Miliband's Wonga tax is another trap for the Tories

Should Cameron's party oppose the levy, Labour will accuse it of again siding with predatory companies against struggling consumers.

After doing battle with the energy companies, Ed Miliband is taking on Wonga and co. The Labour leader will announce today that his party would impose a new levy on the profits of payday loan companies (call it the "Wonga tax") and use the money raised to double the public funds (currently £13m) available to credit unions and other low-cost lenders. The plan was first mooted in August shortly after Justin Welby vowed to put Wonga "out of existence" by supporting non-profit lenders, which charge a maximum interest rate of 26%. Labour says that it is currently "consulting on the rate and details of our addition to the levy" but I'm told by a party source that the rate is likely to be around 10%. 

Miliband will also announce that Stella Creasy, who was overlooked in the shadow cabinet reshuffle, will be given "special responsibility" for leading the party's campaign against abuses by payday lenders. On a visit to Peckham today with Creasy, last week appointed as shadow minister for competition and consumer affairs, he will visit the office of a credit union and meet some of those who have suffered at the hands of high-cost lenders. He will say:

The cost of living crisis afflicting millions of Britain’s families is so bad that it is creating a personal debt crisis too. The prices families have to pay keep on rising faster and faster than the wages they are paid. And, as a result, the market in payday lending has doubled in just four years. Almost a third of the payday loans taken out in Britain at the moment are to cover the cost of people’s gas and electricity bills.

For too many families the end of the month is now their own personal credit crunch. A One Nation Labour Government would deal with the causes of the cost of living crisis. But it would also act to help prevent people falling into unpayable debt with radical reform of the payday lending market. We would cap the cost of credit, halt the spread of payday lenders on our high streets and force them to fund the credit unions that can offer a real alternative for people in desperate need.

We must protect the most vulnerable people in our society from the worst of exploitation by payday lenders. And it is right that the companies that benefit from people's financial plight, accept their responsibilities to help ensure affordable credit is available.

As well as good policy, the announcement is also smart politics. Following his call for an energy price freeze, the Labour leader has again put himself on the side of consumers against predatory companies and set a trap for the Tories. Should they oppose the levy (as will be their instinct), Miliband will accuse Cameron's party of again "standing up for the wrong people" and defending the interests of its donors rather than those of the public. As Labour said last night: "this Tory-led Government stands up only up only for a privileged few and, just as it does nothing to stop energy firms overcharging families, drags its feet over uncontroversial reforms of a poorly regulated industry and is doing little of significance to boost low-cost alternatives to payday lending."

While some Tories are sympathetic to calls for action against payday lenders, others argue that state intervention will raise the cost of borrowing for consumers and push them into the arms of unregulated loan sharks. Labour has already pledged to impose a cap on the rates lenders can charge but despite having supported amendments on this issue in the Lords (after pressure from the opposition and others), the government has yet to act. Asked by Labour MP Paul Blomfield at PMQs yesterday whether he would introduce "tough regulation of payday lenders", Cameron replied: "We are still considering the issue of a cap, and I do not think we should rule it out, although we must bear in mind what has been established in other countries, and by our own research, about whether a cap would prove effective."

The PM will likely take a similar view of Miliband's Wonga tax. But having so badly misjudged their response to his proposed energy price freeze, the Tories would be wise to avoid rushing to oppose it. 

Ed Miliband speaks at the Labour conference in Brighton last month. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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The Fire Brigades Union reaffiliates to Labour - what does it mean?

Any union rejoining Labour will be welcomed by most in the party - but the impact on the party's internal politics will be smaller than you think.

The Fire Brigades Union (FBU) has voted to reaffiliate to the Labour party, in what is seen as a boost to Jeremy Corbyn. What does it mean for Labour’s internal politics?

Firstly, technically, the FBU has never affliated before as they are notionally part of the civil service - however, following the firefighters' strike in 2004, they decisively broke with Labour.

The main impact will be felt on the floor of Labour party conference. Although the FBU’s membership – at around 38,000 – is too small to have a material effect on the outcome of votes themselves, it will change the tenor of the motions put before party conference.

The FBU’s leadership is not only to the left of most unions in the Trades Union Congress (TUC), it is more inclined to bring motions relating to foreign affairs than other unions with similar politics (it is more internationalist in focus than, say, the PCS, another union that may affiliate due to Corbyn’s leadership). Motions on Israel/Palestine, the nuclear deterrent, and other issues, will find more support from FBU delegates than it has from other affiliated trade unions.

In terms of the balance of power between the affiliated unions themselves, the FBU’s re-entry into Labour politics is unlikely to be much of a gamechanger. Trade union positions, elected by trade union delegates at conference, are unlikely to be moved leftwards by the reaffiliation of the FBU. Unite, the GMB, Unison and Usdaw are all large enough to all-but-guarantee themselves a seat around the NEC. Community, a small centrist union, has already lost its place on the NEC in favour of the bakers’ union, which is more aligned to Tom Watson than Jeremy Corbyn.

Matt Wrack, the FBU’s General Secretary, will be a genuine ally to Corbyn and John McDonnell. Len McCluskey and Dave Prentis were both bounced into endorsing Corbyn by their executives and did so less than wholeheartedly. Tim Roache, the newly-elected General Secretary of the GMB, has publicly supported Corbyn but is seen as a more moderate voice at the TUC. Only Dave Ward of the Communication Workers’ Union, who lent staff and resources to both Corbyn’s campaign team and to the parliamentary staff of Corbyn and McDonnell, is truly on side.

The impact of reaffiliation may be felt more keenly in local parties. The FBU’s membership looks small in real terms compared Unite and Unison have memberships of over a million, while the GMB and Usdaw are around the half-a-million mark, but is much more impressive when you consider that there are just 48,000 firefighters in Britain. This may make them more likely to participate in internal elections than other affiliated trade unionists, just 60,000 of whom voted in the Labour leadership election in 2015. However, it is worth noting that it is statistically unlikely most firefighters are Corbynites - those that are will mostly have already joined themselves. The affiliation, while a morale boost for many in the Labour party, is unlikely to prove as significant to the direction of the party as the outcome of Unison’s general secretary election or the struggle for power at the top of Unite in 2018. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.