HC Deb 22 July 1999 vol 335 cc1312-5
4. Mr. James Plaskitt (Warwick and Leamington)

What steps he is taking to ensure that people in poorer communities have access to financial services. [91094]

The Economic Secretary to the Treasury (Ms Patricia Hewitt)

Following the publication of the report of the social exclusion unit, "Bringing Britain Together", we established two policy action teams, led by the Treasury to consider the problem of financial exclusion. We have involved community groups, credit unions, banks and buildings societies in their work and we expect to publish their reports and action plans in the autumn.

Mr. Plaskitt

Does my hon. Friend welcome the new duty imposed on the Financial Services Authority to perform an educational role? Does she agree that it should seek to concentrate its efforts on people with lower incomes, who have not previously had access to financial services? Does she further agree that the impact of the national minimum wage and the forthcoming working families tax credit will give lower-income families far greater opportunities to draw on financial services? Do not all those measures extend financial opportunity to the many, as opposed to the few?

Ms Hewitt

My hon. Friend is right on both points. First, the Financial Services Authority has an important role to play in spreading information among all sections of consumers, particularly those on low incomes. Secondly, the Conservative party is opposed to the minimum wage, the working families tax credit and the new deal for the unemployed. In other words, the Conservatives would make the poor even poorer while a Labour Government are delivering opportunities and social inclusion for all.

Sir Peter Tapsell (Louth and Horncastle)

While we are on the subject of poor communities, does the hon. Lady think that the Chancellor understands that his decision to sell our gold has plunged South Africa into crisis, and only today 2,500 Ghanaian miners have been laid off, and they and their many dependants have been plunged into abject poverty? Is that a good way to help poor communities throughout the Commonwealth?

Ms Hewitt

I quite understand that the hon. Gentleman's question and the question that the shadow Chancellor was planning to ask about gold sales were destroyed by friendly fire. I do not really think that the hon. Gentleman can get them out of that hole.

My right hon. Friend the Chancellor has made the position on gold sales absolutely clear. We are continuing the policy of the previous Government, to support gold sales by the International Monetary Fund in order to help to relieve the debt burden of the poorest people in the poorest communities—because, unlike the Conservative party, we are determined to deliver opportunity and security, and to help the poorest people, whether in our own country or in the poorest countries of the world.

Mr. Gerry Sutcliffe (Bradford, South)

I thank my hon. Friend for meeting a delegation of community-based credit unions the other week. She knows the concerns that they raised about the balance between community-based credit unions and other credit unions. Will she give us an undertaking to ensure that the balance is redressed and that community-based credit unions are supported?

Ms Hewitt

My hon. Friend has taken a long-standing interest in this matter. I entirely agree that credit unions have a very important role to play, especially in the most disadvantaged communities. We have some very successful credit unions in this country, such as the one that I recently visited at Speke in Liverpool, but they could obviously play a much larger role in helping to combat financial exclusion.

We shall shortly publish the report of the task force chaired by Fred Goodwin of the Royal Bank of Scotland, on how banks and building societies can help promote credit unions throughout the country, but especially in the poorest areas.

Dr. Vincent Cable (Twickenham)

Following the Chancellor's eloquent comments in the Daily Mail earlier this week about the abuses in the mortgage market, is the hon. Lady aware of the disappointment at the fact that the Government continue to disregard the advice of the Treasury Committee and the Treasury Joint Committee on the Financial Services and Markets Bill that mortgages should be brought within statutory regulation and not allowed to remain within the self-regulating framework of the very institutions that are abusing the market?

Ms Hewitt

I know that the hon. Gentleman was not always able to attend meetings of the Joint Committee, but I think that he will be aware that, earlier this week, we published a consultation document on whether the sale of all mortgage products and advice on those products should be brought within the scope of the new Financial Services Authority. As we said then, we shall decide on the scope of the Financial Services and Markets Bill, and in particular the issue of mortgage regulation, before the end of the year, but we shall do so following proper consultation, and following a proper cost-benefit analysis, so that we can ensure that we get the best possible deal for every consumer and home buyer.

Dr. Brian Iddon (Bolton, South-East)

I am pleased by the focus that we have had this morning on credit unions, but will my hon. Friend admit that credit unions in this country have tighter restrictions than those in Australia and other countries? Are the Government considering relaxing those restrictions so that credit unions may expand, as they have in several countries?

On a different subject, do the Government look favourably on the expansion or development of local exchange trading schemes?

Ms Hewitt

I am very grateful to my hon. Friend for raising both those points. We have already issued proposals for a deregulation order that would improve the capacity and the ability of credit unions to offer wider services, for instance by enabling them to bring into membership people who work in a specific area as well as those who live in it. We are currently considering the responses to that consultation.

We are also considering in the social exclusion policy action teams the role that LETS can play, especially in helping unemployed people to develop skills that may be useful to them on returning to work.

Mr. David Heathcoat-Amory (Wells)

Does the Economic Secretary agree that one way of making financial services less accessible to people would be to put VAT on them? Will she therefore comment on the fact that, with the Treasury's knowledge and consent, Customs and Excise is engaged in discussions organised by the European Commission about extending VAT to financial services? To prevent the Government getting into the same muddle on this as they have on the withholding tax, where they are led along into damaging negotiations, will she make it clear now, in advance, that the Government will veto any attempt to extend VAT to things such as credit cards, bank charges or mortgages, and will she give that categorical assurance now, in advance of the negotiations, which are already under way?

Ms Hewitt

I am astonished by the right hon. Gentleman's ability to see European conspiracies even in a question about financial exclusion and credit unions. I remind him that it was the Conservative Government who imposed value added tax on fuel and who would have increased it to 17½ per cent. had we not stopped them and brought the rate down. It is a disgrace for the right hon. Gentleman to try to divert attention from what we are doing to promote competition in financial services and to ensure that the poorest people have access to mainstream financial services.

Mr. Dale Campbell-Savours (Workington)

Will the consultation paper to which my hon. Friend referred include any reference to rates of interest paid on building society deposits, which many low-income families are very much dependent upon?

Ms Hewitt

The consultation document to which I referred deals with many of the problems that consumers have raised with us and with others in relation to mortgages. My hon. Friend will be aware of many of those problems, including the danger of lock-in periods, high financial penalties and the bundling of some mortgages with expensive home-and-contents insurance policies. The best way to deal with interest rates on both mortgages and on savings deposits is to ensure that there is healthy competition within a well-regulated banking and financial services sector. That is precisely what we are delivering through the Financial Services and Markets Bill. My right hon. Friend the Chancellor of the Exchequer has recently invited Mr. Don Cruickshank to conduct a special review of competition within the banking sector.

Rev. Martin Smyth (Belfast, South)

Having grown up on a road where there was no bank, I know how people always look to the Post Office for savings and other services. I welcome the Minister's statement on credit unions. Given that consultation is taking place, may I suggest that she does not give too much credit to those who might be opposing credit unions because they have vested interests? I have seen how credit unions have freed many small, poor communities and given them more liberty in spending.

Ms Hewitt

I am grateful to the hon. Gentleman for making that point. I happily assure him that we will not allow any vested interests to stand in the way of the development of credit unions and other services for low-income areas. I draw the hon. Gentleman's attention to the announcement that the Government made in May about computerisation of the Post Office network.

As we modernise Post Office Counters Ltd. so it will be able to offer efficient banking and financial services to everybody within the communities that it serves, including rural and deprived communities. It will be able to do that in partnership with banks and building societies, which may in the past have withdrawn their branches from rural and deprived communities.