Could a less exercised parliament mean a less pressured regulator?
We’ve seen the first parliamentary exchanges of 2018, so what do they tell us about what’s in store in the year to come?
As it currently stands — an important caveat — 2018 will be a year free of national elections and constitutional referenda. The UK will not be leaving any nearby trading blocs until at least March 2019 and conceivably later if Remainers have their way.
What we will have is a lot of Brexit related legislation (the EU Withdrawal has only just entered the House of Lords where it is destined for a choppy ride); and a lot of inter-party politicking between an opposition leader reborn in 2017 and a Prime Minster seeking to salvage something from a failing premiership.
In the world of credit, the parties start the year with well-defined positions. For Labour the goal is to heighten a sense of crisis around stagnant incomes, rising living costs and rising borrowing to bridge the gap between the two. For the government, the goal is the opposite: To defang Labour’s narrative by accentuating data from higher authorities like the Bank of England that reveal borrowing hot spots but no overall crisis.
And so it was with the first parliamentary occasion of note in the new year — the second reading of the Financial Guidance and Claims Bill in the House of Commons on January 22. The passage of this Bill in the House of Lords illustrated just how weak the government is in parliamentary terms. A 19-clause bill had 12 new clauses added to it, none of them wanted by ministers but all of them accepted owing to the precariousness of their position in terms of votes.
Both government and opposition front benches had new teams on display in the House of Commons. It was a first outing for the new Secretary of State for Work and Pensions, Esther McVey MP, and it showed: Many of the proposals and much of the detail seemingly alien to her. Her deputy minister, Guy Opperman MP, was more assured.
Labour’s shadow Pensions Secretary, Debbie Reynolds MP, had the easier job of opposing the Bill while pledging not to defeat it. She was less restricted by the confines of the legislation and able to draw on familiar sounding briefings from debt charities.
The debate itself focussed on a handful of proposals — a single financial guidance body to replace the Money Advice Service and Pensions Wise; a statutory debt respite scheme, or period of breathing space, inserted into the Bill by the Lords; restrictions on cold calling by pensions advisers; and new restrictions on claims management companies including a cap on fees.
Having been amended so comprehensively in the House of Lords, there was little in the Bill for opposition parties to feel strongly indignant about. The loudest calls were for an extension in the period of breathing space beyond the six weeks currently proposed.
The other key minister for the credit industry, the new Economic Secretary to the Treasury, John Glen MP, was present for the end of the debate. Summing up for the government, Opperman stressed the extent of to which he and his Treasury counterpart will be collaborating on financial inclusion and credit and debt. Their body language suggests this is more than just talk.
The other closely watched parliamentary institution, the Treasury Select Committee, has yet to hit top gear in 2018. The next sessions in its Household Finances inquiry are keenly anticipated; this is where the sharpest exchanges between Parliament and the regulator tend to take place.
A hearing on credit has been scheduled for the end of February but details of witnesses have yet to be announced. The inquiry will run through the first part of 2018 and evidence sessions outside of London have been mooted. The inquiry will also inevitably call in the FCA’s Andrew Bailey. These encounters usually give us the clearest indication of where regulation and restrictions are likely to fall.
The other crucial factor, of course, is the indebtedness of the nation’s consumers. If borrowing levels rise sharply, as they did in mid-2017, parliamentary concern and scrutiny rise with them. Conversely, if they fall, our MPs tend to fall silent.
So where are we on debt at the start of 2018? Two recent research reports give us a clue.
First, a jointly published blog by the FCA and Bank of England based on credit reference agency data for one in 10 UK consumers. This found that the vast majority of borrowing is by people with the highest credit scores, in other words consumers who are the least likely to suffer distress. There were areas of concern, such as an increase in indebtedness among renters, but on the whole the findings don’t appear to fit the doom scenario promulgated by the opposition.
Second, the Bank of England’s credit conditions survey for Q4 2017 found that the availability of unsecured credit to households had fallen in the last three months of last year; and that lenders expect a further decrease in Q1 2018.
If borrowing trends are on the decrease, it will take a lot of heat out of parliamentary exchanges on credit and debt. And if parliament is less exercised, less pressure will be put on the regulator. We have all of 2018 to find out.