Watch my speech in today’s Budget Debate here, where I speak about the scandal of household debt – now worse than any other time on record.
With so many Members of Parliament wanting to speak, time constraints meant I didn’t get to say everything I’d have liked to. Here’s the full speech I planned to make:
“There is a growing problem in this country of debt.
A problem that eight years of crippling Tory and Lib Dem austerity, stagnant wages, insecure zero-hours jobs, savage benefit cuts and rising living costs has compounded.
8.3 million people are classed as “overindebted” with millions more living in a permanently financially precarious position. Last year household debt was worse than any other time on record and it is something I see time and again in my advice surgeries.
The debt charity StepChange has estimated that over 3 million people are in significant financial difficulty, falling behind on crucial household energy bills, council tax, mortgage or rent and once they fall behind finding it incredibly difficult to get back on track.
The Chancellor’s intention to explore a zero-interest loan scheme is long overdue and welcome. I await the full details and hope it will be implemented as quickly as possible.
But what is this Government doing to crack down on the exploitative employment practices that lead to problem debt? The reality is that people who are on zero hours contracts or whose income changes month to month are twice as likely to have fallen behind on essential household bills over the past 12 months. Yet this Government has kicked the can down the road rather than provide any kind of comprehensive response to the Taylor review of modern employment practices.
I believe it is a national scandal that so many people don’t know how much they will earn from week to week, leaving them unable to budget for basic necessities and unsure if they can pay the rent. This debt crisis in our country isn’t about people living beyond their means, it is about people whose incomes have been squeezed so tight for so long that they cannot make ends meet, however hard they try. Real wages are lower now than they were in 2010 and nearly 10 million people are struggling in insecure work. That’s a third of the workforce, a staggering figure and in the vast majority of cases these are people who used to have permanent employment but are now in the precarious position of not knowing what will be in their pay packet, if anything, at the end of each month.
This Government has stood back and allowed unscrupulous employers to make vast profits on the backs of hard-working people. It has failed to tackle bogus self-employment, failed to ban zero hours contracts and failed to address the fact that a record number of working people are living in poverty with six million workers taking home less than the living wage. On average working people are still £800 worse off than they were a decade ago. That is a shameful state of affairs and one that pushes households into debt, ill health and the hands of irresponsible lenders.
I have spoken in this Chamber on many occasions about the scandal of the failing Universal Credit, so I will not repeat those arguments today. But it is important to note that poverty is only going to increase if the roll out goes ahead, and many working families who are already living from month to month will find themselves up to £2,400 a year worse off.
Once this path of debt leads people to an out of control lending industry, their problems get worse. The Government needs to deal with the root of the problem; the credit industry has been getting away with breaking the rules and selling unaffordable loans to vulnerable people for years.
Last week, I launched a new non-profit service called Debt Hacker in Parliament aimed at helping people who’ve been mis-sold loans to claim compensation. The research they uncovered is appalling. A third of people who’ve taken out a payday loan haven’t been able to afford to get to work; payday borrowers are twice as likely to skip meals because they can’t afford to eat and seven times as likely (as the average) to use food banks.
Who are the biggest users of payday loans? NHS workers, public sector workers and those in the gig economy.
This Government has failed them.
But payday lenders aren’t the only culprits. The flagrant disregarding of Financial Conduct Authority (FCA) rules on affordability has happened on an industrial scale with doorstep, catalogue, credit cards, car finance and more having a lot to answer for.
Why is it taking so long to replicate the interest rate cap on payday lenders across all forms of borrowing to help prevent people falling into this spiral of debt in the first place?
I met Danny at the Debt Hacker launch. He told of how his first payday loan spiralled until he eventually hit the bottom with £26,000 worth of debt. He’d started gambling, desperately looking for the big win that would wipe out his loans but it never came. What struck me was him saying that in all his time taking out payday loans, he never spoke to a human to get one approved. Even when some of the companies could see in his accounts what he was spending money on, see that he was gambling and paying out £1,600 of loans on payday then borrowing it all again immediately to get by, they would just offer higher amounts each month. They didn’t care, just so long as they got their interest.
The best way to stamp out these practices once and for all is for Government to firmly enforce the existing affordability rules. While the regulator has been asleep at the wheel, some borrowers have taken matters into their own hands, and their complaints about unaffordable loans helped bring down Wonga. Now it’s time for more borrowers to be empowered to exercise their rights, and the rest of the payday lenders held to account.
To stamp out these practices once and for all, the Government should be throwing the book at the significant parts of the lending industry who have built their business on the back of ignoring the simple principle that a loan should be affordable. They must take tougher action to produce a cultural change in lending behaviour with proper enforcement and penalties on those lenders who disregard FCA rules.
Borrowers have taken their own initiative and their complaints about affordable loans helped bring down Wonga. But they shouldn’t have been left to do it themselves. A public awareness campaign, similar to PPI claims, supported by Government would help inform consumers that they’re entitled to money back on loans that have been mis-sold.
This Government cannot wipe its hands of its responsibilities as so many lenders have sought to do with theirs.
Particularly as their failed austerity programme is responsible for propelling so many families into problem debt.
Today’s pledge to extend the “Breathing Place” scheme is welcome but that has to include all debts including those to government such as tax or benefit overpayments as well as student loans. Citizens’ Advice tell me that they now see more people with household debt problems (690,000 last year) than consumer credit debts (350,000) and student loans are the biggest source of debt for young people (36% of all debt for 18-24 year olds, 30% of all debt 25-34 year olds)
This has to be implemented alongside proper independent regulation of the bailiff industry, whose heavy-handed tactics cause great distress and anxiety. I’ve had constituents come and speak to me who have been left too terrified to even open their front doors. Last year Citizens Advice saw a 25 per cent rise in bailiff problems, helping 42,000 people with 98,000 issues. That’s one person every three minutes desperately seeking help – and it is government and local authorities who are often the worst offenders.
Finally, I cannot end this speech without mentioning Brexit and the damage this is already causing to our economy. Manufacturing orders falling, investment in new plants and machinery at their lowest level since the aftermath of the financial crash, and the threat of a “no deal” exit causing huge uncertainty for businesses. This will inevitably impact on more families whose finances are already on the edge, and for who one month of reduced hours – or no hours – because their company is cutting back makes the difference between paying their bills or feeding their family.
Your Government is failing millions of people. Total consumer debt (including credit cards, car finance plans and payday loans) is growing at a rate of 8 per cent each year, faster than it did in the run up to the last financial crisis.
It is a ticking time bomb and this budget tinkers at the edges.”