My Lords, in the film “Groundhog Day”, the same character repeats experiences on a number of occasions until, mercifully, he is eliminated from it. I feel a little like that, not least because people stream out when I stand up to speak. But I gather that there are rival attractions about to start elsewhere and I can understand why people might wish to be present for those. I thought that we had also lost the Minister as well, but she was just temporarily unavailable.
Group 1 today contains a single amendment, Amendment 22, which is in my name and the names of the noble Baroness, Lady Altmann, and the noble Lord, Lord Sharkey. I am grateful to them for their support. One of the good things to come out of the Bill has been the incredible willingness of people from all around the House to work together and seek progress, not only on this important issue but on a much wider range of topics. Before I get into the detail, I will declare my interests. I am a former chair of StepChange Debt Charity and a commissioner on the independent Financial Inclusion Commission. I thank debt charities and in particular the Children’s Society for their support of this amendment.
I also want to mention the water companies. Rae Stewart of Water UK wrote to me recently and gave me permission to quote him, so I would like to set the context for the Bill in the light of this industrial comment. He said:
“I understand that your ‘breathing space’ amendment to the Financial Guidance and Claims Bill may be debated today. I thought that you might like to know that the water industry backs a breathing space for those people struggling to pay bills and who are seeking financial advice. But although we already operate that way as an industry, we believe that such a scheme will only be properly effective if other companies follow suit. After all, any responsible creditor—whether in the private sector or public sector—would support a breathing space. It’s something that’s been talked about for years, so we very much support its introduction soon”.
It is interesting to look back at the progress we have made in realising this vision of a breathing space. It has the support of all the political parties, as evidenced in the manifestos for the recent election. More by accident than by design, we have arrived at a system where a group of charities, including StepChange, Citizens Advice, the Money Advice Trust, Christians Against Poverty and a number of others, have created an effective system of debt counselling, which enables hundreds of thousands of people in need of help to receive advice, support and access to formal mechanisms that enable them to pay off their unmanageable debts. I pause to pay tribute to Malcolm Hurlston CBE, who was largely responsible for much of the current debt-counselling activity and was my predecessor as chair of StepChange.
We have the infrastructure and, with the support of the financial companies, it is free at the point of the use to those who wish to be part of it. However, these organisations have struggled for far too long to do their job properly. Basically, the only solutions that are readily available to people with unmanageable debt—such as payday loans, guarantee loans, logbook loans and the rest—push people further into debt. The additional charges, punitive interest rates and appearance of bailiffs compound the situation. The combination of this with the stress of dealing with making ends meet causes what is estimated to be some £8 billion-worth of social cost to the economy each year through illness, relationship breakdown and suffering to children.
All this impacts on creditors, too. Most banks, credit card companies and other lenders have good systems in place to deal with people who have problems meeting monthly repayments. But these companies cannot cope with the situation that so often arises, when people owe money to several different creditors. That is where the debt charities largely come in. Creditors need certainty; they need a timescale and they are entitled to receive 100% of their borrowing back—although in practice they will and often do settle for a lot less.
In my experience most people with unmanageable debt and sufficient resources, most of whom want to repay their debts, can be brought on to a formal repayment plan which ensures that their creditors will receive more of their outstanding debt—and in a shorter timeframe than if those creditors had had recourse to legal action. But it is abundantly clear that this whole process is enhanced if the person with unmanageable debts can be given some time to sort out what their actual financial situation is; to work out with advice what constitutes a sustainable budget; and to sign up to a formal debt-management plan. This is at the heart of the amendment which I am moving.
What we have in Amendment 22 may not be perfect; it has had to be constructed within the very narrow limits of the Long Title of the Bill. Even so, it would introduce the breathing space that we all want to see. It is based on the Scottish system, which has evolved over the last 15 years and does what is required. The amendment has the following key elements: the Secretary of State will have the power to set up the scheme; a body will be designated which will be able to designate authorised charities to operate the scheme; it establishes a flexible regime with reasonable time limits; it identifies categories of protections to be offered; and it ensures that creditors are kept informed.
There is a case for considering this amendment on its merits, but there are also ways in which it might be expanded in future, particularly in its territorial extension to make sure that England, Wales and Northern Ireland follow what is happening in Scotland. It is unreasonable and unfair to have a differential approach, because this problem is common to the whole of the United Kingdom.
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This amendment would have the great advantage compared to where the Government currently are of being able to get something on to the statute book now which creates the powers that will be necessary to bring forward a breathing space when it is required. We would like to see this in reasonable time, so we have set a time limit of a year after Royal Assent. This contrasts with where the Government have got to. I welcome their position, but it would be much slower. It would involve a lot of consultation, no necessary identification of a piece of legislation to carry forward the proposals, and the possibility that other factors might intervene before it could become law.
The advantage with our amendment, in contrast to where the Government are, is that the breathing space, whose time has come, will happen within 12 months. Even though the Government have moved with what some people would call spectacular speed in the last few weeks, with this they will be able to say they have satisfied the commitment in their manifesto and done something that the country wants. I beg to move.