§ 4. Mr. Andrew Smith
To ask the Secretary of State for Trade and Industry what further steps are being taken to curb irresponsible credit lending.
§ The Minister for Corporate Affairs (Mr. John Redwood)
The Government set out in December 1990 proposals for improved regulations on credit marketing and I am sure that my hon. Friend the Under-Secretary of State for Industry and Consumer Affairs will take the hon. Gentleman's comments as a reply to the consultation document.
§ Mr. Smith
In view of the mounting misery caused by irresponsible lending, with mortgage repossessions doubling last year and with the Oxford money advice project in my constituency reporting default actions up by 10 per cent., bailiffs' warrants up by 16 per cent. and bankruptcy petitions up by 88 per cent., is not it time that the Minister took some action? Should not he also launch a rescue package for the many advice centres facing closure as a direct consequence of the Government's poll tax capping policy—in many cases, leaving the people in the deepest debt with nowhere to turn?
§ Mr. Redwood
I have just told the hon. Gentleman that the Government have taken action. We have set out proposals to make it clearer to those entering into credit agreements what the rate of interest would be and what the impact would be on their family budgets. I am sure that the hon. Gentleman would welcome those proposals if he read the document and saw what the Government were trying to do. The Government also support various schemes to help those involved in offering advice on consumer debt. That is part of helping the market work. It is most important to have clear disclosure to all those thinking of embarking on new debt and that is precisely what the proposals set out in the consultation document do.
§ Mr. Nicholls
Although I dismiss the nonsense that we have just heard from the hon. Member for Oxford. East (Mr. Smith) and pay credit to the steps that the Government have taken in this area, I continue to receive examples in my constituency of offers of credit that are clearly irresponsible and should not have been made. Does my hon. Friend accept that sometimes there is such a disparity in the bargaining position between lender and borrower that the matter must be kept under review? Despite the steps that have already been taken, will the Government continue to keep the matter under review and respond to individual cases that might be drawn to their attention?
§ Mr. Redwood
My hon. Friend can have that reassurance. Of course, the Government are watching the matter closely and are involved in consultations with regard to proposals that we believe will go a long way towards remedying the defect that my hon. Friend recognised. In the pre-agreement phase it is most 270 important that the consequences of that agreement should be clear to individuals so that they can understand what impact it would have on their family budgets. I am worried about Labour's proposals, which seem to suggest that people should not be able to borrow in certain circumstances. That could make their position far worse. We want to see responsible borrowing based on a sensible regime of disclosure of the consequences to those thinking of entering into agreements.
§ Mr. Nigel Griffiths
Why have the Government failed to implement the proposals in the 1988 White Paper to protect the public against irresponsible extortionate credit deals? With 170,000 people unable to pay bad debts to five and more creditors, why are not the Government commissioning a report from the Office of Fair Trading on extortionate credit agreements?
§ Mr. Redwood
The Government are consulting on all those matters at the moment. The hon. Gentleman is quite at liberty to send in his views, which we should be most interested to see. The action that we propose addresses the very issue about which the hon. Gentleman is worried. It would cover advertising and the agreements themselves and deal with matters such as sending details to minors, which we believe is quite wrong and about which there are recommendations in the consultative document. Will the Opposition please read the consultative document and give us the benefit of their advice on it?
§ Mr. Alton
While welcoming the consultative document and the remarks that the Minister has just made, may I ask him to accept that the phenomenal growth of consumer credit from £15 billion to £50 billion this year, coupled with the growth of credit cards—2 million are available in Germany compared with 30 million in this country—requires rather more than simply responsible borrowing and probably requires tighter controls on the kind of credit facilities that can be made available? Many families, especially poorer ones, are becoming increasingly indebted and 2.5 million families are now in serious debt.
§ Mr. Redwood
The savings ratio has been rising. All Conservative Members welcome that and it shows that the balance between saving and borrowing is improving in the way in which the hon. Gentleman suggests. Is the Liberal Democratic party really suggesting that people should not have access to credit on any basis? Is the hon. Gentleman aware that 84 per cent. of personal borrowing is in the form of mortgages, not in the form of credit cards? The main factor in any credit increase is mortgages, not credit cards.
§ Mr. Batiste
Will my hon. Friend rule out of his consultation exercise at this stage any possibility of introducing credit control curbs along the lines advocated by the Opposition? Would not they reduce the amount of credit and competition available for the mass of responsible borrowers and also destroy the credibility of United Kingdom financial institutions, thus making a free gift to their overseas competitors?
§ Mr. Redwood
My hon. Friend makes two extremely powerful points. The Labour scheme would not work, because there would be ways of borrowing from banks outside our jurisdiction. However, to any extent that it was effective in limiting some people in gaining access to borrowing, it could be an extremely cruel scheme. People 271 need to borrow. We are trying to make sure that they do so on an informed basis, aware of what impact it will have on their budgets, so that they can come to sensible decisions before committing themselves to undesirable borrowings.