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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New Digital Editor: Serena Kutchinsky

The New Statesman appoints Serena Kutchinsky as Digital Editor.

Serena Kutchinsky is to join the New Statesman as digital editor in September. She will lead the expansion of the New Statesman across a variety of digital platforms.

Serena has over a decade of experience working in digital media and is currently the digital editor of Newsweek Europe. Since she joined the title, traffic to the website has increased by almost 250 per cent. Previously, Serena was the digital editor of Prospect magazine and also the assistant digital editor of the Sunday Times - part of the team which launched the Sunday Times website and tablet editions.

Jason Cowley, New Statesman editor, said: “Serena joins us at a great time for the New Statesman, and, building on the excellent work of recent years, she has just the skills and experience we need to help lead the next stage of our expansion as a print-digital hybrid.”

Serena Kutchinsky said: “I am delighted to be joining the New Statesman team and to have the opportunity to drive forward its digital strategy. The website is already established as the home of free-thinking journalism online in the UK and I look forward to leading our expansion and growing the global readership of this historic title.

In June, the New Statesman website recorded record traffic figures when more than four million unique users read more than 27 million pages. The circulation of the weekly magazine is growing steadily and now stands at 33,400, the highest it has been since the early 1980s.