Cap the cost of credit to make life easier for those forced to turn to payday loans

Tackling the legal loan sharks.

Today, Lord Mitchell, an opposition spokesperson for Business, Innovation and Skills, will debate an amendment he has introduced to the Financial Services Bill (now in the report stage in the House of Lords) to potentially cap the total cost of credit which lenders can charge (this is different to capping interest rates in so far as interest rate caps can be sidestepped by upping other costs such as administrative fees. Total cost caps seek to address this potential loophole).

Many peers, like Lord Sugar and Baroness Thompson-Grey, the Welsh former wheelchair racer and disability campaigner, have already pledged their support for his amendment, which will give the new Financial Conduct Authority the power to apply sanctions to those who offer credit contrary to the its terms.

But it's an amendment which everyone, from all political parties, should get behind and support.

It is good for consumers

While the payday lending industry has enjoyed unprecedented growth (worth £100m in 2004, now worth over £2bn in 2012) in recent times, credit access has become tougher for consumers. Around 1.75 million UK adults go without a transactional bank account in the UK today and 9 million adults cannot access credit from mainstream banks. This spells bad news for consumers as the only option for many is expensive short-term loans. Capping the costs of credit will make borrowing less expensive for consumers, at a time when wages are stagnant and the cost of living rises.

It is good for the economy

Damon Gibbons for the Centre for Responsible Credit, in their recent report on Japan and interest rate caps, noted that, all things considered, putting a ceiling on the amount a lender can charge for a loan will make borrowing less expensive - given the rate at which over-priced short-term lending has risen over the last few years. This will have a knock-on effect on saving behaviour and investment. Reinstatement of savings initiatives like the Savings Gateway should also boost this kind of behaviour.

It doesn't contradict the Tory message

Small-c conservatives in the Tory Party have always raised concern about how financial institutions can hurt, rather than help, the finances of those most vulnerable in society. But even those of a more free market bent inside the party have started to see what a problem payday lending is. Damian Hinds MP, chair of the All-party Parliamentary Group on Credit Unions, for example, once felt the market would drive down prices in payday lending, but has now decided that “normal market rules do not apply with payday lenders”.

It will not boost illegal money lending

Important work carried out in 2010 by Professor Dr. Udo Reifner, Sebastien Clerc-Renaud, and RA Michael, for the European Commission, found no convincing evidence to back up the argument introducing interest rate ceilings leads to a growth in illegal lending “or would force people into arrears and default on bill repayments”. In fact it is found in the same report that in spite of the fact the supply of credit in France and Germany is not as abundant as in the UK, this has not been matched by an increase in illegal lending.

A shark. Not a loan shark. Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.

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How the row over Jackie Walker triggered a full-blown war in Momentum

Jon Lansman, the organisation's founder, is coming under attack. 

The battle for control within Momentum, which has been brewing for some time, has begun in earnest.

In a sign of the growing unrest within the organisation – established as the continuation of Jeremy Corbyn’s first successful leadership bid, and instrumental in delivering in his re-election -  a critical pamphlet by the Alliance for Workers’ Liberty (AWL), a Trotskyite grouping, has made its way into the pages of the Times, with the “unelected” chiefs of Momentum slated for turning the organisation into a “bland blur”.

The issue of contention: between those who see Momentum as an organisation to engage new members of the Labour party, who have been motivated by Jeremy Corbyn but are not yet Corbynites.

One trade unionist from that tendency described what they see the problem as like this: “you have people who have joined to vote for Jeremy, they’re going to meetings, but they’re voting for the Progress candidates in selections, they’re voting for Eddie Izzard [who stood as an independent but Corbynsceptic candidate] in the NEC”.  

On the other are those who see a fightback by Labour’s right and centre as inevitable, and who are trying to actively create a party within a party for what they see as an inevitable purge. One activist of that opinion wryly described Momentum as “Noah’s Ark”.

For both sides, Momentum, now financially stable thanks to its membership, which now stands at over 20,000, is a great prize. And in the firing line for those who want to turn Momentum into a parallel line is Jon Lansman, the organisation’s founder.

Lansman, who came into politics as an aide to Tony Benn, is a figure of suspicion on parts of the broad left due to his decades-long commitment to the Labour party. His major opposition within Momentum and on its ruling executive comes from the AWL.

The removal of Jackie Walker as a vice-chair of Momentum after she said that Holocaust Memorial Day belittled victims of other genocides has boosted the AWL, although the AWL's Jill Mountford, who sits on Momentum's ruling executive, voted to remove Walker as vice-chair. (Walker remains on the NEC, as she has been elected by members). But despite that, the AWL, who have been critical of the process whereby Walker lost her post, have felt the benefit across the country.

Why? Because that battle has triggered a series of serious splits, not only in Momentum’s executive but its grassroots. A raft of local groups have thrown out the local leadership, mostly veterans of Corbyn’s campaign for the leadership, for what the friend of one defeated representative described as “people who believe the Canary [a pro-Corbyn politics website that is regularly accused of indulging and promoting conspiracy theories]”.

In a further series of reverses for the Lansmanite caucus, the North West, a Momentum stronghold since the organisation was founded just under a year ago, is slipping away from old allies of Lansman and towards the “new” left. As one insider put it, the transition is from longstanding members towards people who had been kicked out in the late 1980s and early 1990s by Neil Kinnock. The constituency party of Wallasey in particular is giving senior figures in Momentum headaches just as it is their opponents on the right of the party, with one lamenting that they have “lost control” of the group.

It now means that planned changes to Momentum’s structure, which the leadership had hoped to be rubberstamped by members, now face a fraught path to passage.

Adding to the organisation’s difficulties is the expected capture of James Schneider by the leader’s office. Schneider, who appears widely on television and radio as the public face of Momentum and is well-liked by journalists, has an offer on the table to join Jeremy Corbyn’s team at Westminster as a junior to Seumas Milne.

The move, while a coup for Corbyn, is one that Momentum – and some of Corbyn’s allies in the trade union movement – are keen to resist. Taking a job in the leader’s office would reduce still further the numbers of TV-friendly loyalists who can go on the airwaves and defend the leadership. There is frustration among the leader’s office that as well as Diane Abbott and John McDonnell, who are both considered to be both polished media performers and loyalists, TV bookers turn to Ken Livingstone, who is retired and unreliable, and Paul Mason, about whom opinions are divided within Momentum. Some regard Mason as a box office performer who needs a bigger role, others as a liability.

But all are agreed that Schneider’s expected departure will weaken the media presence of Corbyn loyalists and also damage Momentum. Schneider has spent much of his time not wrangling journalists but mediating in local branches and is regarded as instrumental in the places “where Momentum is working well” in the words of one trade unionist. (Cornwall is regarded as a particular example of what the organisation should be aiming towards)

It comes at a time when Momentum’s leadership is keen to focus both on its external campaigns but the struggle for control in the Labour party. Although Corbyn has never been stronger within the party, no Corbynite candidate has yet prevailed in a by-election, with the lack of available candidates at a council level regarded as part of the problem. Councilors face mandatory reselection as a matter of course, and the hope is that a bumper crop of pro-Corbyn local politicians will go on to form the bulk of the talent pool for vacant seats in future by-elections and in marginal seats at the general election.

But at present, a draining internal battle is sapping Momentum of much of its vitality. But Lansman retains two trump cards. The first is that as well as being the founder of the organisation, he is its de facto owner: the data from Jeremy Corbyn’s leadership campaigns, without which much of the organisation could not properly run, is owned by a limited company of which he is sole director. But “rolling it up and starting again” is very much the nuclear option, that would further delay the left’s hopes of consolidating its power base in the party.

The second trump card, however, is the tribalism of many of the key players at a local level, who will resist infiltration by groups to Labour’s left just as fiercely as many on the right. As one veteran of both Corbyn’s campaigns reflected: “If those who have spent 20 years attacking our party think they have waiting allies in the left of Labour, they are woefully mistaken”. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.