Waving and drowning

Whilst government ministers trumpet improvements in the UK economy, they are undoubtedly out-of-touch with the difficult reality for most households.

The headline employment figure may be up, but that is because of big increases in part-time and self-employment and zero hours contracts. The rate of inflation may have reduced but, for the last 4 years, most people’s earnings have been well below inflation, leaving them worse off. There has been a 60% increase in the number of working households getting housing benefit to help pay the rent.

Low income working households have been the hardest hit by a combination of wage freezes, big increases in energy and rent costs – whilst the energy companies and some landlords have made exceptional profits, and cuts in benefits.

Now, the Governor of the Bank of England is signalling early increases in interest rates. Undoubtedly, many households have been cushioned from the global economic crisis by, historically, very low interest rates. Increasing rates will undoubtedly feed in to mortgage interest rates and, it is estimated, that this will cause real problems for more than to million home-owners who are just managing to keep their heads above water at the moment.

In this situation, you would think that Cameron and Clegg would want to stop those falling in to, or in danger of falling in to, debt from being exploited. However, this is clearly not the case. Parliament is currently debating a Consumer Rights Bill and opportunities are being missed.

Everyone knows that log-book loans make pay-day lending look prudent. Logbook loans are a form of high cost credit, secured against the value of a motor vehicle. They are underpinned by ‘bill of sale’ agreements, a type of contract that goes back to the Victorian era and has no modern day consumer protections.

The Financial Conduct Authority (FCA) thinks that around 40,000 consumers took out logbook loans in 2013, typically borrowing £1,000 a time- although some lenders offer sums of up to £50,000. In 2010, the market was estimated to be in the region of £38m-40m, when the Office of Fair Trading reported more than 1,000 consumer complaints. These related to the lack of protections available to people if they fall into arrears, unfair collection practices, the complex and confusing nature of the language used in the agreements and the excessively high cost of the loans.

The Financial Conduct Authority says

‘…….logbook lenders have borrowers over a barrel’.

The Chief Executive of the Citizens Advice Bureaux says

‘The logbook industry is still in the dark ages and has been getting away with lawless practices. It is absolutely absurd that a firm should be able to take away someone’s possessions without any due legal process. High interest rates and lack of affordability checks as well as threatening practices and phantom charges mean logbook loans are a toxic mix of the worst parts of payday loans and unruly bailiffs.”

Yet the government not only refuses to abolish logbook loans, it is also voting against these Bill of Sale agreements having the same protections that apply to other contracts.

Then, some people in financial difficulty turn to companies which claim to be able to help them manage their debts. In fact, a staggering 5% of British adults - 2.5 million people - are currently on a debt management plan. But, in many cases, this can make things worse not better. 

Fee-charging debt management plans often prolong customers’ debts or increase them.  Some ‘cowboy’ firms are keeping up to 90% of money consumers give them to repay their debts as fees for their services rather than using it to help pay off creditors.

For a debt of £30,000, a client of a typical debt management company would pay almost £6,000 extra in fees, over and above repayments to creditors. This would extend the plan by approximately 18 months compared with a Stepchange organized debt management plan, which is free.

Ministers have admitted that there was evidence that the fees, which debt management companies were charging, were abusive but allow this to continue. The government is opposing measures which would allow the courts to scrutinise the fairness of these contracts.

Ministers are also opposing an increased levy on payday lenders to pay for the provision of independent and free debt advice and affordable alternatives like Credit Unions.

Ministers fail to recognise that many people are waving because they fear they are drowning. They need a lifebelt rather than to be left to the whims of the pirates.

The Condition of Britain

Last week, think-tank the Institute for Public Policy Research (IPPR) published its Condition of Britain report.

It’s an important contribution to the debate about how to build a better society in tough times. It sets out some valuable principles for reform around devolving power, rewarding contribution, and building institutions.

We’re in an economy where a minority are doing very well, but the majority are finding the household budget more difficult to balance than it was five years ago as price increases have outstripped income changes. In addition, there is a significant part of the population who see themselves as locked out of the opportunities available to the rest. That gap, and the level of inequality, is increasing.

The report proposes that we must all work together to build a stronger society on three ‘pillars’:

• spreading power,
• fostering contribution, and
• strengthening shared institutions.

•  

It then goes on to make 28 specific recommendations about:

• Families: Raising children and nurturing relationships
• Young people: enabling secure transitions into adulthood
• Working life: promoting work and rewarding contribution
• Housing: mobilising local leadership to build more homes.

These are big issues requiring tough decisions. Inevitably, some of the recommendations have received more publicity than others.

For instance, young people and their parents will be particularly interested in the proposal that 18-21 year olds who aren’t work ready should be in training and not on benefits. Therefore, they should be assisted to get good qualifications and/or work experience. Support would be given to those whose parents can’t support them through training, in the same way as we currently do for those in higher education. Exceptional support would be given to those who genuinely can’t live at home. But, otherwise, entitlement to Job Seekers Allowance should end.

What do you think?

You can read the report, in full or in summary, at

www.ippr.org/publications/the-condition-of-britain-strategies-for-social-renewal

All students are equal………

I was very proud of the expansion of higher education a decade ago, which reversed the 36% cut in funding per student of the previous decade. The investment saw a significant increase in the number of students who came from families which had little or no experience of university. Many very able young people had thought that ‘university wasn’t for them”.

For instance, between 1998 and 2008, there was a 46% increase – from 1415 to 2070 - in the number of young people from Sheffield going to university. In my own constituency, there was a 57% increase and, in the neighbouring Brightside (David Blunkett’s) constituency, it was a massive 159%.[1]

Investment was also made specifically to boost access for students with disabilities, who were significantly under-represented in the university population, not because of lack of ability, but because of problems of physical access or the inability to fund essential aids for learning.

Many people have forgotten that, in 2009, Nick Clegg supported a big cut in higher education funding which would have meant that 200 fewer young people each year from Sheffield would go to university. So much for warm words about raising educational aspiration; it was clear that this funding reverse would mainly hit those families and communities which historically had the lowest access to advanced learning. This policy reverse was completely over-shadowed by Nick Clegg’s subsequent ditching of his tuition fees’ promise.

Now, as well as trebling tuition fees, the coalition government has managed to create a black hole in student finances and develop a funding system that is haemorrhaging taxpayers’ money. The all-Party Public Accounts Committee says taxpayers are facing a hole of as much as £80 billion in the student finances. Debt write-off rates from the tripled tuition fees are now so high that the new system is almost as expensive as the one it replaced.

So, the government is proposing more cuts in spending on higher education.

Amongst these is a proposal to ‘modernise’ (ie cut!) the Disabled Students Allowance (DSA), because the current level of funding is ‘unsustainable’ (ie too big!). The expenditure on DSA is about £125m a year – a drop in the ocean of the overall budget.

In 2013, there were 215,370 disabled students in the UK, representing 8.6% of all higher education students. 62.2% of disabled undergraduates who receive DSA reached a first or upper second class honours degree, compared to 60.7% of disabled students not receiving an allowance. More than 2,400 students at Sheffield University and Sheffield Hallam University currently receive some DSA.

The exact amount of DSA for an individual is agreed after a needs assessment conducted by a specialist staff member in consultation with the student. The amount is specifically related to the student’s particular needs, whether that be technology or transport.

I strongly support equal access to higher education. It shouldn’t be determined by whether your parents went to university or not, or whether they can afford to support you or not, or, if you have a disability, whether you can only do the course if you can personally and independently afford to pay for the necessary aids.

I fear that this government is reversing all the progress was made in equal access after 1997. Unless you are wealthy enough for this not to be an issue, someone in your family is almost certainly going to lose out.

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[1] The number of young people from each Sheffield parliamentary constituency entered an undergraduate course at a UK higher education institution in (a) 1997-1998 and (b) 2007-2008:

                                    1997/8             2007/8             Increase

Brightside                       85                  220                  158.8%

Central                         190                  355                    86.8%

Hillsborough                 260                  410                    57.7%

Attercliffe                     175                  275                    57.1%

Heeley                          190                  265                    39.5%

Hallam                          515                  545                      5.8%

Sheffield                     1415                2070                    46.2%

Who benefits?

Research by the House of Commons Library has revealed that the cost of living crisis has led to a 60% increase in the number of working people needing to claim housing benefit to pay their rent since 2010. 

400,000 more working people are now claiming housing benefit costing the taxpayer an estimated extra £4.8bn in housing benefit over the course of this Parliament.

Every single local authority in the UK has seen an increase in the number of people in work claiming housing benefit. The biggest increase in the country was in Croydon which has seen an astonishing 1100 per cent rise since 2010. 

More locally, Sheffield has seen a 93% increase, Rotherham 92%, NE Derbyshire 62%, Doncaster and Bolsover 54%, with Chesterfield and Barnsley at 42%.

So, we now have the situation that thousands of hard-working local households are reliant on housing benefit just to pay the bills and to keep a roof over their heads. Working people are now on average £1600 a year worse off than in 2010 as wages have fallen while prices have soared. Many people in work can’t get the hours they need while low-paid and insecure work is forcing more people to rely on housing benefit. 

We also face a massive housing shortage in this country, as this government has presided over the lowest level of home building since the 1920s. Cameron and Clegg’s failure to tackle this shortage means the cost of housing is rising beyond the reach of ordinary working people.

Up and down the country, we see prospective house purchasers at the lower ends of the market being out-bid by buy-to-let landlords, where rents have continued to rise and, in consequence, forced increased expenditure on housing benefit.

It can’t be right that ordinary people who do the right thing and go to work have to rely on housing benefit. This government appears either unwilling or unable to do anything about this and seem content to let the British taxpayer pick up the bill. 

Where there’s a will……….

Should will-writing only be carried out by a regulated legal professional, like a barrister, solicitor or specified legal executive?

There has been a wide-ranging debate on this, particularly over the last decade. It has been rather like watching the hokey-cokey as public, professional and political opinion has swayed between regulation and leaving things as they are.

As well as legal and finance professionals who specialise in advising on writing wills, there are also three associations of will-writers with different membership requirements and offering different codes of conduct. But there is no requirement to be a member of any of these before proffering advice.

As one person in favour of regulation persuasively and accurately argued

“Independent financial advisers are regulated and required to be qualified, and solicitors need to be qualified and closely controlled, but someone could be a convicted fraudster, set up as a will writer tomorrow with no qualifications, experience or professional indemnity insurance and proceed to dispense advice on tax, inheritance laws and so on. Most consumers are unable to judge the quality or value of the service that they are getting, so it is no exaggeration to say that will writing has become a happy hunting ground for the incompetent, the dishonest and the fly-by-night operator.”

In 2005, the last Labour government said it would only regulate if there was evidence it was necessary, whilst the Conservatives, in debate on the Legal Services Bill in 2007 called for will writing for fee, gain or reward to be added to the list of reserved legal activities. Then, in 2013, following a statutory investigation, the Legal Services Board recommended that will writing activities should be a reserved activity (ie regulated), but the new Conservative/Liberal Democrat government decided to reverse its earlier position and decline to regulate.

In January this year, the Legal Services Board convened a round-table of will-writers to try to find ways of improving service standards and quality. But, in May, the government confirmed that it did not intend to regulate.

Perhaps the most worrying thing is that around one-third of pensioners don’t have sufficient savings or assets that would require any specialist advice on will-writing. Further, what would day-time TV be like without ‘Heir Hunters’?

What we do know is that where there’s a will, someone will have an interest.

The best advice I can give is that, if you are looking for assistance in drafting your will, make sure you don’t get it from the dishonest or the incompetent.

I rather suspect that, after the next bad-news story about a family who have lost everything because of the poor advice from a will-writer, there will be another surge of pressure to regulate.

More anarchy than deregulation

We are now considering the Government’s third Deregulation Bill in three years. It represents their absolute failure to address the cost of living crisis or implement a proper industrial strategy.

Deregulation alone is not a long-term, sustainable growth strategy. This Deregulation Bill is a desperate rag bag, comprising an incoherent bunch of proposals which look as though they were brought together after a drunken session at an anarchists’ convention.

The draft Bill’s statement of impact estimates that all the measures together would only save British businesses 20 pence per business per year. Wow! And this is Cameron’s latest big idea.

Therefore, you may think it’s not worth considering. Well, it is, because of the rag, tag and bobtail proposals that have been thrown in at the last minute.

For example, the government’s obsessive view, that health and safety legislation is a hindrance to the economy, has lead them to propose exempting self-employed people working in certain lines of work – to be decided by the Secretary of State – from health and safety legislation.

It’s staggeringly inept. From clarity, it will create confusion and muddle. It is estimated to save self-employed people thirty-seven pence each a year. Yes, you read that correctly, 37p each a year.

Then, we have botched proposals about taxis and private hire vehicles (PHV).

In May 2012 the Law Commission launched a consultation on changes to taxi regulation, with a final report and draft Bill originally scheduled for publication in April 2014. The industry, unions and local authorities have been engaging with this process. Then, out of the blue in January 2014 the Government announced a 10 day consultation on three measures relating to taxi and PHV regulation.

Then, in March, without any meaningful engagement with stakeholders, new proposals were made for this Deregulation Bill. Report Stage is expected in the next few weeks. The proposals include allowing a PHV operator to subcontract your booking, without your consent, to another operator who is licensed in a different licensing district.

I’ll leave you to think about whether you think this is either sensible or something you will welcome. For my part, I think the proposals are both unwise and unwelcome.

The regulation of letting agents

I have written before about private rented housing and, specifically, about the investigations and recommendations of the all-party communities and local government select committee, which I chair[1].

The housing crisis is pushing home ownership out of reach for many people. We are building less than half the number of homes we need to keep up with demand. The current coalition government has presided over the lowest level of house-building in peacetime since the 1920s.

Since its launch, I have been asking serious questions about the appropriateness of George Osborne’s Help to Buy programme. Now, as I write, the Governor of the Bank of England says the housing market has “deep, deep” problems and is the “biggest risk” to Britain’s economic recovery sending a clear message to the Bank’s new Financial Policy Committee (FPC) to consider early intervention.

Meanwhile, 9 million people now rent privately including over 1.3 million families with children.  Nearly half of private rented households are over the age of 35. Many want the same security and stability they would have if they owned a home or had rented from their council.

But rules on private renting have not caught up with these changes, leaving people struggling with the growing cost of renting and with the insecurity and uncertainty built into the rental market. I shall write separately about rents and tenancy terms, but want to concentrate here on the regulation of letting agents.

The cost of letting agents’ fees, which can be up to £500 every time someone moves house, has added to the growing cost of renting. There are large numbers of complaints about agents, almost all about fees and charges. It is not just that there is one fee upfront for a tenancy agreement; there are also the charges for inventories and for credit checks. 

People enter into a viewing not knowing what the ultimate charge will be. It is a charge they have to find upfront as a prospective tenant; at the same time as they are trying to find the deposit.

The process gets repeated to a degree every time people renew their tenancy after six months or 12 months, and that militates against having longer term contracts. Agents see this as an incentive not to let longer term contracts because short-term contracts mean renewals and more fees for them. 

The Committee said there should be absolute transparency of fees upfront when a property is advertised and it must be clear what the totality of charges to tenants will be, and there should be no double charging. If there is transparency, it will be harder for a letting agent to charge a tenant and a landlord for the same thing, which happens at present.

We did not then recommend a complete abolition of fees to tenants. What we said was that it has been done in Scotland and that we should review the Scottish experience. We will do that in the autumn. 

We’ll also consider whether banning charges to tenants means higher rents. If so, there is a question as to whether tenants favour paying slightly more in rent rather than being forced to pay massive fees upfront, often on a frequent basis.

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[1] http://clivebettsmp.blogspot.co.uk/  24 March 2014

Sheffield hit hard by cuts – is that fair?

Between 1997 and 2008 levels of Government borrowing fell as a proportion of the country’s income. Then the worldwide banking crisis caused a recession which sharply reduced income from taxes and increased the deficit.

Despite austerity measures the Government is still borrowing over £100bn a year having failed as promised to balance the books in this Parliament.

I want to address how fair the cuts are to the people I represent in Sheffield.

Firstly to reduce borrowing taxes have been increased. Most would agree that those with the most should have their taxes increased the most. Is it fair that as working families struggle with the rising cost of living, millionaires’ income tax is cut and the bankers who caused the crisis get bonuses without any extra tax being levied on them?

Most of the effort to reduce borrowing has been by cutting spending. Has this been done fairly? Is it fair that grants to councils have been cut more than twice as much as other spending? Are important services such as help for the elderly and disabled, refuse collection, parks, libraries, sport facilities, and subsidies for buses and trams less important than anything else government does?

I know from listening to constituents that they feel it’s unfair that the elderly and disabled have received the largest cuts. Perhaps it’s because ministers find it easier to pass responsibility for the cuts onto councils rather than doing them themselves.

Finally, there is the issue of whether cuts have been applied fairly. Is it fair that in this Parliament Government will cut the grant to Sheffield Council by half, with more cuts planned after the election? The Prime Minister says “we’re all in this together”, but his local authority of West Oxfordshire, one of the country’s least deprived areas, gets an increase in spending of 3.1 per cent in 2013/14. By 2017 the government plans that Sheffield Council will have less to spend on services than affluent Wokingham. This isn’t right or fair.

As a Sheffield MP it’s my job to fight for a fairer deal for Sheffield. I would like to think the other MPs in the city will be doing the same. I know most of them are.

This article first appeared in THE STAR on 8^th May 2014 at

http://www.thestar.co.uk/news/letters-opinion/sheffield-hit-hard-by-cuts-is-that-fair-1-6603685

Some facts: all checkable:

• Between 1997 and 2008, UK government borrowing fell as a proportion of both national income and Gross Domestic Product.
• The global financial crisis was caused by incompetent, reckless and, sometimes, criminal banking and unsustainable private borrowing and debt.
• Between 1997 and 2008, the Conservatives had exactly the same net spending plans as Labour; they were only marginally lower in 2009/10.
• Between 1997 and 2010, the Liberal Democrats demanded net expenditure higher than Labour and the Conservatives in each and every year.
• Between 1997 and 2008, UK government borrowing fell as a proportion of both national income and Gross Domestic Product.
• UK government borrowing rose massively from 2008 because we nationalised the banks’ private borrowing and losses to prevent the collapse of the finance system, and because tax income dropped sharply because of the economic crisis.
• Despite promising to have balanced the books by 2015, the Conservative/ Liberal Democrat government is still borrowing an additional £100bn a year.
• The vast majority of ordinary working families are much worse off since 2010, because of the VAT increase to 20%, above inflation energy bills and frozen wages.
• Working families on the lowest incomes have been the hardest hit because of the bedroom tax, and cuts in council tax and housing benefits.
• Millionaires have been given an income tax cut, on average, of more than £100,000 a year.
• Bankers’ bonuses have got bigger, without being subject to any extra tax.
• In 1984, on average, bank executives were paid 16 times the wage of the banks’ lowest paid employees. In 2014, it will be 160 times the lowest wage.
• The biggest cut in government expenditure has been in grant to local councils. In councils of all political controls, libraries, children’s centres, bus services and youth and sports facilities are closing. Fees and charges for care services, burials, sports and parking are all increasing. More than 500,000 elderly people have lost their care service altogether.
• The government is forcing a massive switch of resources from the poorer, urban north to the wealthier, rural south-east. For example, Sheffield has had its government grant cut by £226.40 per head, whereas wealthy Wokingham has lost £1.44.
• The government wants to switch £40m a year of health funding from Sheffield to Surrey and the SE, where people are already wealthier, healthier and live much longer.

Water, water everywhere

We’ve had a lot of rain over the last year. The good news is that most reservoirs are full and aquifers have been topped up. The bad news is that many households are struggling to pay their water bills.

There is a cost of living crisis. Inflation has far exceeded income increases over the last 4 years. Inflation in utility, energy and housing bills has been even higher and lower-income working families have been the hardest hit. OFWAT estimates that 11% of households currently spend more than 5% of their income on their water and sewage bill. That’s 2.26 million households across England and Wales, 990,000 adults, 730,000 pensioners, and 540,000 families with children.

Water bills have increased by almost 50 per cent in real terms since privatisation in 1989. Many companies are using complex and ‘opaque’ financial structures, including worryingly high levels of debt, to minimise tax in the UK. The Chairman of Ofwat has warned of increasing levels of debt in the sector: “the overall proportion of equity has diminished from 42.5% in 2006 to 30% of regulatory capital value today with several companies at 80% gearing, thus obtaining only one fifth of their financing from equity”. Profit margins are exceptionally high, with the regional water companies making £1.9billion in pre-tax profit last year and returning £1.8billion of this to shareholders.

The Government’s voluntary approach, by which water companies can choose whether to offer a ‘social tariff’, has resulted in only three water companies offering a scheme, assisting fewer than 25,000 consumers nationally. Following significant criticism, last October, David Cameron’s spokesman briefed that there was imminently to be ‘decisive action on water bills’ from Owen Paterson and Defra. This turned out to be nothing more than a letter to the water companies asking them not to put up bills. You can guess what they did with it!

There is a Water Bill in Parliament at the moment. Cameron and Clegg ought to do three things now:

• introduce a national affordability scheme – to replace voluntary arrangements - to help those struggling with their bills, funded by the water companies from their excessive profits, thus ending the current postcode lottery;
• give OFWAT stronger powers to cut bills - when these monopoly providers benefit from favourable economic circumstances outside their control; and
• enable OFWAT to take corporate structures and levels of investment, tax and dividends into account - when setting the regulatory framework for each company.

Will they do that? I wouldn’t bet on it.

Planning change

In 2012, the government introduced the National Planning Policy Framework (NPPF). Ministers claimed this speeded up and streamlined the system. They also stated that if councils failed to meet particular targets – for example, the speed with which planning applications are determined – the government would deem those councils to be failing and would intervene.

At the end of last year, the all-party Communities and Local Government Committee, which I chair, commissioned some research to examine whether different outcomes in relation to these targets are a reflection on the quality and value of the outcomes to citizens and developers. The researchers told us:

“It is clear that the planning performance targets do not tell the whole story; they may mask both good and bad practice and can be misleading about practice and outcomes……..” 

So, simply measuring performance, by the number of decisions taken within eight or 13 weeks from the start of the formal process, masks good and bad performance. 

They also found that some councils, which the government deemed "exemplary" because of their speed of decision-making, were actually "described as horrendous by those with first-hand experience of working with them", and that some appeared to be trying to "game the system".

It is particularly concerning that good councils, which focus on customer service, enable good development and deliver good value, could be placed in special measures because they miss arbitrary and unsatisfactory targets. The Government’s planning performance targets may actually be driving perverse behaviour.

This research is a starting point for our inquiry into the whole of the NPPF. We welcome evidence about how the National Planning Policy Framework has worked in the last two years. In particular, we will be looking at the impact of the NPPF on three key areas:

• planning for housing;
• town centres; and
• planning for energy infrastructure 

If you want to contribute your views or, more importantly, your experience of the NPPF in operation, please do so by Thursday May 8th. Advice on the terms of reference and the best way to submit evidence are available at

http://www.parliament.uk/business/committees/committees-a-z/commons-select/communities-and-local-government-committee/inquiries/parliament-2010/national-planning-policy-framework/