Bill McKenzie outlines our approach to the Financial Guidance and Claims Bill, ahead of today’s Second Reading in the Lords
One of the first pieces of government legislation out of the blocks in this new Parliament, and the first Lords starter, is an expected but important consumer bill. Covering in part, provisions which offer support of one form or another – information, guidance, advice – to the public, the Bill also seeks to protect against consumer detriment by strengthening the regulation of claims management companies.
As a high level framework bill however, there is little detail of how things will operate in practice and what level of resources will be available. There will be a merger into one Non-Departmental Public Body (NDPB) of three existing operations: the Money Advice Service, The Pensions Advice Service and Pension Wise. This will have a temporary name of the Single Financial Guidance Body (SFGB) to pre-empt mimicking in the market.
Replacing three organisations with overlapping remits, but different brands, independent strategies and business plans with a single body has the potential to be more efficient. But it is unclear whether the benefits of these efficiencies will be directed to the frontline or enable reduced funding levies.
The government see the priority focus for the SFGB as being provision of debt advice, information and guidance about occupational and personal pensions, helping consumers avoid financial fraud and scams, information on money matters to help improve financial capability, and co-ordination of non-governmental financial education programmes for children. It also has a strategic function to ‘support and develop’ a national strategy to improve the financial capability of the public.
While we support these areas of focus, there is scope to go wider and deeper if we are to secure a step change in the financial capability of our country. Coincidentally, the introduction of this Bill follows the recent publication of a Lords select committee report on Tackling Financial Exclusion, and some of its recommendations – around government leadership, education, the role of the FCA – will be relevant to the debates.
On the matter of debt, recent data shows that against a backdrop of rising prices and stagnant wages growth real incomes have fallen for three successive quarters and savings levels have crashed. Evidence provided to the select committee referred to fears expressed by debt agencies concerning queries covering rent arrears, energy, water and telephone bills, and council tax. And some of this indebtedness relates directly to the impact of government policies, including waiting days for Universal Credit and changes to council tax support.
The SFGB will also have to cope with a pensions sector of increasing complexity and scope. The growth of auto enrolment will bring many more people into new or increased pension savings, while the introduction of ‘pensions freedoms’ bring greater choice over when and how entitlements can be accessed. The latter has also opened the door to financial fraud and scams, exacerbated by the precipitate manner in which the changes were introduced and with some people cheated out of their entire pension savings.
On claims management companies, the Bill provides for a change to regulating the industry – moving responsibility from the Ministry of Justice to the Financial Conduct Authority. The current situation is characterised by poor value for money, information asymmetry, nuisance calls and texts, and the progression of fraudulent claims. It is time to call a halt on such skulduggery, whilst accepting there is a public interest in fostering an effective market.
Overall, this Bill has the potential to deliver consumer benefits. Labour will press the case for these to be maximised.
Lord Bill McKenzie of Luton is a Shadow DWP Minister in the House of Lords
Published 5th July 2017