by Stella Creasy
Today’s evidence from R3, the insolvency practitioners, that the rapid and rabid growth of Britain’s payday loan industry is leading people to go hungry in order to repay these debts, is saddening but not surprising to me. For two years now along with many others I’ve been trying to warn the government that they needed to protect British consumers from these legal loan sharks- and for two years they have found excuses not to do so. Now as debt engulfs the household budgets of so many, we see the consequences of their choice to do nothing.
As the government tries to claim Britain is now on the up, we ignore how people are coping with the financial hardship of the recession at our peril. ONS data shows families are being squeezed much more this time than in previous eras, as they experience both falling household incomes and rising inflation. Predictions are wages will stay flat for years to come, offering little respite to which to look forward.
Dismissing the consequences of this as some in the government have done by telling people they should ”live within their means” misses the point. Too many in Britain, both in and out of work, cannot make their incomes meet the basic costs of everyday living. Research by Which? published last week found a third of payday loan users had taken out credit they knew they couldn’t afford to repay in order to pay for essentials such as food and fuel. In the week when British Gas bills will rise again, consumers are looking at the gaps in their budgets and rightly asking when will this all end. With massive cuts in benefits around the corner only adding to the misery they face, it is a question Westminster must answer.
Under this government the prospects for change are slim, as they doggedly claim the industry itself- making record breaking profits – will somehow self regulate. Instead of recognising the urgency of avoiding mountains of personal debt piling up across the country, they are doing everything they can to avoid responsibility. This week again they have quietly tried to announce a further delay in responding to the calls to debate this industry, by announcing via a written question that they won’t look at this matter until 2013. In seeking again to kick the issue into the long grass in parliament they give the green light to the legal loan sharks to press on taking over Britain’s high streets and search engines. Indeed, many say their plans for further expansion in the UK are because our regulatory system is so lax in comparison to most other countries.
When most other nations cap what these companies can charge to prevent the debts this type of lending can cause, our government stands by, and hopes the market will sort it out. Labour knows this is both economically and socially misguided. Effective consumer regulation not only gives consumers rights, it also ensures the competition that gives them choice. It’s a key part of a progressive society, helping to prevent the inequalities in services and support that are generated when those with the largest wallets or the loudest voices get the best deals. This research today is further evidence that the Government’s failure to recognise the need to act is being felt firsthand by millions of families financially.
The government seems to be hoping consumers will sit quietly at home, panicking about the bills piling up and the bailiffs at their door. Labour must show there is an alternative way to manage consumer credit. Please help us ask every Lord to vote for the amendment to the Financial Services bill in ten days time that will give regulators the power to cap what these companies charge.
In doing so we can speak up for a better deal for every consumer, and start to tackle the debt crisis unfurling in communities across the country. When I first began arguing for a total cap on the costs of credit, I feared a million consumers may find themselves stuck in the toxic cycle of debt these kinds of loans create- now we look to a New Year in which five million could use them to try to make ends meet. If Britain fails to deal with these legal loan sharks and the factors which feed them, when future generations consider Cameron’s legacy to the nation financial hardship will surely be top of the list.
Stella Creasy is Labour and Co-operative MP for Walthamstow and a shadow minister for home affairs