Speaking about consumer credit and enforcement, Brooks Newmark calls for reappraisal of terms on which personal credit is offered, debt management and relief to provide a second chance and regulation of bailiffs.
Mr. Brooks Newmark (Braintree) (Con): I am delighted to follow my hon. Friend the Member for Hornchurch (James Brokenshire), who covered part 4 in his usual forensic manner.
I pay tribute to Lord Newton, who has already made such a valuable contribution to debate on the Bill in the other place. Although, as a successor of his, I now have the pleasure of representing the people of Braintree, unlike him I have had no involvement with the Council on Tribunals. I must therefore steer clear of part 1 and confine my remarks to parts 3 and 5, which deal with enforcement proceedings and debt management. I also pay tribute to the Minister, who delivered the Government's case cogently and responded to interventions thoughtfully.
Much of the debate on part 3 has revolved around the vital question of balance. As Lord Kingsland was at pains to make clear in the other place, market economies are dependent on contracts being enforceable, and the necessary result of that is that debtors must be made to pay. Foreign investment is dependant on the rule of law and the enforcement of contract, as countries such as China have found, to their credit, in recent years. However, that somewhat cold principle must be balanced against the consequences of enforcement against more vulnerable debtors, of which we have heard much during the debate. If we fail to strike that balance correctly, we truly will show the unacceptable face of capitalism. Treating debtors with greater humanity in what are usually very stressful circumstances should never be seen as undermining either commercial certainty or the rule of law. I am pleased that the Government have recognised that principle by bringing this Bill before the House.
There has been plenty of comment on the delicacy of the balance between the rights of creditors and debtors, and I do not intend to add to that. However, it is important that each group should know their rights without having to go through legal gymnastics. The citizens advice bureaux have dealt with 1.4 million debt problems in the last year-about 5,300 per day-and I am sure that they would be happy if those numbers were to come down because people could find their own answers.
Unfortunately, debt is a widespread problem and it tends to afflict those who are least able to deal with it; I have spent a considerable amount of time in the Treasury Committee trying to tackle that issue. That being so, there is a strong case for taking two steps in particular: first, proper regulation of bailiffs, and secondly, the provision of clear and standardised information to debtors, setting out their rights, responsibilities and remedies at the first point of contact with a bailiff.
On the first point, the Government seem to have resiled from a promise to regulate the industry, and the justification that has been given is based on cost,not need. That is perplexing to me, because the Government are not known for stinting on the cost of regulation elsewhere, and if ever regulation were needed, it is here. Bailiffs have the potential to cause more distress and loss than any other arm of the state-except perhaps the Child Support Agency. If the Government are to make a case against the regulation of bailiffs, they must do so for better reasons than cost.
On the second point, it seems to me reasonable that bailiffs should have to provide clear and standardised information to debtors. Let me raise by way of comparison the situation that currently applies in the mortgage lending and insurance industries. At the instigation of the Financial Services Authority, for the last two years providers have had to provide a "key facts" analysis of the service that they give and the products that they are offering. It is a standardised and branded format that sets out, as the name suggests, key facts. That system is easily accessible to the laymanand makes for sensible consumer protection. I would like something comparable to apply to bailiffs,which provides debtors with standardised and easily understood information. Such a document should include all relevant details of the debt, the charges and the expectations about repayment. More importantly, it should also set out the debtor's rights, and details of how to pursue complaints about any breach of those rights.
That principle is very much in line with recommendations 3, 4 and 5 of Professor Beatson's independent review of bailiff law. It also underpinned the amendments tabled, but not pursued, by Lord Kingsland and Lord Thomas in another place. Lord Kingsland argued that the information provided to debtors should
"include the rights of the debtor, the powers available to the bailiffs, and, perhaps most importantly, what the bailiff cannot do."-[ Official Report, House of Lords, 14 December 2006;Vol. 687, c. GC93.]
The information that bailiffs must provide by virtue of paragraphs 7 and 28 of schedule 12 currently falls far short of that standard. Baroness Ashton said in another debate:
"One reason for bringing the legislation together into one piece of law-from common law, statute, regulations and so on-is to enable greater clarity both for those who enforce the law and those at the receiving end".-[ Official Report, House of Lords, 31 January 2007; Vol. 689, c. 272.]
I say: let us ensure that that new-found clarity is communicated to those affected. I hope that the Minister will reconsider whether the mandatory provision of a standardised document along the lines suggested can be incorporated into the Bill.
I shall now turn to the proposals of part 5 on debt management and relief. That part of the Bill received very little comment, and almost no alteration, during its passage through the other place. Perhaps the reason for that is that these provisions have been broadly welcomed. However, I want to make some broad comments not on what is present in part 5, but on what is absent from it.
In November, the Treasury Committee, of which I am a member, published a pair of reports addressing financial inclusion and the ways in which it is lacking for many of the most vulnerable people in our society. One of the points that we looked at was the difficulty that undischarged bankrupts and others with irregular credit histories encounter when trying to open basic bank accounts. That appears to be an innocuous issue, but in my view it is the tip of the iceberg.
Figures compiled by Credit Action show that there were 27,644 individual insolvencies in England and Wales in the third quarter of 2006-an increase of55.4 per cent. on the same period a year previously. The number of people becoming insolvent in 2006 is likely to exceed 110,000, which is more than the population of Exeter. The estimate for 2007 has already risento 150,000. That trend has been affected by the Government's commitment in the Enterprise Act 2002 to
"allow a fresh start for those who have failed through no fault of their own"
by removing some of the stigma of insolvency. That intention is good, as is the intention behind the provisions in part 5 of the Bill, but what worries me is that the Government have yet to address the issue of personal debt in the round.
As my hon. Friend the Member for Newbury (Mr. Benyon) said, the level of consumer debt is staggering, at well over £1.3 trillion; indeed, the only other sum that reaches such dizzy heights is the time bomb of public sector net debt. Of that more than£1.3 trillion of personal debt, more than £200 billionis unsecured, with the average British adult owing £4,524 in unsecured debt at the end of last year.
The Bill is an unsightly agglomeration of a number of necessary reforms, all bundled together into a weighty 297-page document; my hon. Friend the Member for South Staffordshire (Sir Patrick Cormack) alluded to that. It has already been remarked upon that the provisions in part 6 concerning the protection of cultural objects on loan seem incongruous in the context of the Bill.
Instead of the hotch-potch that we have been given, I would have preferred a Bill that addressed all the factors that come into play in relation to consumer credit and enforcement. The first, and in my view most important, step that should be taken is to reappraise the terms on which personal credit is offered. I have come across one case in which a man who had recently been granted leave to remain in this country and was living off benefits nevertheless managed to secure a loan of £25,000. He proceeded to withdraw the entire sum from the bank the day after it was paid to him, and has returned to his country of origin, leaving his young wife to deal with the bailiffs. Such situations are not rare, and some fault must attach to unscrupulous lenders. Secondly, there should be debt management and relief to provide people who are in a financial muddle with a second chance. Thirdly, then-and only then-there should be clear and complete regulation of the bailiffs, who step in when all other options have been exhausted.
The Government have missed a valuable opportunity in the Bill to examine not only debt, but its causes. I am unable to resist an offering from 1758 by Dr. Johnson on that theme. Speaking of the practice of imprisonment for debt, he said:
"We have now learned that rashness and imprudence will not be deterred from taking credit; let us try whether fraud and avarice may be more easily restrained from giving it."
We may have abolished imprisonment for debt in the 1860s, but for many people, getting out of the debt trap remains as difficult as escaping from prison.
It has already been said that many of the people who get into debt are the most vulnerable in our society and the least well equipped to deal with the situation. The Bill's debt management and relief proposals may offer them a key, but I would rather that they did not serve a sentence at all. There appears not to be a meeting of minds within the Government on that issue. I should like the Minister's assurance that the Departmentof Trade and Industry and the Department for Constitutional Affairs have agreed on what must be done. If so, will he tells us what discussions have taken place?
In October, the Under-Secretary of State forTrade and Industry, the hon. Member for Poplar and Canning Town (Jim Fitzpatrick), seemed ready to blame the banks for irresponsible lending, saying:
"maybe the banks are lending too much money or maybe they're not being as careful as they used to be in scrutinising the applications...If they'd not lent it in the first place then they wouldn't be in the difficulty of trying to recover it."
However, the real problem is not with high street banks, but, as we have heard, with the less reputable end of the market, where credit is more aggressively marketed and less rigorously vetted. Many IVA-individual voluntary arrangement-providers have been placed in that bracket, but the DTI still seems opposed to regulating them.
Chapter 4 of part 5 creates approved debt management schemes that can arrange debt repayment plans, which amounts to partial regulation. Those new schemes are intended to complement other provisions-including IVAs. So some schemes are approved by the Lord Chancellor and others not, the sole difference being that only approved schemes can compel creditor participation. I question whether that is good enough, because debtors will still be vulnerable to aggressive marketing of unapproved IVAs; there was still a 118 per cent. increase in the use of IVAs last year. It is a great shame that although we have such positive progress on providing more options for those caught in the debt trap, we do not go further to protect both creditors and debtors by requiring the approval of all IVAs.
I welcome many of the provisions in the Bill relating to debt and enforcement proceedings. The Government have indeed recognised the need to tie up a number of loose ends and to offer debtors more options for a second chance. However, I am convinced that there are several areas in which the Bill could be improved, and I look forward to continuing our discussions upstairs in Committee.
EARLIER INTERVENTION IN THE DE BATE
Mr. Brooks Newmark (Braintree) (Con): My biggest concern is not what will happen to big companies that are forced to deal with the contracts; it is the fact that the most vulnerable people in our society will be the most affected by the legislation. I am curious to know how the hon. and learned Lady will deal with the sensitivities involved in dealing with the most vulnerable people in our society.
Vera Baird: It is a pretty sweeping statement to say that it is the most vulnerable people in society who are covered; it is, of course, all debtors.
Mr. Newmark: May I just clarify what I said?
Vera Baird: Of course.
Mr. Newmark: My concern is with the most vulnerable people in society; I was not saying that the legislation deals only with them.
Vera Baird: All right. I am happy to share the hon. Gentleman's concern for the most vulnerable in society; there would be few in the Chamber who would say that they did not.