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Debt Advice and Debt Management

That is a perfectly legitimate and credible line of argument. The hon. Lady mentioned, however, that the payday lending market barely existed in this country five years ago. There are many other high-cost forms of credit, so this market has a remarkable ability to shapeshift, and targeting just one sector will result in the growth of other sectors. Not all the states in America have the payday loans regulations the hon. Lady mentioned, but those that do have experienced growth in other areas of lending, such as rent-to-own loans. Somebody always picks up the slack in the market, therefore. I am not arguing against all regulation, but I am arguing that what appear to be easy and general solutions are usually ineffective. Education and advice are essential. Some people would say that the best advice on debt that we could give to individuals—or to Governments—is, ““Don't.”” To be a little more nuanced, we could say that capital spending—people investing in themselves through investing in their education, their home or a car that will help them get to work—is a legitimate reason to incur debt, whereas current spend is usually to be avoided unless people can be confident they will be able to pay the money back. In other words, people must ensure that in the ups and downs of life there are not only downs, but an up will come, too. We might call that a golden role. Opposition Members will recognise that term, and they will also appreciate how important it is to stick to the golden rule and not change it part way through. My hon. Friend the Member for North Swindon (Justin Tomlinson) has done amazing work not only in running the all-party group on financial education for young people but in raising the profile of this issue. I agree that young people must be equipped with the necessary skills for when they enter adulthood and the marketplace, and I believe the best way to do that is through maths, because if people understand percentages and so forth, they can assess all sorts of financial products. If schools and society are doing their job well, people will understand their self-responsibility too, which is also very important. There will always be a need for a backstop solution for when things go wrong and I believe that debt counselling and advice should be mainly industry-funded. It must also be available through all channels—online, telephone and face to face. However, we must accept that face-to-face advice is massively more costly than the other channels. The hon. Member for Stockton North cited Citizens Advice cost-benefit analysis figures in respect of debt advice, but they are slightly exaggerated as they represent not the return to the Exchequer, but a much broader view of cost-benefit analysis taking account of the benefit to the economy. We must accept that face-to-face advice is costly, but, as my hon. Friend the Member for North Swindon rightly pointed out, it is essential to have that provision as it is important for some of the most vulnerable members of society. I am delighted that the Money Advice Service is focusing on how it can improve productivity—the case load throughput per person—in order to make face-to-face advice more affordable. There is a role for debt management companies. There are hundreds of them and we must not over-generalise. On the other hand, a considerable number of them have got into trouble with the OFT, which suggests there might be a systemic problem in the sector. It is worth bearing in mind the circumstances of the customer that a fee-paying DMC will take on. They are, as has been said, typically not letter-openers. They often have unrealistic optimism about how the circumstances of their lives are about to change and turn around and, conversely, they have an enormous myopia about fixing today's problem and today's bills rather than looking at how to lay down long-term foundations. They are, almost by definition, quite easily swayed by good advertising—usually by either the first ad they see or the last. That all means that they are quite susceptible to the offer of an apparently easy solution whereby somebody else will take on the administrative burden and deal with the range of creditors on their behalf and they will focus on the smallness of the monthly payments rather than on how the alleged solution will bring them into long-term financial health. That means, in turn, that the successful companies in the sphere tend to be those with the biggest marketing spend, the biggest promises, the longest repayment term on the loan and therefore the highest conversion rates. Although they will have a substantial drop-out rate, it does not matter so much if they have charged up-front fees that mean that they have ensured that their cash flow is safe. I hear from my excellent citizens advice service in East Hampshire that debt management companies all too often fail to consider the consumer's overall position, the priority debts that they must pay first and their ability to pay back the loan schedule.