This is a blog of two parts. The actual issue is the need to do something to prevent the poorest in our society from becoming trapped in debt. The wider issue is British politics poor record in bipartisanship.
On Saturday I was doing my best to ignore domestic duties when I saw this tweet from Labour MP for Walthamstow Stella Creasy.
“Labour people on twitter- can you help me shame the Govt into action on loan sharks? RT this for how http://bit.ly/bQOt2M”
This is a really important issue I thought and deserves a wide coalition of support, so why doesn’t she want my help? I know Labourites get twitchy at the thought of coalition but this is an issue everyone can unite behind. I replied:
“What about Tories and Lib Dems? I’m sure you can get some cross party support on stopping loan sharks.”
To Stella’s credit she quickly responded:
“Have tried and if you can get them interested please do but so far little interest- asked Govt Mins twice on record and nada!”
1. Making credit affordable for all
Yesterday Stella Creasy introduced a Ten Minute Rule Bill; the Consumer Credit (Regulation and Advice) Bill. The high costs of lending which exploits some of the poorest people in the UK needs to be regulated appropriately. Because millions on low income do not have bank accounts, property or good credit records high street banks turn down their loan applications. As a result it is estimated that around 3 million people use the high cost door-to-door or home credit lending market. Companies are known to charge up to 444% APR, penalty charges and offer ‘refinancing’ packages that lead to a situation of continuous debt. Regulation is needed in this area because the free market is not functioning to the benefit of consumers. Six lenders account for 90% of the home credit market, with one company accounting for 60%, thus there is little competition to drive down interest rates.
The negative social consequences can be devastating for individuals, families and the communities they live in. High debt repayments are linked to rent, council tax and utility arrears, constraints on job seeking behaviour, poor diets, cold homes, and mental and physical health problems. The government has no excuse to ignore this issue as it has already committed to regulate excessive interest rates on credit and store cards. They can deal with the pernicious practice of legal loan sharking within this process.
Stella Creasy’s Bill contains four sensible and achievable proposals:
- A cap on the total lending rate that can be charged for providing credit and imposing additional interest on late payment and default charges.
- A levy on the sale of credit cards and store cards to set up a fund providing grants for the provision of debt advice and financial management services.
- Powers for local authority planning committees to enable them to restrict the provision of premises for licensed consumer credit agencies within a local area.
- Requirements for the Post Office network to provide back-office functions that integrate its services with credit unions, thereby helping consumers access credit union loans, current accounts and saving accounts through Post Office branches.
I have written to my MP (Lynne Featherstone) asking her support the Bill. No-matter which party you belong too making the effort to deal with legal loan sharking is the right thing to do.
2. New politics: working together?
As I watched the introduction of the Bill I couldn’t help noticing how partisan it all felt. Stella was surrounded by Labour colleagues who murmured their support when her speech attacked the spending review. The 11 MPs who public leant their support to the Bill were all Labour. In British politics we don’t have a history of bi-partisan initiatives as they do in the US. I don’t know if Stella asked any MPs from other parties* to support her Bill but it is completely understandable if she didn’t, especially as she felt government had given her the cold shoulder. The atmosphere of Westminster is extremely tribal and those who work with the ‘enemy’ are treated with suspicion or contempt. I am sure the public would appreciate politicians working across party lines on issues of mutual interests. It is after all how the real world works. Can ‘new politics’ enable this to happen? Or is this an example of how Westminster culture prevents new ways of working and ultimately ‘new politics’?
* Stella has informed me that she did ask Government MPs to lend their support to Bill. Hopefully some will support it in the Westminster Hall debate on Tuesday.