thrown many dilemmas at families, schools, and indeed government, about how to bring up and educate our children. Over the past 20 years, the landscape has changed enormously. Whereas in the 1990s children’s entertainment came from TV, comics, books and video games, with a few families having a computer in the corner, the turn of the century saw wholesale change. Homes became connected to the internet, and now four in five children have mobile phones, most of which are internet-enabled, which act as their main means of contact with the world at large.
For many parents and grandparents this is difficult new territory. The power shift of competence has changed, while our care instinct remains. How do we best protect our children both from the dangers of the known world and that of the unknown and byzantine internet? Ensuring children’s safety online is a complex—
I am sorry to interrupt the noble Baroness when she is in full flood and what is obviously going to be a lengthy speech. If the balance of competence has shifted to the child, could she explain why we are taking away, or not prepared to support, protections to make it more difficult—in effect, holding back the shift in the balance of competence—by requiring default protection?
I ask noble Lords to be patient; I am just painting a scene and intend to explain about the 90% and the 10% and the issues that have been raised by the noble Baroness opposite.
The safety of our children is our collective responsibility. The Government are not being laissez-faire about this. Recognition of our collective responsibility lies at the core of the UK’s world-renowned collaborative self-regulatory approach. According to the Family Online Safety Institute, the UK is a global net exporter of internet safety. It states:
“Since the emergence of the Internet in the mid-1990s the United Kingdom has been at the forefront of online safety and best practice”.
Under the auspices of the UK Council for Child Internet Safety, every three months, key players from industry, the third sector—including parents—and government bodies meet and work in partnership to help keep children and young people safe. This model serves us extremely well, and has driven recent progress.
Technical tools that we have discussed, such as filters, play an important part in enabling parents to protect children from inappropriate content. I outlined in Committee the tremendous progress made on this by Government and industry, which I will summarise now.
The vast majority of mobile phones sold are done so with filters automatically set to default on—including pay-as-you-go handsets. For contract customers, three of the UK’s four major mobile network operators also have their filters on by default, with the remaining provider, Three, committed to doing so by July 2015. I am quite happy to take away Tesco and have a look at Tesco online.
Responding to the Prime Minister’s request, the four major providers of home broadband—BT, Sky, Virgin and TalkTalk—now provide customers with family-friendly filtering solutions. Parents can easily block a range of content categories, such as adult content, gambling and violence. Nine in 10 UK broadband connections are provided by these four companies. In Committee, noble Lords expressed concerns about families not covered by filters. It is correct that smaller, more niche companies, many focused on the SME market, provide one in 10 UK broadband connections. They also have acted. The largest of these, including EE, covering 3% of the market, and Kcom, already offer family-friendly filters to customers free of charge, and Plusnet, the sixth-largest ISP, is trialling its filtering tool next month with a launch plan for March 2015. I think it is worth mentioning that in Committee, I asked the noble Baroness, Lady Howe, to let me know which one was flouting the Prime Minister’s request openly, and I do not think I heard from her, so if she would like to get back to me with that one, I am quite happy to take action on that as well.
We should note that seven in 10 households do not have children, so we can surmise that few family homes are served by the smallest providers, who might not provide filters, and every family in the UK has the ability easily to choose a provider with strong child-safety credentials. Children also access the internet outside the home, often through public wi-fi, and we have therefore taken action here too. The six major providers, covering more than 90% of the market, provide family-friendly public wi-fi wherever children are likely to be. Taking into account progress on mobiles, on home broadband internet access and public wi-fi, we can be confident that families now have the technical tools available to enable them to filter inappropriate content.
Filters are an incredibly important part of the solution, but they cannot protect children from the aspect of online life which evidence shows us causes most distress—cyberbullying. Nor can they give parents a cast-iron guarantee that children will be protected from inappropriate content, and at some point, at a certain age, filters may be turned off.
It is an unwelcome truth that there is no silver bullet to child safety online. Alongside technical solutions and through education, which I will come to, we must therefore support parents to adopt other forms of mediation, such as having conversations with children and monitoring internet use. Parents do not always feel aware of the risks their children face when online. Indeed, many feel overwhelmed by technology and certainly less savvy. This leads to reluctance among some parents to engage in issues surrounding their children’s online activity. The need for us to guard against parental complacency is an incredibly strong reason for preserving the unavoidable parent choice on filters. The systems that providers have put in place act as a useful catalyst, forcing parents to take decisions, and prompting them to enter into discussions with their children. Default-on filters would eliminate that route to engagement.
As we do in relation to road safety, unsafe sex, alcohol consumption and other risks children face, we must raise awareness. Earlier this year, the internet service providers made a significant addition to the online resources already available to parents in the UK from education, charity, industry and law enforcement sectors. Internet Matters was launched in May and provides parents with advice on how to keep their children safe online. I commend it to noble Lords.
As well as government, parents and industry, schools have a critical role to play here. Through schools we are teaching our children the skills they need to navigate the online world safely. As part of our reforms to the national curriculum, we have adapted computing programmes of study to incorporate internet safety. Since the start of the school year in September, the curriculum has included internet safety for five to 16 year-olds, key stages 1 to 5.
The promise of a software or hardware gizmo to protect our children is seductive. Yet even with filters on, in possession of excellent digital skills and with a sensible head on their shoulders, children will still have worrying experiences in this area, whether through exposure to inappropriate content via a text message, or witnessing abusive comments online or in other situations. As well as informing and supporting parents and working with industry, we must empower children and foster their confidence online so that they are resilient when the time comes.
In childhood, we learn about the world and develop the skills to make good choices. We must avoid over-cosseting our children to the extent that they do not acquire the skills required to cope with offline and online challenges when they face them. When a child encounters a problem online it is critical that they are able to find help and support. This might be through accessing online or offline information and advice, or by speaking to a friend or trusted adult, or to a teacher, carer, parent or other family member. We all share the responsibility to be there for them when needed.
It is right that the Government take steps to regulate where necessary. However, progress on filters has been remarkable. We should for a moment consider the real impact of the amendment. If it became law, while all providers would be required to provide a filtered service parents would still be able to opt for a filter-free service if they chose to do so. In doing so, they would need to verify their age, but account holders already need to be over 18. What difference would this amendment make? Arguably, the difference would be that parents would make the choice at the point of sale, rather than being able, as they can currently, to choose to customise their settings according to family circumstance and context.
In addition, this amendment would place significant burdens on and potentially sound the death knell for the very smallest ISPs, which are in any case business focused—and this at a time when government is seeking to reduce regulation. Furthermore, parents have told the Government that they want the freedom to make this choice, which is why at present they are faced with an unavoidable choice. If we take this choice away from them, we risk their disengagement and apathy. Many may reject filters completely, leaving children less protected than they are now.
The internet can be an outlet for children’s creativity and a tool for social engagement. However, we are all aware that it brings risks. We share a responsibility to ensure that children make use of digital opportunities in a safe and supported way. I believe strongly that self-regulation and partnership have got us further than regulation in this area would have done, given the pace and complexity of change. Filters are an important part of our approach to online safety. I note that the noble Baroness, Lady Howe, introduced her internet safety Private Member’s Bill in 2012, before the current parental control filters and the unavoidable choice had been introduced. I pay tribute to her and others who have engaged with this important debate. It has reaped results already, but we are not complacent and the debate is now moving on.
I have painted a broad picture of the issues concerning online safety and I thank the House for its tolerance. I have done so to highlight the range of challenges that we face and the collective approach needed to address them. Through work with industry, we are improving the tools available to families, who now have the resources that they need to keep their children safe online. Through schools, we are equipping children with digital skills and the understanding that they need. Through awareness-raising, we are supporting parents to engage in these matters.
While I know that all noble Lords here wholeheartedly agree that children should be protected from harmful digital content, which is the intention behind the amendment of the noble Baroness, Lady Howe, I hope that they are reassured that the Government’s current approach is the right one. Therefore, I ask that the noble Baroness withdraw her amendment.
Before my noble friend sits down, can she help me on one point? Can she recommend any better protection than this amendment specifies? If not, why should we allow children to be able to access this type of material until the negotiations are complete, which will not be tomorrow or the next day?
I thank the noble and learned Lord for his question. I said earlier that there is not a silver bullet in this situation. This is a very elegant amendment and, as I say, it is really very seductive—but as soon as it has been enacted, we will find that people will develop workarounds and we will be back to square one. Parental and educational means are the best way forward.
My Lords, I am extremely grateful to all noble Lords who have spoken today. There was an amazing range of huge expertise and concern for our children. It was interesting to hear the comments of the noble Baroness, Lady Shields, as a new Member of the House. She is clearly going to be involved in lots of such things.
The Minister indicated exactly why I want to put this to a vote: each time one puts pressure on the Government, it improves the situation. It is important that we have age verification; there is no doubt about that, when we think of the amount of material that is streamed into this country, not able to be accessed, theoretically, via any of the routes, but nevertheless able to enter this way carrying R18 material—live streams from outside the UK. So I am very grateful for the range of comments made, I think we will all be thinking about this for a very long time, and I would like to test the opinion of the House.
Amendment 50E not moved.
Consideration on Report adjourned until not before 9.29 pm.