Financial Services Bill

I welcome the Bill, which will give consumers more protection, an issue that I shall dwell on in my speech. The legislation will also empower the FSA and the Government to introduce tougher regulation of banks and their risky practices; better protect the taxpayer; importantly, restore consumers' confidence in financial services by providing people with greater protection and education; and, very importantly, provide powerful and easier routes to redress, when consumers have suffered widespread detriment. Although we might be discussing how we will create better regulations to give the consumer more protection, we should not forget the impact of the banking and financial crisis on constituencies such as mine and the human cost, which is so often lost when we get to the detail of such Bills. Over the past year or two, unemployment has increased more rapidly in Halton than anywhere else in the north-west bar Knowsley. Recently, the unemployment rate has slowed, but it continues to affect many families and individuals in my constituency and elsewhere. People have found themselves unemployed for the first time. Indeed, one constituent told me that, until recently, he had not been unemployed in 38 years. Many poor people have fallen into debt, something that we are discussing as part of the Bill, and many have had their houses repossessed. We should not forget the impact on businesses, particularly small businesses. All that, of course, was caused by the incompetence and greed of bankers and financial institutions. On executive remuneration, my constituents have raised with me the issue of greedy bankers and bank bonuses. Of course, I am not talking about the ordinary bank workers in the offices of local branches but those who take the decisions and make the big salaries. It is hard to ignore the link between the risky activities of companies at a corporate level and an incentive structure that rewards such risk-taking at an individual level. Knowing what we know now, it seems remarkable that the financial institutions and those who had responsibility for managing them did not recognise and understand the risks they were taking on and were unable to prevent the consequences or to put in place plans to deal with them. I am pleased that the Bill gives the FSA new powers on bankers' pay. Importantly, it also gives the FSA the power to rule that employment contracts not compliant with the code are void and unenforceable, and to make provision for the recovery of any payment made under a void provision. There must be more transparency on the disclosure of remuneration and pay bands. Irresponsible behaviour has to be changed. I welcome the increased supervisory and information-gathering powers and punitive measures. The provisions on the disgraceful practice of sending out unsolicited credit card cheques to consumers are particularly welcome. There is no doubt that that can encourage people to take on more debt when many are already in financial crisis, and I am pleased that the Government will legislate to ban that practice. We have seen the usual bad practices with small-print conditions—for example, the interest rate applying to payments is not clearly stated in all cases, and it is sometimes not indicated that using credit card cheques to make payments means that cardholders do not have any redress against the credit card company. I welcome the intention to make it an offence for a credit card issuer to send credit cheques to a customer other than in response to a request from that customer. Excessive bank charges have been the subject of ongoing discussion, particularly with the recent court ruling. That problem has to be dealt with, and I would prefer the Government to take more regulatory powers in order to do so. We should take action on unsolicited credit card limit increases that just appear through the letterbox. The practice of changing the interest on monthly credit card payments will particularly affect young people and get lots of them into debt. I very much welcome the proposed establishment of the consumer financial education body and the provision of guidance on money. Several hon. Members have mentioned the importance of education on consumer credit and financial management. Consumer education and awareness is a key part of the Bill. Citizens Advice welcomes the establishment of the consumer financial education body, saying that it is a step change that will benefit consumers enormously. The work of citizens advice bureaux in delivering financial education has demonstrated the appetite and need for such training and the quantifiable improvement that it makes to people's confidence in dealing with their financial affairs. For example, according to Citizens Advice, 38 per cent. of clients who took part in the Save Xmas financial education sessions funded by the Office of Fair Trading said that they had since made changes to how they save. From October 2008 to September 2009, citizens advice bureaux dealt with more than 2 million debt problems—an increase of 21 per cent. on the same period in 2007-08. I pay tribute to citizens advice bureaux, particularly the branch in my constituency, which does an excellent job, and with which I work very closely, in helping people in severe debt or other financial difficulties, which have been exacerbated by the economic downturn. I particularly commend its volunteer programme. I am pleased that the impact of debt on health is being further highlighted. That is why the primary care trust in Halton has been funding debt advice in addition to the money that the Government are putting in. A few months ago, I met representatives from the Resolution Foundation, whose aim is to improve the well-being of low earners by delivering change for that income group, who are currently disadvantaged. The foundation identified that low earners fall into an "advice gap" whereby commercial advisers focus their attention on the better-off, and the third sector and the Government focus on the most vulnerable. Its research found that a low earner in receipt of money guidance could be £60,000 better off by the age of 60 by making sound financial decisions throughout their life. A poll conducted by the foundation in March 2009 found that nearly 3 million low earners worry all the time about their personal finances—double the number in a similar survey in 2007. The CFEB will increase the profile of money advice, the wider financial capability agenda and general financial education that so many people badly want to see. It will also be able to raise funding from a variety of streams, with no extra administrative burden on financial services. Short selling has been mentioned. It has been an area of great concern at the outset of the crisis and since, and there is some discussion about how it should be regulated. I think it right that the FSA should have a power to place a restriction on short selling and require its disclosure. An independent power dealing with market abuse is very important, but I would like Ministers to provide further clarification, because points have been made about how such a power will be incorporated in the Bill and actually improve the situation. I continue to have serious concerns about short selling. I understand the benefits that it can bring, but we have seen far too much of the disadvantages of that practice, and I would like some more information on it. Increased supervisory powers, information-gathering and punishment are key measures that I support, but I also welcome measures to enable consumers to obtain redress and compensation more easily in cases of widespread consumer detriment. I want also briefly to mention banks and bank lending. I know that there is a view that some banks have improved, but I still get constituents and businesses coming to me to complain bitterly about the banking system and how it does not help small businesses, particularly regarding lending. I am not suggesting that we have to put such regulations in this Bill, but we should consider the issue. I welcome the Bill's main proposals, but there are certainly other areas, particularly those affecting consumers, that we need to look at. I hope we can discuss them at a later date.