Published in The Common Good, Winter 2009/10
The story in Matthew Ch 18 could have been written this year: The King forgave his wicked servant a huge debt, but that same servant would not forgive the little debts owed to him and instead threw his debtors in prison. (Matthew 18: 23-35).
In the turmoil of the global recession, one type of business is doing particularly well.
Provident Financial – the UK’s largest home-credit agency offering ‘affordable’ loans at up to 250%, – has attracted 100,000 new clients in the last year, and the rent-to-buy retailer Bright House has seen its profits rise by 23% in the last six months.
Many of their customers are among the poorest in society, they living in the poorest communities such as my Bishop Auckland constituency, and they overwhelmingly take out loans in order to pay for things such as basic household appliances, school uniforms and Christmas presents.
In short, they are often the people who need temporary credit most, and yet they are least able to access it from banks, building societies or credit unions: their bust has been the Loan Shark’s boom.
And just as we united through the Jubilee 2000 Campaign to tackle debt in developing countries, so we should feel the same anger and share the same commitment to prevent the poorest in our society being trapped in a cycle of debt while unscrupulous moneylenders see their profits sore.
Our faith in markets has left the poorest most exposed, and one of the most pressing tasks we face today – and all political parties will face at the next General Election – is how to redesign our financial institutions so that poorest are protected, so that they are able to access low-interest credit when circumstances require it, and so that they are not driven into the arms of avaricious loan companies.
The Labour Party – with our roots in communities where personal debt is often most debilitating – has a strong record of providing practical support to the financially excluded.
We have, for example, invested an extra £280 million in the Social Fund – which provides grants and interest free loans to people in acute financial crisis and on benefits – and in the New Year I will, as the Minister responsible, be announcing a consultation document on how the Social Fund can be improved.
Affordable lending has also been offered to people in the poorest communities through the Growth Fund for credit unions, which has seen a budget increase from £36 million in 2004 to almost £100 million by 2010.
We have also introduced new legislation and dedicated more resources to catching and prosecuting loan sharks.
But despite these concerted efforts, there are still 4 million people in the UK who are financially excluded, and 1 million who do not have a bank account.
These figures are far too high, and that is why the Labour Government are pressing ahead with proposals for a new kind of bank – a ‘People’s Bank’ – at the Post Office, so that people on low incomes will be able to open a bank account, access low-interest credit when they need it, and save money for their future rather than scrimping simply to pay off loan companies.
These measures – a reformed Social Fund, a strong Growth Fund, increased pressure on loan sharks, and an expansion of safe, low-interest banking – will form the backbone of a fourth-term Labour Government’s program to build a more socially responsible financial system.
As we move forward and tackle global financial institutions, it is absolutely vital that we address the needs of small savers and those on low incomes so that they can access affordable credit and do not fall into debilitating debt traps.
If you have nothing with which to pay, why should your bed be taken from you? (Proverbs 22:27)
