The nasty world Vickers missed

In his banking review, John Vickers said there isn’t enough competition among high street banks. He

Doorstep lending and loan sharking is causing misery for thousands of people across the country right now, but a small credit scheme is fighting back in east London and it has had some good news.

Fair Finance, based in Stepney, has raised £1m for its loan book from Société Générale and BNP Paribas so it can offer loans to poor families that are at the mercy of doorstep lenders and loan sharks – no collateral required.

It was set up five years ago by Faisel Rahman to provide funds to those typically rejected by the banks. They typically borrow up to £500 for items such as a new oven or school uniforms.

Fair Finance runs repayment over about a year and charges an annual percentage rate of 44 per cent. It helps customers set up bank accounts and encourages the reporting of loan sharks to the police. Its default rate is just 7 per cent and the company now employs 12 people.

This system of microlending is similar to that of the Grameen Bank, started in Bangladesh by the Nobel prizewinner Professor Muhammad Yunus, now sadly battling opponents of his own after being forced to retire as Grameen's head.

The problem in the UK is that people rejected by banks as being too high a risk resort to doorstep lenders, who bring the cash to your door but charge up to 2,500 per cent. This is big business.

There are two problems at work here. The Competition Commission has warned that there aren't enough lenders prepared to take on the high-risk market (otherwise known as "poor people"). And loan sharks are flourishing because enforcement rules aren't tough enough.

But the Labour MP Stella Creasy has been steering a private member's bill through parliament. The Consumer Credit (Regulation and Advice) Bill was parked in February; however, it will return in October. Here's more about the whole issue in detail.

Trading Standards officers across the country want the bill to become law so that they can work with the police to take on the worst offenders they know by name. Doncaster has been doing some great work this way.

But, on this issue as usual, the anti-regulation-more-red-tape brigade can't see the wood from the trees.

Trading standards officers are council officials, so it would be a big help if the Communities Secretary, Eric Pickles, backed the bill. Think it through and there's an efficiency saving here which also prevents people falling into deeper problems.

But will Pickles get involved? He may need a little gentle persuading. So why don't you email him and try a bit of "nudge" behavioural change?

Getty
Show Hide image

Leader: Trump's dangerous nation

From North Korea to Virginia, the US increasingly resembles a rogue state.

When Donald Trump was elected as US president, some optimistically suggested that the White House would have a civilising effect on the erratic tycoon. Under the influence of his more experienced colleagues, they argued, he would gradually absorb the norms of international diplomacy.

After seven months, these hopes have been exposed as delusional. On 8 August, he responded to North Korea’s increasing nuclear capabilities by threatening “fire and fury like the world has never seen”. Three days later, he casually floated possible military action against Venezuela. Finally, on 12 August, he responded to a white supremacist rally in Virginia by condemning violence on “many sides” (only criticising the far right specifically after two days of outrage).

Even by Mr Trump’s low standards, it was an embarrassing week. Rather than normalising the president, elected office has merely inflated his self-regard. The consequences for the US and the world could be momentous.

North Korea’s reported acquisition of a nuclear warhead small enough to fit on an intercontinental missile (and potentially reach the US) demanded a serious response. Mr Trump’s apocalyptic rhetoric was not it. His off-the-cuff remarks implied that the US could launch a pre-emptive strike against North Korea, leading various officials to “clarify” the US position. Kim Jong-un’s regime is rational enough to avoid a pre-emptive strike that would invite a devastating retaliation. However, there remains a risk that it misreads Mr Trump’s intentions and rushes to action.

Although the US should uphold the principle of nuclear deterrence, it must also, in good faith, pursue a diplomatic solution. The week before Mr Trump’s remarks, the US secretary of state, Rex Tillerson, rightly ruled out “regime change” and held out the possibility of “a dialogue”.

The North Korean regime is typically depicted as crazed, but its pursuit of nuclear weapons rests on rational foundations. The project is designed to guarantee its survival and to strengthen its bargaining hand. As such, it must be given incentives to pursue a different path.

Mr Trump’s bellicose language overshadowed the successful agreement of new UN sanctions against North Korea (targeting a third of its $3bn exports). Should these prove insufficient, the US should resume the six-party talks of the mid-2000s and even consider direct negotiations.

A failure of diplomacy could be fatal. In his recent book Destined for War, the Harvard historian Graham Allison warns that the US and China could fall prey to “Thucydides’s trap”. According to this rule, dating from the clash between Athens and Sparta, war typically results when a dominant power is challenged by an ascendent rival. North Korea, Mr Bew writes, could provide the spark for a new “great power conflict” between the US and China.

Nuclear standoffs require immense patience, resourcefulness and tact – all qualities in which Mr Trump is lacking. Though the thought likely never passed his mind, his threats to North Korea and Venezuela provide those countries with a new justification for internal repression.

Under Mr Trump’s leadership, the US is becoming an ever more fraught, polarised nation. It was no accident that the violent events in Charlottesville, Virginia, culminating in the death of the 32-year-old Heather Heyer, took place under his presidency. Mr Trump’s victory empowered every racist, misogynist and bigot in the land. It was doubtless this intimate connection that prevented him from immediately condemning the white supremacists. To denounce them is, in effect, to denounce himself.

The US hardly has an unblemished history. It has been guilty of reckless, immoral interventions in Vietnam, Latin America and Iraq. But never has it been led by a man so heedless of international and domestic norms. Those Republicans who enabled Mr Trump’s rise and preserve him in office must do so no longer. There is a heightened responsibility, too, on the US’s allies to challenge, rather than to indulge, the president. The Brexiteers have allowed dreams of a future US-UK trade deal to impair their morality.

Under Mr Trump, the US increasingly resembles a breed it once denounced: a rogue state. His former rival Hillary Clinton’s past warning that “a man you can bait with a tweet is not a man we can trust with nuclear weapons” now appears alarmingly prescient.

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear