Treasury Committee Select Committees

Thank you very much so that that

you're the first two panels we have

the second. People are coming and

going to advance and, just for the

benefit for those who are not in the

room, I'm going to ask you to

introduce yourselves.

I'm the head

of policy for consumer and public

services from citizens advice.

I'm...

I'm managing to do that thank

you very much indeed and we will

have a series of questions don't

feel...

Please do chip in if you

have points to make. I wanted to

start with citizens advice and step

change first. The money advice

service have estimated separately

that just under 16 of the UK adult

population are over indebted. And he

defined that as keeping up with the

missing bills, is a heavy burden.

That's a million people. I just...

From your work, the evidence that

you've collected and the people you

work with, does that sound like a

fair estimate and would you agree

with that as a definition of over

indebtedness? B would agree with

those numbers. You have to split it

down. As a charity, we help say such

earn 20,000 people here. -- 620,000

people. You're -- and in some places

in the Northeast, it's one in 50

people. We recognise the numbers as

not only folks who are in financial

difficulty, which by... Those who

are in some distress or at risk of

financial difficulty, being in 8-9

and quite often their individuals

who you would expect to measure

lives on a day-to-day basis but

through overspending for under

£50,000 a month, -- of £150 a...

Do

you think that's fair, the

definition of indebtedness keeping

up with the missing bills and credit

commitment being a heavy burden, set

a summary? DeLaet is that a fair

summary -- is that a fair summary?

It's right that you combine a

combination of measures. It chimes

with our experience, that sees --

that is the second biggest issue we

see people with. To .7 million

people -- 2.7 million people... We

help bridge and 50,000 individuals

pretty with that and still sad about

the demographic breakdown of some

those issues, -- Phil talked about.

There are differences between people

in long-term debt and short-term

debt, but that analysis recently and

found that about 1 million people

who struggled with long-term debt

from 2006 all the way through to

2014, so eight years of persistent

debt. Sunday headline figures hide

that.

In your experience, you've

already hinted at some of it, the

reasons for, like shocks and

employment and everything else. Do

you think it's become easier to

become over indebted? Are you

finding people are slipping into

that over indebtedness more quickly?

I think we are seeing both the

average numbers of the amount going

up slightly at the moment. The

amount that's owed on individual

credit cards going up to over £8,000

on the individual. What we are

seeing is that individuals aren't

just only the one creditor, they are

averaging to just over five

creditors. That creates difficulty

in terms of how you're going to

manage, who shouts loudest and what

that intervention that is. You see

that as a significant challenge.

We

are not going to get into a macro

economic debate, but what we're

seeing is a picture of increased

insecurity, whether it be through

stagnant wages, rises in inflation,

Universal Credit, having fewer

pounds in the pocket to ride out

shocks when they happen. But also

people are increasingly -- are on

increasingly volatile income. We see

people's incomes fluctuate a

significant level from

month-to-month and many more see

their incomes fluctuate from year to

year. That adds to the problems that

we see, and it makes it easy for

people to slide into high levels of

debt.

Does this all sound familiar

to you, John? Slightly different

perspective on it.

We are the

biggest investor now in the social

ethical lenders, and I think that

about I think the challenge we have

is people talk about debt, the

measures we do on debt, we talk

about affordability, we haven't

talked about suitability, how do we

change data sets and how do we look

at stuff that actually people can

understand it. Some of the adverts

are Santelli now, you think, it

reminds me of the mall -- Malboro

adverts. There is a predatory nature

to them. The promotion of debt seems

to be acceptable. And it's moving to

the tempo Magdeburg. I'm not going

to name any particular ones, but the

adverts are sexy. There are

alternatives but it's a predatory

lenders with the big box that are

advertising that people are

attracted to. How do we actually

open up the market and let people

know the credit unions exist, that

other alternatives are there,

because it's a very singularly

focused market, who's got the

biggest budget?

Where the things

we've had evidence about is that we

should worried about the overall

picture, but it's problematic that.

As defined, do you agree that the

the Toys "R" Us, Carillion, I think

they just extensions of over

indebtedness.

This country has the

biggest credit Bill get going,

doesn't? How do we get people to

understand that it is, because I

think there is a this conception

about it. How do we change and take

away that, talk about suitability.

Some rates could be suitable for

short-term fix. A talk about Ford

ability but the data that is

collected, it is debt data. It's not

spend data. The biggest expenditure

of any household is the housing. So

how do we make sure that people's

expenditures alone. Your team is

when going through a stop going to

William Hill or don't drink so much.

You're not looking at the

suitability of the debt. We are

looking at theoretically at the

affordability based on indebtedness?

It seems upside down to me.

We don't

see credit in itself as a bad thing.

The question is, is it affordable?

Is appropriate? Is a sustainable?

And do you understand when we're

getting into it what you're getting

yourself into? Are using it

appropriately? For instance if you

are using credit cards to pay your

utility bills or you are paying off

credit. It's a spiral. It's a spiral

out, and then we move onto the next

question, which is rather than being

an adequate ambulance at the bottom

of the clip to help these

individuals, the question for us is

what are we doing to stop people

falling into this in the first

place. We moved straight on to the

concept of rainy day savings, people

having an ability to pay out of some

savings or being able to go to a

low-cost provider of debt rather

than a publicised ones as John says.

Your question about growth and

consumer credit versus problematic

debt. I think it's right because

people can get fixated on this 200

billion, 210 billion figure in

itself, and borrowing is not bad in

itself. A couple of points I would

make about it is, one thing that is

worth focusing on is, are those

debts, which have more significant

consequences, household debt, rent

arrears, being cut off, or debts

that can involve imprisonment. One

of the real dangers I think is that

a lot of those debts, the not

consumer credit debts, are all

captured as part of this figure so

you have the Bank of England and

other bodies, very clear on the size

of this consumer credit bubble, but

no attention being paid to these

much more damaging debts that went

into the billions of pounds, and

have those more saviours

consequences. There's a sense that

people need to grip the overall

picture rather than just obsessing

over consumer credit. Where the

other sides that were focused on is

I think we should be focused more on

problem that where actually it is

the product itself, which can often

cause a death, I know we will be

talking about high-cost credit and

whether it be credit cards or short

term credit... Rent own or do less

rent to own -- rent to own...

We

were hosted by... One of the things

we explored there was none credit

defaults, such as on council tax and

utilities. That is a growing trend.

I just want to perhaps look at your

point of view how you see it,

because we heard that government

departments can be very inflexible

in terms of dealing with it, making

arrangements.

It's something we are

seeing, and it's something we've

seen council tax debts, over £1000

on average now, around 31% of our

clients last year. Quite often, the

governmental organisations are very

aggressive in the way they go about

getting the payments made. There's a

quick jump to the use of bailiffs

which we are concerned about.

We

talked about at length this past

week. I think people find acai be

difficult to grasp because when

people first hear government

collection, local authority question

is effectively the that perhaps

emotionally, it's difficult to

accept, because the Government must

do better than some of these firms

that we hear about. I think there

often a lot the Government could

learn in terms of forbearance or

understanding from some of those

consumer creditors and part of that

is because regulation has brought

some of those firms online, but

partly, if you talk to banks, it's

because lots of organisations agree

that aggressive collection methods

are not effective in and of

themselves and actually getting

money in the door because people

don't respond well to some of those

tactics. Does a couple of reasons

why they should look at the way they

collect that.

There will be people who are two

months behind on the rent, haven't

paid the council tax, but on all

CRAs will say job's a good un. The

difference in attitudes is one of

the reasons that price is so high,

they are factoring in failure. The

way to get high costs down apart. In

some predatory action is to lower

down the failure record.

I'm so

tempted to go right down the path of

what happens to people in crisis but

I'm going to stick to

creditworthiness and financial

inclusion. Apologies by the way if I

leave shortly afterwards but one of

my constituents here is part of the

lobby of Parliament and they are my

boss so don't think it's a

reflection of my interest in this

topic. The big issues behind the

credit assessment Bill, taking into

council tax and council tax payment

history, what problems do you think

this will solve and how much

practical difference do you expect

it to make to borrowers?

At the

moment, everyone concentrates on

their mortgage. Actually there are

12 million renters and growing. We

have people growing from 22, not

going to buy a house until 35, they

don't have digital footprints or any

record of doing stuff. Why am I

still paying my kids' mobile phone

bills, because they cannot get the

credit account themselves. They are

paying rent, it's not recorded

anywhere, they don't exist so some

of it is about digital

authentication. About 30% would not

even past digital authentication

because the data is not there. We

developed a credit system... What

was experienced cold 20 years ago?

Push what was Experian called? It

was Gus, a catalogue company, which

grew from providing affordable

credit of the masses. The whole CRA

system has moved from where it

started to actually excluding the

masses because the nature of the

data of its been recorded is not

necessarily... Ariel Sharon upon

creditworthiness is what are the

datasets we should be recording

whether it's calculating someone's

credit rating will reportedly the

data is available to look at

affordability unsuitability of

products.

I will broaden it out to

the panel because one of the things

we see in our case work as

constituency MPs is there is a real

cliff edge in consumer credit

ratings and this kind of perverse

situation where anyone with adverse

credit history is pushed towards

high cost lenders because they are

the only lenders prepared to lend to

them so we end up effectively,

because of bad credit history,

pushing people towards a higher cost

of borrowing. If you've been in the

poverty trap you are more likely to

spiral further into that trap. Do

you think the proposal of including

rent assessments would help?

I think

the only counter argument to the

point here is that's fine if the

thing that is going to be included

is something you are paid well for a

long time. If you are behind on your

rent and council tax payments, all

that will do is enhanced social

exclusion. For a minority of people

it could push them further into

social exclusion.

There's a lot of

good in the proposal, it's important

to acknowledge it's a double-edged

sword. Obviously we will get onto

broader topics as well but a lot of

the clients we see who struggle to

access credit, there is a proportion

for which credit referencing is a

factor but it's not the big factor.

Anything too hard?

We have had

discussions about negative, but the

last thing in the credit worthiness

bill is about promoting people get

into more debt. It's about making

sure data is recorded so the

suitability and access to products

is improved. Whether that be... If

you go and try and provide insurance

and putting your correct address you

will get one quote. Change your

postcode by two digits, your quote

will go up by 20% because it's going

ping ping ping, we will price the

risk automatically. If you don't

have a digital footprints you are

automatically paying more. That is

right.

Can I ask a broader question

because this is the kind of policy

maker's dilemma so hopefully you

will solve it this afternoon.

Broadly speaking, in terms of how we

approach problematic debt and

tackling it, you can either restrict

access to credit but then

potentially deny people opportunity

to smooth their incomes or to

overstep those bumps on the road

without hitting crisis or reform

credit products so they become more

sustainable. Do you think the latter

option is realistic or is preventing

people from accessing products in

the first place?

It is a complicated

answer. Clearly we talked about

borrowing is a positive thing,

whether people borrow to smooth

expenditure and so on. There is no

doubt receive certain proportion of

clients and it is right extra

borrowing will get them into further

financial difficulty and to some

extent it isn't the answer for them.

But I think the thing I would want

to be very careful of is we will get

into conversation about arguments

whether to regulate or not, say high

cost lenders for example. It's often

an argument that use which is if you

regulate you will just deny people

access to credit. It is a simple

trade-off and all of our evidence

shows it's not the case. If you look

back at payday loans, those are the

arguments made about payday lending,

the vast majority of people who need

credit but all the stops is the

predatory side of it which means you

have a group who are not shopping

around according to cost and value.

They are just desperate for credit

and it means those people can be

exploited to the same extent so I

don't see it as a trade-off between

access to credit and improving

credit products.

I would break it

down into four stages really. I

think the first element is an

educational and awareness element

which we must talk about because it

is extremely important that

individuals understand what good

personal financial management looks

like and can avoid getting

themselves into difficulty. That

goes on to the second element, which

is talking about having a safety net

and soaks you are not immediately

recall seeing to debt. Or at least

access to a social lender who is

going to do things at a reasonable

rate. If you do have to take on

debt, it has to be affordable and it

has to be sustainable and

appropriate for you. Then if you do

get yourself into difficulty with

that, there has to be measures in

place such as for breathing space

legislation which is going through

at the moment which gives you a

little bit of time so that if you

get yourself into difficulty you are

given a bit of time without penalty

interest to get yourself back on

your feet and to start putting in

place a proper debt management plan.

It's important because in terms of

step change as a charity, we say if

you have borrowed it you should pay

it back and we give people the

opportunity to pay it back even if

it is over a long period of time.

There's a lot of people who don't

have a bank overdraft, who don't

have a credit card. End of the

month, the washing machine is

broken, it's a five-week month. We

have got to accept some of the

payday lending is what many in this

room may do because the cat got sick

or whatever. I don't think we should

demonise the fact people at some

point in a month are couple of quid

short, it's just life happens. We

have got to have that ability, we

have got to accept people are living

to the ends of their means. In the

old days, go to Nottinghamshire and

people would go, you know, the Lady

of the House would go to the pit on

a Friday, pick up the wage packet,

he would go to the pub but they've

managed on a week by week basis and

people are still managing on a very

tight budget with no cushion. I

think are important thing on the

stuff we are doing is we are not

hold up too much about interest

rates. We are hung up about the

suitability but more importantly

what happens when things go wrong.

We spend a lot of time looking at

affordable members saying what do

you do when it goes wrong because

that's the critical point for these

people. If it just spirals out, it

is that. Also some of the education

stuff, fair money .com just launched

trying to provide a website to more

better lending decisions and it

starts with credit unions and

explains what it is. How do we get

education out there that understands

stuff because things have gone

wrong, you see the advert on the

telly. We are a society of very

poor... Those with the biggest

marketing budgets can be the most

predatory. I think we have all

experienced that feeling of watching

someone would come to us sooner for

advice before they hit crisis point.

Am I finish with a question on the

FCA's consultation on assessing

creditworthiness. They are proposing

an explicit definition of

affordability risk to show where

repayments could have an adverse

effect on people even if they don't

default. Do you think about the

right approach? Is there a risk this

will cut people's access to credit?

If particularly for you, John, how

do you see their state of

objectives?

Their first bid came

round, a definition of high cost

over 100%, actually I've got a bit

of a struggle with that because it's

the package I want to know. What is

the suitability for the individual

and so on. If you look at the amount

of effort that goes into mortgage

lending, actually we are changing

what's happening, there has to be

greater effort in checking

affordability unsuitability of that.

That's the start of putting the

fence at the top of the cliff and

not the ambulance at the bottom.

From the step change perspective we

are absolutely welcome the

suggestions and recommendations.

There are some areas where we need

to go further and particularly on

revolving products, persistent

overdrafts that kind of thing but we

welcome it.

We still see too many cases where,

especially with small loans, where

it is properly assessed. Anything to

strengthen that is a positive step.

The head of the SCA told this

committee, I don't think we have a

sustainable means of providing

low-income households with credit at

the moment. Do you agree with that

and what might we have done about

it?

One of the challenges, if you're

looking the that we're doing a tip

of the iceberg investigation into

ethical and social lenders, but

because of the legal structure, its

lending its loan, how do they ever

pay back if they grow? It's having

that large lump of capital that can

support the other that they haven't

got the capital to do it. Barclays

may run big equity, the legal

structure where is that big lump, is

the hundred millions, the 200

millions that is supporting the

growth of that sector, along 25-30

your position. People can't grow

businesses on short-term positions.

We agree entirely. I think one of

the challenges we have to ask

ourselves about is the reasoning

behind the lending of the doubt

whether one of the reasons is is

they might follow the difficulty in

some way and create a profitable

situation for the lenders. I agree

with John, the challenge... There is

no way developed market in terms of

social and low-cost lenders so

people have to resort to lenders who

do a fully risk-based pricing

approach in the way they lend money,

so interest rates are very high, so

we are welcoming of the cap on

overall borrowing costs, but we do

need to extend into other areas like

rent to own.

They will consult on

proposals to reform high-cost credit

including overdrafts, rent to own,

in the spring. What changes would

you like to see?

I echo what Bill

just said. We'd like to see the cap

and payday applied successfully. --

what Phil just sent. There

opportunities... All the spectres

were raised before it was brought in

about denying access to credit and

people going to illegal

moneylenders. These things sound

emotive in a forum like this,

especially things like moving into

illegal moneylenders. No 1's bought

any evidence that this is actually

happening. There was such a strong

argument, don't shop around and

differentiate, there on these

particular markets, exploding with

exponential interest rates and

holdover loans. That's something we

would like to see. Rent to own is a

big market. Very much towards a

vulnerable... They're young, usually

female, usually very vulnerable, you

have the individuals put into a

situation where there is no cap on

the cost of credit, and then it's

compounded by the the... So when you

do the overall costs, it's

absolutely horrendous. Quite

frankly, it just has to stop. It's

not right.

Just to pick an example.

The figures we had, about 20% of

rent-to-own customers pay a fifth of

their income on rent to own

repayments, that's phenomenal amount

of money, we're not talking about

small in the margins.

Just looking

at rent to own, many of my

constituents complain about the of

interest and that the goods

themselves are more expensive than

it would be able to find in their

local curries. They could also find

better credit in terms on offer as

well. What sort of caps do you think

should be placed?

We think there

should be 100% cap that we have on

payday lending. But as I said, I

think we have to look more widely.

You need to decouple the warranty

and it just needs properly

regulating because it serves a

really useful purpose. There's a lot

of people who use it and if used

well, it can be effective. But it's

deeply under regulated stop it needs

to change.

To an extent, a

relatively simple headline cap would

solve some of the problems because

you are then able to see, even if

the upfront costs are usually

inflated, which in many cases it is,

it is easier as a consumer to see

that it is incredibly highly priced,

and there are other ways around that

if you costed out. The cost it out,

even though it's a slightly

different product to payday.

Would

you don't see in these, by the time

you're finished, you have paid £3500

for the television and it's only

worth 1500. Some of the

presentation, you will see. £10 a

week. It's how we promoted. It's not

being insulting to people. We need

to have the explanation of what that

really means, read loud and bold.

One of the problems is some of these

things actually promote this

unending cycle of debt. We have to

stop products that promote that.

Did

I just moved to credit cards? The

credit card market study... Early

warnings and interventions for those

getting into difficulty. What do you

think of these ideas?

We just don't

think it went far enough, for about

6 million of us, getting those

increases every year, I'm sure

people in the committee have had

that letter through the letterbox.

Melamed has gone up without having

tested. The best might limit -- my

lemon has gone up. -- limit. For

those who are in distress and who

get the increase, 50% increased his

spending. It has a number of holes

in it, and you've got to ask why.

It's a phenomenal amount of money to

be made out of pushing credit on the

people, and you have to ask why the

banks fought so hard for a voluntary

arrangement. It's one of those

things that, if I'm honest, and five

years' time, we will be sitting here

would it being banned and we will

think of this incredible situation

that we used to have where people

just to get credit without asking,

thinking how it was something we

considered to be fair game. May be

that they ridiculous concept was up

I just think it's a very strange

move to not bother the piercing

regulators should just come along

and then at.

Full stop.

Voluntary

schemes can be good. We don't push

for regulation for regulation sake.

If someone sense among the text and

asks, it's one thing. It's a huge

barrier for a bank to pass. It's a

very different issue, just raising

it unilaterally without asking them

in the first place.

It seems

strange. We think it's a good start

in terms of the suggestions.

However, it does work on individuals

who've gotten themselves and the

troubles that it's not doing enough

to address the ability of people to

get themselves into trouble in the

future because there's not proper

assessments done of an individual

buys likability to pay off the

credit cards going forward. It's a

good... We are not sure what it does

going for.

They say they don't

propose to restrict normal sense

credit card balance transfers.

That's good news for consumers,

isn't it?

Or is it exploitative?

It's an interesting leading

question. It depends what you are

going to do with that zero balance

transfer. If you're going to use it

in a sophisticated manner, to have a

continuing rolling 0% bound

structure. If you get to the point

where points out as a zero balance

transfer period, and you might want

to higher overall costs... Then

obviously, that is a problem. If you

gain it is fine, if you get caught

up by it it's not. It again goes

back to financial education and

being aware of what you're getting

yourself into.

The minute you spend

on that 0% credit card, the debt you

are paying off and you paid opposite

not percent debt, another... It's

promoted in a way that actually

isn't, to a lot of people, there is

a clarity.

As you say, some people

are good at this, a lot of people

just use credit cards in the wrong

way. It's not a particularly good

way to use a credit, not necessarily

what it was intended for. Some of

the other remedies that the SCA

brought were positive, -- FCA.

So I

want to focus on the rainy day

savings ideas. Mr Andrew, that

change has written... If every

household in Great Britain had £1000

saved, this could reduce the number

and problem debt by 500,000. Is this

realistic in your view? The actual

cost would be very significant. Can

you say bit more about that?

Obviously it's not going to be easy

to get everybody to put aside £1000

in excess Bill cash savings. It has

to be -- in excess cash savings. But

I think for us... The matching

through the UK savings Gateway pilot

was very successful and we applaud

that and we would like to see that

extended out. An area where there's

been suggestions that it would be

very helpful is on giving tax

relief, we don't feel that works so

well at the lower income and of the

spectrum. We are not soaking on

that, though it has a place, though

probably not for the types of

individuals who come in and conduct

step changes.

You would say that the

schemes are not well targeted

towards the most indebted or...

They

are not because if you are paying

little to no tax, something that is

tax-free is irrelevant. The marginal

savings were getting is very small.

It may sound shallow as a structure,

but what we've seen in other

environments is a savings scheme,

like premium bonds, forgive them an

incentive to save by getting prizes

and potential... Something that will

give you a jump up, which is free to

you at the point of saving. We have

found it worked in other parts of

the world, and it's something that

needs to be looked

the world, and it's something that

needs to be looked.

Backspace

incentives don't have a benefit or

appealed to lower income households.

Very much agree.

One of the things

that are a bit more innovative is

the modelling of the credit union,

which is to borrow as you pay but

you save the same time. How can we

think of depositions were if you are

paying off her credit card and the

percentage of that is going to a

savings account. I keep paying with

a love again. I don't pay, and will

be used or whatever, but it can be

handled in a more innovative way

that can encourage the it could

actually reduce the interest rate

because if IRD have money and that,

I will keep a because I want that

back. This bit of animation about --

there is a bit of innovation and how

can look of the product that could

be credit and saving at the same

time.

To build on that point, it is a

slightly different way to look at

it, and it's been a really positive

take-up of the standard financial

statement, where people are paying

back their debts and building in the

element of saving as part of it

which is an incredible positive

because of the habits it built. Much

less adopted by the public sector

creditors and collectors so you will

often see a situation where someone

has a plan in place if their

consumer creditors is able to save

something. Excessive amounts taken

back by the state then stops them

saving the amount which might solve

their problem in the long term so

another challenge of the Government

and public sector taking with one

hand but causing problems with

another.

You have kind of answered

my question I was going to ask you.

In a way this whole session, thank

you for giving your time, this whole

session is thoroughly depressing.

That's why I picked the section,

because I was keen to understand

better why the big interventions

could be made by government. On the

one hand my questions and my section

is about what the indebted

individual, how they can be

supported to save but as you talked

about the labour market and the

pressures and there is even greater

pressures on changes in the benefits

system and so on, where do you

think... In a sense what I'm trying

to get up as to what extent do you

think this is going to be resolved

by coming up with new innovative

mechanisms to help people save. But

if you don't have the money, if you

just can't make ends meet, how are

you men to save and what's your

proposal to government about what

they should be doing to address that

side of the equation?

I think it was

still make a huge difference. I'm

not going to pretend there is and to

challenge with how much money people

have in their pockets. Of course

that's the case but I go back to

high-cost credit and I won't dwell

on it too long, but certain

products, it's not that they just

don't help the problem, they

actively make it worse. You regulate

some of those products effectively

and I think you can make a huge

difference. If you give people a

small savings offer, you can make a

huge difference. Focus on savings

and regulating the market and

focusing on not, again debt

collection from the state, a classic

example might be what we spoke about

last week, someone having a fossil

tax debt, the council calling in

bailiffs and suddenly it is doubled.

Can I ask you to say more about the

Help To Save programme and how well

targeted you think that is.

We

welcome it. The a -- clearly it

cannot help people in crisis today

but it will help people falling into

that in the future. We think there's

about 3.5 million low-income adults

eligible for Help To Save and we

recommend that fully support doing

that. The question I think for us is

how are the Government going to help

maximise take-up of that? Because it

is deeply countercultural as it

stands at the moment because we have

got ourselves into a culture of

absolute immediacy and a culture

where building the dead as a student

as an example is deemed as

absolutely acceptable. If you are an

undergraduate, you are actively

encouraged to get yourself £40,000

into debt, don't worry about the

interest rate, you might not have to

pay toffs so don't worry about it.

We are giving that message -- you

might not have to pay it off. And

the message is so far off kilter

with normal culture that it will be

difficult to sell. It will require a

real drive.

I think education and

people's understanding of stuff is

awful. People are going for advice

after the event. How do we promote

people understanding that and what

£10 a week really means, but how do

we promote a product that is both

credit and saving at the same time.

Because I think that would be good.

And do you think the Government has

got the wrong balance in terms of

tax breaks. If you look at the ISAs?

They are middle class.

Middle

classes tend to do better out of

those products. Do you think they

could refocus on some of the

incentives towards those who are

more indebted so we are coming at

the problem from both directions,

more aggressive government

interventions to target that group

of people as well as encouraging

people to save themselves.

If you

look at promotion writers, you can

save up to 20,000 per year, that

this cloud cuckoo land for lots of

people.

That is not even a lot of my

constituents' salaries.

You can save

£5 a week. And actually that £5

could be £6. The language is wrong.

20,000 quid and the promotion of to

get in before...

And there are lots

of concerns about not being able to

take your money out, not being able

to access it. If you are in a cycle

of expenditure, up and down, what

would you recommend the Government

to do around those sorts of concerns

people have?

If you take the

mortgage industry went very much and

there was the joint account between

the current account and mortgage

account to actually he will be using

the mortgage quite often, the

majority of these people are

invented and it's how we link rent

and so on. We all have good times

and bad times, the problem is in the

good times we are just not... And

these buffers are small. Ten, 20

quid is the difference. Out of

Leicester we have a couple of

housing association tenants going

into the food bank, now selling the

big issue, ten a week, but that's

money is transformational. We are

not talking about £20,000, we are

talking up the grass root level of

20 quid a week transforms people's

lives.

You are right and it's not

just the small amounts of money but

the speed at which people might need

to spend it. We might traditionally

imagine saving over several years

but high velocity saving is natural

to a lot of our clients, saving for

six weeks to pay the 50 quid

exponents which otherwise would tip

them over the edge. That should be

encouraged because it's the reality

of how their lives are. It shouldn't

be discouraged.

Some of the response

to this inquiry has suggested part

of their pension savings under auto

enrolment could be made available as

liquid savings in the sidecar

account. Would you support this, and

what limits would you need to put in

place?

There are so many people who

will be in such poverty in their old

age. To rub it now really is Peter

and Paul from my point of view.

We

think there is a place for this if

it is properly policed haven't done

for a small portion of your overall

pot so it too is a very short-term

small bridging element, then we are

OK with that, but the concept of

allowing it to ebb away your overall

pension pot in a material way would

be a significant challenge.

We would

encourage the principle but anything

that dabs away the pension wouldn't

be.

John, you have already touched

upon this in some of your previous

answers so I was going to direct

this at Bill. In your organisation's

experience, what level of financial

awareness do you think people have

in terms of education?

It's a really

difficult question and the reason

it's a difficult question to answer

is that one of the challenges we

have is that we always ask our

clients, do you understand what we

are recommending, do you understand

your financial position. Generally

speaking we will say yes we do. That

can mean one of three things, it can

mean yes I completely understand,

thank you very much indeed. It can

mean I don't understand but I trust

you are doing the right thing for

me. Or it can mean I don't really

understand what I'm too embarrassed

to say. We find ourselves having to

iterate roundabout which makes calls

very long, in order to see whether

people are really understanding what

they are getting themselves into. A

lot of that is around basic

education and understanding. The one

caution I would give is it doesn't

matter how well financially educated

you are, sometimes you simply cannot

earn any more money and then you

will fall into shock through illness

or job loss or whatever it happens

to me and doesn't matter how well

educated you are, you fall into

these issues. If you look at the

cohorts coming through to step

change, very many of the people who

come to us are very highly educated,

have previously been very well paid

and have got a single or multiple

circumstances that have hit them

which they just didn't see coming.

Add-ons that the overlay of the

culture of actually it's all right

for you not really to have any

back-up savings and no safety net.

People switch into crisis extremely

quickly regardless of how well

educated they are.

Have you got

anything in particular you need to

add to that?

No, it is nine or ten

of our clients who get into debt

because of a change in their

circumstances.

OK. I guess that goes

back to the whole savings issue,

doesn't it?

I think there is two

different bits. One is people who

are, whether it is rent to buy who

increase the debt, then there was

the crisis that. I'm sure on the day

Carillion went bust a lot of

employers had spent up over

Christmas, mortgage was due in three

days and they didn't see that

coming. Many will not have heard

that resilience, nor what many of

us. We cannot model them up. There's

the crisis debt, and unknown

Carillion go bust, 4000 people, the

pay cheque has not coming.

You say

we cannot model them up but in

another sense I guess I'm asking

from your experience what you think

is the best way to, I guess, tackle

one side of that coin but also

encourage people not to get into

that situation in the first place.

Obviously you can't... A job,

circumstance changes, but it comes

back to the rainy day and savings.

But also, to what extent, what can

the Government do is fundamentally

what I'm asking in terms of what

recommendations can we make, but

also where do you think the balance

needs to fall between putting

resource into prevention and putting

resource into cure. It comes down to

the issue of there are different

solutions but fundamentally it is

the same problem.

I think the challenge we are going

to have here is that the sector is

fundamentally underfunded, so if you

take away the £35 million a year

that individual debtors pay for help

and advice to pay for all her --

organisations. The sector gets £150

million a year to provide that it

finds.

And that is to help people

who got themselves into debt. So I'm

wondering how much of that resource

should actually go towards

preventing that?

The education is

tiny compared to that. So if you're

going to make a significant impact,

and this is an insecure not going to

want because it's complicated and

hard to do, it has to be a holistic

approach. You have to reduce the

width of the pipe the number of

people coming through because they

are better educated and then they

have a bit of a safety net and they

have been using help, so the number

of people falling over the cliff is

lower. But then, even if you have

people falling over the cliff, we

can still as a sector only help

about one third of the people who

need help because of the lack of

funding to do it. So even if you

restrict the width of the pipe, it

still underfunded.

You're not

suggesting we should reduce or

transfer funding from crisis

services to prevention services,

actually believe that funding...

We

have been in suppression of four

years because if we advertise, we

simply cannot cope with the number

of people who want our help. We have

to demand suppressed down my me know

about 1.3 - 1.8 million people could

use our systems. We could do with

the other that we could help three

times as many people...

But

obviously, that's unpalatable

answer. I think it's important to

say that debt advisers are

preventative as well. Our advisers

will help to build someone's

financial capability, thinking

about... The evidence is it's very

successful, both with the individual

but also for creditors and the money

saved to the state.

There is a

specific proposal in terms of the

breathing space scheme, to give

breathing space for people who have

gotten themselves into debt. How

effective do you think that will be?

How do you feel that is the

solution, or part of the solution?

We fundamentally supported, we have

been pushing very hard for a long

time. It's part of a solution, and

when the questions that needs

addressing quite quickly is how long

is that breathing space for? Because

if its own for say six weeks, it's

just not enough. It doesn't --

doesn't give people time to get on

their feet and have a sensible

conversation with their creditors

and work it through. We would want

it to see it at least doubled or

more. We are very pleased to see it

moving towards statute.

In terms of

the type of situations that it

should apply to. Should it

specifically address noncredit or

faults, council tax, and utility

bills or do you think it's equally

as important or more important to

ease the burden of meeting

repayments on financial debts as

well? Why do you think the scope

should be...

For us, it's the full

set. About 50% of people come to us

with the Government priority debts,

it would have to include those to be

effective from our perspective.

Have

you seen, I know it's in place in

Scotland already, have you seen it

being successful? What evidence

adducing? And what is the amount of

time in Scotland that's been

applied?

You don't know? We would

have to get back to you.

We

undertake the scheme in Scotland and

it works very effectively. It's more

time-consuming to set up, but it's

very effective.

There's also been a

proposal of thinking it to the NHS,

the people who are may be

experiencing a mental health crisis,

have you got any particular thoughts

on how that might be applied?

I

think you are referring to the money

and mental health policy Institute

space scheme. We are fully

supportive of that. We think it's an

excellent initiative and should go

hand-in-hand with the primary

legislation.

So to summarise, we

should probably just get on with

that. I say we, I mean the

Government.

I think with that, we

have to make sure, friends included,

but putting that in place, you don't

exclude people from having access to

stuff because actually, we're not

going to do that, so there has to be

some bounds because we talk about

inclusive systems, but we also have

to make sure that the systems we put

in place aren't used by others as an

excluding tool.

I just wanted to ask

a question as well about credit

unions. This may seem a bit loaded,

it's not. Do you see credit unions

as benign or do you see them adding

to the problem of over dead in this?

Word you see the role of credit

unions in supporting savings,

supporting access to credit, the

kind of creditor we are talking

about. But also some of the danger

point as well.

Credit unions,

they've never scaled, it's been a

great story, they're very localised.

I think the danger we see with some

of them is borrowing 50

quid and going to register with the

big tallies up front. We used to

have our savings bank, but they are

still very localised, driven by

people in the community because they

want to do something.

Do you think

they should be encouraged to grow?

Absolutely. But to do that, there

just is not the capital behind that

sort of stuff. What they are is very

small, localised organisations. How

do we scale up? More and more they

tend to be based on a physical

basis. We've got people using

whatever it is, people expecting the

answer, why to people... How do we

actually move into the modern world?

A couple of questions... Apologies

for arriving late, but I was

presenting a bill in Parliament. We

cannot be at two places at once. Two

questions. I'm interested in whether

you have any quantifiable evidence

at all about whether gambling has

any impact on household finances.

We

do. We put a report out recently on

the impact of gambling, high-stakes

gambling particularly. We do see it,

it's not that of that we would be

more than happy to share it with the

committee.

Maybe we can present

something to you, but the only thing

I would say is that it's one of the

reasons that some people fall into

problem that, but it's not by any

means the biggest challenge that we

see. The biggest challenge we see is

the individuals generally just

overspending on a month-to-month

basis and then have to -- have a

shock. We will give you the numbers,

but it's not the overwhelming

problem...

I'm just interested in

quantifiable evidence. Second and

final question. Universal Credit.

I'm not interested in your view on

it, with respect. But are there any

specific improvements that you would

recommend in relation to the

Universal Credit that would have

been your view a significant impact

that we should be considering? A

positive impact.

I think we can have

a long conversation about Universal

Credit. We have seen lots of people

getting into debt as a result of

Universal Credit. We have been

sharing that evidence with DWP. We

were really pleased to see some of

the changes that the Government made

around the turn of the year to

Universal Credit to help people get

access to events payment and lessen

the weight of first payment. Clearly

there is more that could be done and

all those areas. We would be happy

to share those with the committee in

due course. We will be looked to see

how those changes take effect.

Now

that the weight has been largely

removed in terms of how long it

takes to get your first payment,

that's better. The question for us

is always, if you do run short,

where are you bridging it? So if you

Bridget sensibly, or could bridge it

sensibly by getting that money from

a credit union or some social

low-cost capability, then great. If

you're going to a payday lender, all

that's going to do is tip you into a

spiral. It doesn't create a problem,

it's what people do about it solve

that short-term problem. I think

that's the challenge.

From what

we've seen is actually some

landlords aren't currently positive

about preparing people for it.

Others are doing nothing and then

it's a disaster. It's a big shock

and there doesn't seem to be... The

implementation has got -- that is

based a better day for the bash

better data sets could be a lot

clever.

I am being informed that the

breathing space scheme is a

reasonable length of time depending

on the amount of debt and the

ability to pay. As opposed to the

six week... I assume you would

prefer the Scottish model in the UK

rather than the Limited six weeks.

We would, but we are also realistic

about...

It's better than nothing.

It is the flexibility, let's say for

example that six weeks is a period

of time, it may be that one of our

debt advisers is not able to get the

support they need within that

period, we need to have the

flexibility to extend as required.

Thank you very much indeed for your

generosity and your time. If there's

her anything you would like to

raise, I'm sitting around -- we

absolutely would like to hear. For

now, they get for your it. Thank you

very much for being here today for

our second panel. An inquiry on

household finances. For the benefit

of those were not in the room, if

you could just introduce yourselves.

I am Richard Fuller, we are a...

The

Paul Smith, chief executive of...

I

want to start with questions just

understand your customers. It would

be helpful just to hear about the

gender and age and income profiles

of those you are working with

whether they have bank accounts,

where in the country they would

be...

We have 230,000 customers, 66%

of those customers will be female,

and to give you some age

demographics, the proportion of

customers within the ages of 18 and

50 would be 66 points 7%. But the

majority, the rump of the business

is that the... Household nature is a

mixture of agent benefits, that is

about £15,000 per annum. We have a

hundred regional offices across the

UK from which we have 2000

self-employed agents. We have a bowl

and national footprint, including in

Scotland and Northern Ireland.