Payday Loans

Lord Glasman Excerpts

Thursday 20th June 2013 Lords Chamber

[Lord Glasman]

My Lords, I echo the sentiments of gratitude to my noble friend Lord Kennedy for initiating this debate and for his work over many years. He knows the realities and speaks plainly about them. It is also a tremendous honour to follow the most reverend Primate. I believe that the last archbishop to take a very strong stance against usury was Archbishop Laud and I say to the noble Baroness, Lady Wilcox, that we know what happened to him. I consider it a tremendous act of courage to stand in favour of the cap. It is an interesting story: the church resisted the increasing demands, but in the end, in the time of the Long Parliament, it was decided that politics should have no role in the setting of interest rates. It is wonderful that the voice of the church, Catholic and reformed, is heard once more on this issue.

I declare an interest: I worked for many years for London Citizens and the Industrial Areas Foundation. The noble Baroness, Lady Kramer, spoke excellently about the community development funds. An aspect that may be of interest to the Government is that the seed money was provided by President Nixon. It is not the case that Conservative Governments are hostile to the conditions of the urban poor. The interesting thing was that the initial seed money was £9 million. The assets of the urban development funds, looked at as a mixture of venture capital, urban development and loans, are now well over £1 billion. I have worked with them and looked closely at that in terms of Baltimore, and the effects that this has had there.

That is very inspiring, but we have nothing like it. We have no such framework; no initiatives have been taken. This speaks to the heart of the issue. I here put my head on the block in relation once more to what the noble Baroness, Lady Wilcox, said. My noble friend Lord Hollick spoke about Barclays: it made a loan of £120 million to the Money Shop six weeks before Christmas. I believe that the rate was 7%. The rate that was lent at to people was 4,000%, and now Barclays discriminates against its own customers and will not give them loans. This is completely out of order. The conditions of the working poor and the debt in which that they have to live are, as they say on the 73 bus where I come from, bang out of order. People cannot find access to money. They do not earn enough; they cannot find a decent, meaningful and honest way out of the poverty wages that they receive. Yet there are no new institutions in the banking sector that address this issue.

I am involved in a conversation with Salford about establishing a bank of Salford, working on the credit unions. An interesting addition to the suggestions made, which the Government should look into, is that if you put the payroll through the new institutions of local government or city governance, it transforms the financial status of those institutions, and suddenly they are able to lend. That is one important issue. We need to notice that there has been no innovation in institutions relating to the banking system.

We must go back to 2008 and assert sadly that none of us is innocent. Between 1997 and 2007, of the £1.6 trillion invested in the British economy, 81% was in mortgages and financial products. Family and personal debt exploded. People cannot find a way out of that debt. It is not outlandish to say, as we did in 2008, that 5% of the bailout should be used to establish regional banks, as part of this story. Why is quantitative easing going through the same failed banking institutions that are refusing to lend to local businesses and the working poor? It is important to stress that the overwhelming loans owed to these payday lenders are not from those on benefits. They are from working people who do not earn enough and cannot discharge their fundamental responsibilities to their loved ones and their absolute obligations to pay their taxes and rates. Overwhelmingly, the money goes on food.

I conclude by saying another thank you. This is the most fundamental issue that we face. Debt is exploding. We have not moved to value—we still have debt. We need to look at community development funds and the decentralised way in which they work, and the way in which they are controlled by local people. I worked with the Industrial Areas Foundation. To ease the concerns of the noble Baroness, Lady Wilcox, let me say that when the interest rate cap was set in Maryland, because of access to the alternative finance system there is no evidence that it led unavoidably to loan sharks. That is not the case. There were alternative financial institutions, and many were set up by a partnership between churches and local unions.

There are many creative ways in which we can deal not only with the issue of the working poor but by which we can reactivate the civic institutions to a common purpose, which is value. We need to move absolutely from debt to value in the economic system. We must stop subsidising, bankrolling and giving all the perverse welfare incentives that we had to the banking institutions that are not fulfilling their role. We must create new institutions that have local people’s ownership and control, people who serve their own interests. This debate is a wonderful opportunity to investigate the genuine opportunities to bring some credit to the starving people of our country.