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.

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Former Irish premier John Bruton on Brexit: "Britain should pay for our border checks"

The former Taoiseach says Brexit has been interpreted as "a profoundly unfriendly act"

At Kapıkule, on the Turkish border with Bulgaria, the queue of lorries awaiting clearance to enter European Union territory can extend as long as 17km. Despite Turkey’s customs union for goods with the bloc, hauliers can spend up to 30 hours clearing a series of demanding administrative hoops. This is the nightmare keeping former Irish premier John Bruton up at night. Only this time, it's the post-Brexit border between Northern Ireland and the Republic, and it's much, much worse.   

Bruton (pictured below), Taoiseach between 1994 and 1997, is an ardent pro-European and was historically so sympathetic to Britain that, while in office, he was pilloried as "John Unionist" by his rivals. But he believes, should she continue her push for a hard Brexit, that Theresa May's promise for a “seamless, frictionless border” is unattainable. 

"A good example of the sort of thing that might arise is what’s happening on the Turkish-Bulgarian border," the former leader of Ireland's centre-right Fine Gael party told me. “The situation would be more severe in Ireland, because the UK proposes to leave the customs union as well."

The outlook for Ireland looks grim – and a world away from the dynamism of the Celtic Tiger days Bruton’s coalition government helped usher in. “There will be all sorts of problems," he said. "Separate permits for truck drivers operating across two jurisdictions, people having to pay for the right to use foreign roads, and a whole range of other issues.” 

Last week, an anti-Brexit protest on the border in Killeen, County Louth, saw mock customs checks bring traffic to a near standstill. But, so far, the discussion around what the future looks like for the 260 border crossings has focused predominantly on its potential effects on Ulster’s fragile peace. Last week Bruton’s successor as Taoiseach, Bertie Ahern, warned “any sort of physical border” would be “bad for the peace process”. 

Bruton does not disagree, and is concerned by what the UK’s withdrawal from the European Convention on Human Rights might mean for the Good Friday Agreement. But he believes the preoccupation with the legacy of violence has distracted British policymakers from the potentially devastating economic impact of Brexit. “I don’t believe that any serious thought was given to the wider impact on the economy of the two islands as a whole," he said. 

The collapse in the pound has already hit Irish exporters, for whom British sales are worth £15bn. Businesses that work across the border could yet face the crippling expense of duplicating their operations after the UK leaves the customs union and single market. This, he says, will “radically disturb” Ireland’s agriculture and food-processing industries – 55 per cent of whose products are sold to the UK. A transitional deal will "anaesthetise" people to the real impact, he says, but when it comes, it will be a more seismic change than many in London are expecting. He even believes it would be “logical” for the UK to cover the Irish government’s costs as it builds new infrastructure and employs new customs officials to deal with the new reality.

Despite his past support for Britain, the government's push for a hard Brexit has clearly tested Bruton's patience. “We’re attempting to unravel more than 40 years of joint work, joint rule-making, to create the largest multinational market in the world," he said. It is not just Bruton who is frustrated. The British decision to "tear that up", he said, "is regarded, particularly by people in Ireland, as a profoundly unfriendly act towards neighbours".

Nor does he think Leave campaigners, among them the former Northern Ireland secretary Theresa Villiers, gave due attention to the issue during the campaign. “The assurances that were given were of the nature of: ‘Well, it’ll be alright on the night!’," he said. "As if the Brexit advocates were in a position to give any assurances on that point.” 

Indeed, some of the more blimpish elements of the British right believe Ireland, wedded to its low corporate tax rates and east-west trade, would sooner follow its neighbour out of the EU than endure the disruption. Recent polling shows they are likely mistaken: some 80 per cent of Irish voters say they would vote to remain in an EU referendum.

Irexit remains a fringe cause and Bruton believes, post-Brexit, Dublin will have no choice but to align itself more closely with the EU27. “The UK is walking away,” he said. “This shift has been imposed upon us by our neighbour. Ireland will have to do the best it can: any EU without Britain is a more difficult EU for Ireland.” 

May, he says, has exacerbated those difficulties. Her appointment of her ally James Brokenshire as secretary of state for Northern Ireland was interpreted as a sign she understood the role’s strategic importance. But Bruton doubts Ireland has figured much in her biggest decisions on Brexit: “I don’t think serious thought was given to this before her conference speech, which insisted on immigration controls and on no jurisdiction for the European Court of Justice. Those two decisions essentially removed the possibility for Ireland and Britain to work together as part of the EEA or customs union – and were not even necessitated by the referendum decision.”

There are several avenues for Britain if it wants to avert the “voluntary injury” it looks set to inflict to Ireland’s economy and its own. One, which Bruton concedes is unlikely, is staying in the single market. He dismisses as “fanciful” the suggestions that Northern Ireland alone could negotiate European Economic Area membership, while a poll on Irish reunification is "only marginally" more likely. 

The other is a variation on the Remoaners’ favourite - a second referendum should Britain look set to crash out on World Trade Organisation terms without a satisfactory deal. “I don’t think a second referendum is going to be accepted by anybody at this stage. It is going to take a number of years,” he said. “I would like to see the negotiation proceed and for the European Union to keep the option of UK membership on 2015 terms on the table. It would be the best available alternative to an agreed outcome.” 

As things stand, however, Bruton is unambiguous. Brexit means the Northern Irish border will change for the worse. “That’s just inherent in the decision the UK electorate was invited to take, and took – or rather, the UK government took in interpreting the referendum.”