A fairer financial system starts on the doorstep
Bubble — By Chris Evans MP on June 8, 2010 11:00 am
Access to affordable credit is even more vital in an age of austerity
THE credit crunch has come to our attention on a national scale in the recent past, but many people in Islwyn have been experiencing a crisis of credit for many years. Unlike many other EU countries, the UK does not guarantee people legal access to affordable credit. Lenders can refuse to lend to anyone, for any reason, and they can charge any price for their lending. They can, and do, impose interest rates at percentage rates in the thousands.
When I did some research into this, I found that Safe Loans, for example, charges a typical annual percentage rate of 2,120.1% on 30-day loans, and that Wonga charges a typical APR of a huge 2,689%. I can well remember that, when I was a child, doorstep lenders such as Provident would charge high interest rates and hammer on doors while people cowered inside because they did not have the money to pay them. These extortionate rates of interest are simply disgraceful, and we should not allow companies such as those to take advantage of the vulnerability of some of the poorest in our society. The fact that we tolerate such practices means that many people are unable to obtain credit without extortionate cost.
One answer is for the Government to provide support for the credit unions, which provide credit at reasonable rates to people who would otherwise not have access to it. The Islwyn Community credit union, like all credit unions, is committed to building its members’ wealth. By contrast, our banks seem to have been committed for too long to building wealth only for themselves. Banks really should take a leaf out of the credit unions’ book, and see their role as being a part of the community, rather than trying to profit from it.
The last Government provided £98.75 million-worth of support to credit unions and community development finance institutions, which provide support for small businesses. They also legislated to ensure that credit unions can fairly compete with mainstream providers of financial services. As a result of these measures, credit union membership has more than doubled since the year 2000, yet strengthening the credit union movement is only a small step in tackling financial exclusion. In their last Budget, and in subsequent announcements, the last Government pledged to introduce a range of measures to tackle financial exclusion, including requiring banks to provide bank accounts to all consumers with a valid address, transforming the Post Office into a people’s bank, and consulting on requiring banks to disclose the extent to which they are under-serving their communities. If seen through, these measures would ensure that bank operations serve all parts of the community, so they can really make a difference to tackling financial exclusion. I urge the new Government to adopt and pursue these measures with all the vigour they can muster.
In addition to the problem of financial exclusion, we find ourselves in a unique economic situation that will require us to make large cuts to public spending, which will affect all parts of the United Kingdom. In making these cuts, we must ensure that we do not hurt the poorest and most vulnerable in our society.
Under the last Government, hundreds of thousands of people were lifted out of poverty, and we must ensure we do not send those people back into it. There are some in this House who propose cutting tax credits. To do so would pass the burden for reducing the deficit on to families that are struggling to make ends meet. To cut tax credits would punish the poor for the greed of the very rich. This would be morally reprehensible, and I urge the new Government to protect tax credits, as doing so would shield the poorest and most vulnerable in our society from the impact of the crisis.
I am also deeply concerned about the Government’s plan to abolish the Child Trust Fund, which will jeopardise the future of our children by cutting down on their options as they enter adulthood. For well-off parents, it might-just might-be possible to fund trust funds to support their children, but for those who are already struggling to get by, the state-supported child trust fund is the only chance they have of producing a nest egg for their children. The new Government needs to reconsider and reinstate the Child Trust Fund to protect the future of our children.
We face great challenges ahead, but in facing them we must strive always to make choices that are fair and equitable. As we tackle the deficit, we must strive to protect the vulnerable and the young. We must also seize the opportunities this crisis presents to build a fairer financial system in this country. If we do, we will build a fairer and more just country, which will mean a greater Britain-not just for some, but for all.
*** This is an excerpt of Chris Evans MP’s Parliamentary maiden speech. The full version can be found here ***
Tags: banking, credit crunch, Credit Unions, debt, Islwyn, public spending
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5 Comments
While my children will gain in future years from the Child Trust Fund, they would have gained much more from the money being spent on their dad having better broadband access in a rural area and being able to work more effectively from home or from a better play area in reception class in primary school or ….
Most CTF’s based products after charges won’t keep up with inflation, so it really a good investment for the nation?
Previous governments have borrowed in the region of 35 thousand pounds for each individual, so rather than adding to the profits of the CFT provides with their ~ 1% a year charges and low savings rates, the money could be so much better spent.
CTF, nice idea in isolation.
“Unlike many other EU countries, the UK does not guarantee people legal access to affordable credit”
I could point out that the last Government had 13 years to do this; as a maiden speech this would have had a lot to recommend it in 1992 or 1997 but doesn’t look quite so clever now.
As for credit unions, well they do offer a good savings option for people in work on low incomes. For people who are not in work, who often face the greatest problems of debt, they are often simply not accessible. Credit unions, who themselves have to be financially viable can’t or won’t take the risk of lending to “bad risks” as people on the lowest incomes often are. This comes from having a model of credit union which is there to cater for customers banks don’t want; they never become big enough to be able to have the financial clout to afford to take the risk of lending to those rated least creditworthy (unlike say in Eire). As a metaphor for New Labour’s social inclusion policies it is quite instructive; we’ll do what we can so long as it doesn’t offend any really powerful institutions…….
Ben
This is Chris Evan’s maiden speech – the clue is in the title. Surely having new Members enter the House with new ideas is exactly what we want, no? Of do you simply take the view that as a Labour MP he has been fully signed-up to every dot and comma of his government’s programme, and nothing else, over the past 13 years?
Very glad to see the new MP thinking and concentrating his attention on money matters. Unless financial and banking systems are reformed then we cannot aspire to meaningful social programmes.
Although, over the years, Labour has provided (mainly via EU funds) some welcome support for Credit Unions and similar institutions this has not been effective in providing a viable alternative to high street banks. Credit Unions in Wales, as they are currently structured, are not suitable for or geared up for business finance. If the economy is to grow and help to drive us out of recession then private sector business must be able to borrow and funds must flow within a local economy. To achieve this, credit unions need to be remodelled on the US pattern which are much more ‘business friendly’ and ‘locality based’.
If Mr.Evans is not to continue to deliver wishful thinking and platitudes from the sidelines of Welsh politics then I urge him and his Party to research into and champion reforms into business finance and to get involved in the ‘move your money’ movement that is sweeping the US at the moment.
Sunday January 10th 2011
I’ve noticed all other comments on this page are quite old, so hopefully it is the correct address to contact Mr Evans MP.
My daughter works for an agency and has done so since September 2010. Through the agency she is employed in a local logistics company. She was informed that she would be entitled to 2.3 days per holiday accrued per month. However, these holidays could not be used as she would need them to cover shutdown periods as her place of work shuts down for holidays for two weeks at Christmas and in the summer. This Friday, 7/1/11 she had no salary and on making enquiries was told that she wasn’t paid for the shutdown (Two weeks pay) as she didnt inform the agency that she wanted to use her accrued holidays. As the holidays run from Jan to Dec she has therefore lost them. All requests for holidays need to be put in writing. She is a single mother with a small child. She has been left without any money to pay her rent or buy food. Apparently this is common practice, with no one complaining for fear of losing their job. This is in the UK in 2011.
She then asked for a salary slip to cover the period she had received no pay to be told that salary slips are not issued for no pay. She has to have this information as required by the DWP as she now needs to apply for rent benefit for the Christmas period. She was informed that if she put the request in writing they would see what could be done. My daughter has lost all her holiday entitlemnt and received no pay for the Christmas period because she didn’t state in writing that she wanted to use her accrued holidays. This is a scam and affecting people who are living in Islwyn. Probably affecting hundreds of people who do not have a voice as they have been told they are not allowed to join the union on site, by the agency. If my daughter didn’t have a supporting family she would have been left destitute. How many people does this happen to? If ever there was a case for all employees being a member of a Union, I think this is it, don’t you?
I would appreciate your comments and ask for your help in this matter.
Thank you
Pamela Guy