A victory against usury

The government agrees to act on payday lending.

It gives me great pleasure to say that those of us who campaign to reduce the grip that payday lenders have on the most vulnerable individuals and families in Britain have won a very important victory. The Government has agreed to provisions within the Financial Services Bill providing the newly created Financial Conduct Authority (which will come into existence 1 April 2013) with the power to cap the cost of credit agreements.

While many were understandably focusing on the Autumn Statement, it was finally agreed by the government on Wednesday that the FCA will be able to create rules that:

  • Prohibit the charging of certain types of fees which it considers to be unacceptable;
  • Prohibit the charging of costs above an amount which it specifies as unacceptable; and
  • Prohibit rollover lending, where a debtor arranges separate credit arrangements in order to settle existing ones.

One signatory to the successful amendment of the Financial Services Bill, Baroness Grey-Thompson, told me:

There are too many tragic stories of people who have got themselves in to a massive financial mess, which seems impossible to get out of. I hope that these proposals will crack down on the worst excesses of these loans. 

She continued:

Something that came up in the debate is that we need better access to loans for people, and that we should consider more credit unions. I am by no means an expert on financial matters, but it worries me that people can easily get themselves in to great financial difficulty.

Conservative MP for East Hampshire, Damian Hinds, while welcoming of the move forward by the government, has said that providing a cap on credit is only one part of the overall battle. A shift in direction needs to take place for credit unions too.

Commenting at Conservative Home, Hinds says:

The sector needs a sensible degree of change which maintains safeguards and comfort for customers, but allows them to get onto competition terms with payday and home credit lenders and rent-to-buy stores.

Both Baroness Grey-Thompson and Damian Hinds MP are correct – this is fantastic news. Damon Gibbons of the Centre for Responsible Credit has even called it a “historic moment”. But the fight doesn't end here. 

We must go further. We need:

  • The creation of a Community Reinvestment Act, which would oblige banks not lending sufficiently in local communities to sponsor local affordable lenders such as credit unions;
  • The reinstatement and centralisation of the social fund – something that could be operated through a credit union; and
  • Banks offering emergency overdrafts to more people without charging interest rates that rival those of payday lenders.

We have witnessed a great victory, and an actual government u-turn (I won't rub it in), but we cannot afford to be complacent. The fight against bad debt has only just begun. 

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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Boris Johnson is right about Saudi Arabia - but will he stick to his tune in Riyadh?

The Foreign Secretary went off script, but on truth. 

The difference a day makes. On Wednesday Theresa May was happily rubbing shoulders with Saudi Royalty at the Gulf Co-operation Council summit and talking about how important she thinks the relationship is.

Then on Thursday, the Guardian rained on her parade by publishing a transcript of her Foreign Secretary, Boris Johnson, describing the regime as a "puppeteer" for "proxy wars" while speaking at an international conference last week.

We will likely never know how she reacted when she first heard the news, but she’s unlikely to have been happy. It was definitely off-script for a UK foreign secretary. Until Johnson’s accidental outburst, the UK-Saudi relationship had been one characterised by mutual backslapping, glamorous photo-ops, major arms contracts and an unlimited well of political support.

Needless to say, the Prime Minister put him in his place as soon as possible. Within a few hours it was made clear that his words “are not the government’s views on Saudi and its role in the region". In an unequivocal statement, Downing Street stressed that Saudi is “a vital partner for the UK” and reaffirmed its support for the Saudi-led air strikes taking place in Yemen.

For over 18 months now, UK fighter jets and UK bombs have been central to the Saudi-led destruction of the poorest country in the region. Schools, hospitals and homes have been destroyed in a bombing campaign that has created a humanitarian catastrophe.

Despite the mounting death toll, the arms exports have continued unabated. Whitehall has licensed over £3.3bn worth of weapons since the intervention began last March. As I write this, the UK government is actively working with BAE Systems to secure the sale of a new generation of the same fighter jets that are being used in the bombing.

There’s nothing new about UK leaders getting close to Saudi Arabia. For decades now, governments of all political colours have worked hand-in-glove with the arms companies and Saudi authorities. Our leaders have continued to bend over backwards to support them, while turning a blind eye to the terrible human rights abuses being carried out every single day.

Over recent years we have seen Tony Blair intervening to stop an investigation into arms exports to Saudi and David Cameron flying out to Riyadh to meet with royalty. Last year saw the shocking but ultimately unsurprising revelation that UK civil servants had lobbied for Saudi Arabia to sit on the UN Human Rights Council, a move which would seem comically ironic if the consequences weren’t so serious.

The impact of the relationship hasn’t just been to boost and legitimise the Saudi dictatorship - it has also debased UK policy in the region. The end result is a hypocritical situation in which the government is rightly calling on Russian forces to stop bombing civilian areas in Aleppo, while at the same time arming and supporting Saudi Arabia while it unleashes devastation on Yemen.

It would be nice to think that Johnson’s unwitting intervention could be the start of a new stage in UK-Saudi relations; one in which the UK stops supporting dictatorships and calls them out on their appalling human rights records. Unfortunately it’s highly unlikely. Last Sunday, mere days after his now notorious speech, Johnson appeared on the Andrew Marr show and, as usual, stressed his support for his Saudi allies.

The question for Johnson is which of these seemingly diametrically opposed views does he really hold? Does he believe Saudi Arabia is a puppeteer that fights proxy wars and distorts Islam, or does he see it as one of the UK’s closest allies?

By coincidence Johnson is due to visit Riyadh this weekend. Will he be the first Foreign Secretary in decades to hold the Saudi regime accountable for its abuses, or will he cozy up to his hosts and say it was all one big misunderstanding?

If he is serious about peace and about the UK holding a positive influence on the world stage then he must stand by his words and use his power to stop the arms sales and hold the UK’s "puppeteer" ally to the same standard as other aggressors. Unfortunately, if history is anything to go by, then we shouldn’t hold our breath.

Andrew Smith is a spokesman for Campaign Against Arms Trade (CAAT). You can follow CAAT at @CAATuk.