Welby’s war on Wonga

Are the Archbishop of Canterbury’s plans to take on payday lenders heroic or harebrained?

The Archbishop of Canterbury’s remarks about his desire to compete payday lender Wonga “out of existence” by strengthening credit unions in the UK has got people thinking power has gone to his head.

However, Archbishop Welby could be on to something, if the Church gets its execution right. Just look at the success of Islamic banking to see how religion can be a powerful force in banking. The first question is: why would the Church take on a market leader in its own game from a standing start? The second is whether credit unions are a business the Church should be getting into, given that mainstream lenders steer clear of this sector with a bargepole?

The first answer is pretty simple: the Church loves a fight. Think the Crusades, gay marriage or female priests. Although the latter two show that more recently it’s been internal rather than external conflicts. So Archbishop Welby picking a fight with payday lenders, of which Wonga is the best known, is par for the course. Welby said this could be a “decade-long process”, which again isn’t a concern, since the Crusades lasted 200-odd years. A couple of decades is a cakewalk.

So now to the second question, why do it? Backing credit unions is risky, but could pay off, for several reasons, not least the social good it could generate.  There is little doubt that credit unions represent a small slice of the overall retail /commercial banking, although that is changing. According to the most recent unaudited figures by the Association of British Credit Unions, there are 1,025,438 people in the UK using credit unions, including over 123,000 junior savers. Since 2007, the number of members has increased by almost 50 per cent while the number of credit unions has dropped by 23 per cent. The Department of Work & Pensions say up to seven million people use sources of high cost credit e.g. home credit, pay day lenders and pawnbrokers.

So there is a rising market worth £2bn, with a falling number of competitors – both good and bad news. Good because there’s demand, bad because it’s tough to make money.

A second reason is that the Church has a strong brand to leverage off, a loyal customer base (parishioners) and presumably trust in its overall intentions, something badly lacking from many mainstream retail banks. Thirdly, on the surface, its costs/overheads would be relatively low. It already owns the church halls and properties it’ll operate the credit unions out of – a reason why many mainstream banks have cut back branch numbers. It also has a ready supply of cheap labour. According to Welby, there are plans to encourage church members with relevant skills to volunteer at credit unions. It would need to invest in an easy-to-use and quick technology platform to make the most of its countrywide scale.

Now to the downsides. The main reservation about launching such an initiative is the fact that most financial institutions steer clear of the sub-prime sector because there’s significant risk. Mainstream banks don’t go there because these are high risk loans with a danger of not having them paid back. Although Airdrie Savings Bank has launched its own short-term loan, Co-op is an example of a mutual (so not in itself a credit union) that is clearly not working at the moment. Finally, there is the reputational risk. If Church-backed credit unions were caught up in a PPI-style, or sub-prime mortgage, scandal, it would lose the trust of not only its customers, but its parishioners too – the ultimate death knell for The Church.

So why do it? To provide an alternative for those who can’t get credit from traditional lenders, with a social, rather than profit, motive is a noble cause. I wish them good luck, but with the words from a report by Civitas ringing loudly: "To be effective charities, they must first be effective financial institutions."

The Archbishop of Canterbury, Photograph: Getty Images

Nick Moody is the editor - Private Banker International at Progressive Media Group.

 

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Donald Tusk is merely calling out Tory hypocrisy on Brexit

And the President of the European Council has the upper hand. 

The pair of numbers that have driven the discussion about our future relationship with the EU since the referendum have been 48 to 52. 

"The majority have spoken", cry the Leavers. "It’s time to tell the EU what we want and get out." However, even as they push for triggering the process early next year, the President of the European Council Donald Tusk’s reply to a letter from Tory MPs, where he blamed British voters for the uncertain futures of expats, is a long overdue reminder that another pair of numbers will, from now on, dominate proceedings.

27 to 1.

For all the media speculation around Brexit in the past few months, over what kind of deal the government will decide to be seek from any future relationship, it is incredible just how little time and thought has been given to the fact that once Article 50 is triggered, we will effectively be negotiating with 27 other partners, not just one.

Of course some countries hold more sway than others, due to their relative economic strength and population, but one of the great equalising achievements of the EU is that all of its member states have a voice. We need look no further than the last minute objections from just one federal entity within Belgium last month over CETA, the huge EU-Canada trade deal, to be reminded how difficult and important it is to build consensus.

Yet the Tories are failing spectacularly to understand this.

During his short trip to Strasbourg last week, David Davis at best ignored, and at worse angered, many of the people he will have to get on-side to secure a deal. Although he did meet Michel Barnier, the senior negotiator for the European Commission, and Guy Verhofstadt, the European Parliament’s representative at the future talks, he did not meet any representatives from the key Socialist Group in the European Parliament, nor the Parliament’s President, nor the Chair of its Constitutional Committee which will advise the Parliament on whether to ratify any future Brexit deal.

In parallel, Boris Johnson, to nobody’s surprise any more, continues to blunder from one debacle to the next, the most recent of which was to insult the Italians with glib remarks about prosecco sales.

On his side, Liam Fox caused astonishment by claiming that the EU would have to pay compensation to third countries across the world with which it has trade deals, to compensate them for Britain no longer being part of the EU with which they had signed their agreements!

And now, Theresa May has been embarrassingly rebuffed in her clumsy attempt to strike an early deal directly with Angela Merkel over the future residential status of EU citizens living and working in Britain and UK citizens in Europe. 

When May was campaigning to be Conservative party leader and thus PM, to appeal to the anti-european Tories, she argued that the future status of EU citizens would have to be part of the ongoing negotiations with the EU. Why then, four months later, are Tory MPs so quick to complain and call foul when Merkel and Tusk take the same position as May held in July? 

Because Theresa May has reversed her position. Our EU partners’ position remains the same - no negotiations before Article 50 is triggered and Britain sets out its stall. Merkel has said she can’t and won’t strike a pre-emptive deal.  In any case, she cannot make agreements on behalf of France,Netherlands and Austria, all of who have their own imminent elections to consider, let alone any other EU member. 

The hypocrisy of Tory MPs calling on the European Commission and national governments to end "the anxiety and uncertainty for UK and EU citizens living in one another's territories", while at the same time having caused and fuelled that same anxiety and uncertainty, has been called out by Tusk. 

With such an astounding level of Tory hypocrisy, incompetence and inconsistency, is it any wonder that our future negotiating partners are rapidly losing any residual goodwill towards the UK?

It is beholden on Theresa May’s government to start showing some awareness of the scale of the enormous task ahead, if the UK is to have any hope of striking a Brexit deal that is anything less than disastrous for Britain. The way they are handling this relatively simple issue does not augur well for the far more complex issues, involving difficult choices for Britain, that are looming on the horizon.

Richard Corbett is the Labour MEP for Yorkshire & Humber.