Posts Tagged ‘Payday Loans’

Vox Political: Labour to Regulate Banking Sector and Create New Investment Bank

February 13, 2015

Open Hours Pic

Arkwright, Granville and Nurse Gladys Emmanuel from Open All Hours: The face of the British s-s-s-small businessman, who should benefit from a proper investment bank for their needs.

Mike over at Vox Political has today published this article, Labour’s bank reform plans, including bonus clawback and a British Investment Bank, announcing that Ed Balls and Labour’s Shadow Financial Secretary to the Treasury, Cathy Jamieson, will today announce the Labour Party’s plans to reform the banking industry. The new legislation will extend the amount of time in which the government can confiscate banker’s bonuses in the cases where they’ve broken the law. They also want to increase the levy on payday lenders to support alternative sources of credit and increase competition between banks. They also want to set up an investment bank, which will support investment in small and middle-sized businesses.

Mike’s article begins

Labour is today (Friday) publishing its plans to reform the banking sector so that it better supports growing businesses, economic growth and rising living standards.

Ed Balls MP, Labour’s Shadow Chancellor, and Cathy Jamieson, Labour’s Shadow Financial Secretary to the Treasury, will publish Labour’s banking reform paper after a visit to a business in Bedford.

The banking reform paper is part of Labour’s economic plan and sets out a series of measures the next Labour government will take, including:

· Extending clawback of bank bonuses that have already been paid in cases of inappropriate behaviour to at least 10 years and enacting legislation, passed by the last Labour government, to require banks to publish the number of employees earning more than £1 million.

· Creating a proper British Investment Bank to provide vital funding for small and medium-sized businesses. All funds raised from the planned increase in the licence fees for the mobile phone spectrum – estimated to be up to £1 billion in the next Parliament, subject to Ofcom consultation – will be allocated to the British Investment Bank.

· Introducing a one-off tax on bankers’ bonuses to help pay for Labour’s Compulsory Jobs Guarantee – a paid starter job for all young people out of work for 12 months or more, which people will have to take up or lose their benefits.

· Addressing the lack of competition in the sector. We welcome the Competition and Markets Authority inquiry which we called for and want to see at least two new challenger banks and a market share test to ensure the market stays competitive for the long term.

· Extending the levy on the profits of payday lenders to raise funding for alternative credit providers.

Mike quotes Ed Balls as recognising the importance of the banking industry to this country, but states that it needs to be better regulated in order to encourage and promote economic growth.

“Banks are essential to our economy, but we need them to work better for the businesses and working people who rely on them.

“We need much more action than this government has been prepared to take. So Labour’s banking reform paper sets out how we will change rules on bonuses, increase competition and get more lending to small and medium-sized businesses.”

He also quotes Cathy Jamieson on the importance of a proper source of investment for small and medium businesses:

“Bank lending to businesses has fallen year after year under this government. This just isn’t good enough. Without access to finance, SMEs cannot grow and create the high quality, well paid jobs we need to increase living standards. That’s why our plans will deliver more competition in our banking sector and a proper British Investment Bank too.”

The article’s at http://voxpoliticalonline.com/2015/02/13/labours-bank-reform-plans-including-bonus-clawback-and-a-british-investment-bank/. Go over there and read it. Mike wants to hear what his readers think.

The Importance of an Investment Bank

I have some problems with it, but I think in broad terms it is very much a step forward. It also marks a strong break with New Labour policies. Mike’s been arguing over on his blog that Ed Miliband is not the same as Tony Blair and Gordon Brown, whose time is long past. This provides further proof. Despite the rubbish that Cameron and the Tories have spewed about the banking collapse being due to over-regulation by Labour, the very opposite was true. New labour was strongly opposed to regulating the financial sector. Indeed, it played a major role in the City’s change of support from the Tory’s to Labour during Gordon Brown’s and Mo Mowlam’s ‘prawn cocktail offensive’ under Tony Blair. Brown repeatedly reassured the bankers that Labour would regulate them with a light touch. The massive collapse and gaping black holes in the banking industry that led to the recession was not created by too much regulation, but by Labour not watching what the bankers were doing closely enough.

The amount of money bankers have been allowed to pay themselves in bonuses while very efficiently wrecking the economy and ruining the livelihoods of everyone not a millionaire banker is nothing short of scandalous. Extending the amount of time available to confiscate bonuses in cases of illegal conduct is a good start, and should start to restore confidence in the industry.

British industry has also been in desperate need of a proper investment bank for a very, very long time. The authors of Socialist Enterprise and Neil Kinnock, before he dropped Socialism in favour of the free market, recognised that the City was not geared to providing inward investment, and certainly not to manufacturing industry. The major investment banks had been set up to channel investment to Britain’s colonies during the Empire. Even after that had gone the way of ancient Rome, Assyria and Egypt, the banks still preferred to invest overseas than domestically. British domestic investment lagged far behind our competitors in Japan and Germany.

The administrations of the last three decades, following Thatcher, have also been harshly indifferent, or even hostile, to the manufacturing sector. Quite apart from destroying British heavy industry in order to break the unions, Thatcher and her circle had strong links to the financial sector, and neither understood, nor were particularly interested in the needs of manufacturers. In one of their recent issues, Lobster carried a piece about a captain of industry, who did end up mixing with Thatcher and her cabinet. The particular industrialist was a staunch Tory, and so shared her views about crushing the unions and the importance of private enterprise and competition. He remarked, however, on how absolutely ignorant she and her chancellors were about basic economics. One of the obstacles for British exports was the strong pound. This particular businessman tried pointing out to Maggie that a strong pound discouraged countries from importing from Britain, as it made our goods expensive and therefore uncompetitive. Of course, Maggie didn’t want to hear about this, and pointed to Germany as a counter-example. Look at the Germans, she said. The Mark’s strong, and it hasn’t stopped people from buying German. To which the businessman tried telling her that the Mark was strong, because people were buying German goods. It was not a case of people buying German goods, because the Mark was strong. But this was too much for the Iron Lady and her sycophants and acolytes to grasp.

Britain’s manufacturing factor needs to be rebuilt. Unfortunately, Balls and Jamieson’s statement doesn’t recognise this, but the establishment of a proper investment bank will be a very good start.

As for increasing the levy on pay day lenders, I’d rather see them either shut down completely, or have their tariffs lowered even further, as well as promoting alternative forms of credit. Nevertheless, this is another good start.

I also have objections to using money levied on the bankers to set up the compulsory employment scheme. Johnny Void has already attacked the scheme earlier this week with a piece sharply criticising Rachel Reeves. I believe he’s right. The scheme does look like another version of workfare, just slightly better in its treatment of the people forced to take it. I believe the whole welfare-to-work industry needs to be scrapped totally.

Nevertheless, even with these caveats, I believe that Balls’ and Jamieson’s policies should be an excellent step forward. And a proper investment bank that provides support to the small and medium businessman should get the approval of aspiring Arkwrights up and down Britain. Even if it does come from the Socialists.

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The Bulgarian Peasant Party’s Solution to the Housing Problem

June 1, 2014

Last week I blogged on the several contemporary issues, which were similar to those tackled by the Bulgarian peasants’ party, BANU, nearly a hundred years ago. These were a local village power company, which was run as a co-operative by the whole community. It was thus similar to the idea of the Utopian British Socialist, Thomas Spence, for the communal ownership of land by the individual parishes, and also to the idea of the Bulgarian peasants’ party for the transformation of Bulgarian agricultural society through the formation of peasant cooperatives. I also remarked on the way the Bulgarians had also set up a policy of allowing the banks to provide loans on reasonable rates to credit cooperatives as a way of driving out the moneylenders. This is a problem that now besets British society, through the return of loan sharks and payday loan companies, like Wonga, that offer extortionate rates, because of wage freezes and cuts to welfare benefits.

Bulgaria, like modern Britain, also suffered from a housing crisis, made worse by the influx of thousands of refugees displaced by the First World War. They attempted to solve it through a mixture of policies, one of which was similar to the Bedroom Tax. They laid down the maximum amount of space that a family could occupy in a property, so that there would be more space available for the homeless. They also set about building cooperatively owned tenement blocks. R.J. Crampton describes these policies in A Short History of Modern Bulgaria (Cambridge: Cambridge University Press 1987) 90).

The principle of maximum holding was applied to urban as well as rural property. The post-war refugee invasion had placed severe strains upon the already hard-pressed housing resources of Bulgaria’s towns, particularly Sofia. According to Agrarian legislation no family was to occupy more than two rooms and a kitchen, with an extra room for every two children over fourteen. Office space was also subject to restriction, and in the case of both domestic and office accommodation commissioners acting on behalf of the ministry of the interior had extensive powers to enforce the new and widely resented regulations. A second and more popular response to the housing shortage, and one much in conformity with Agrarian philosophy, was to encourage the building of new apartment blocks cooperatively financed and thereafter owned by their inhabitants. This reform survived the fall of the Stamboliiski regime and cooperative building continued through the inter-war period.

The German radical Socialist party, the USPD, also had a similar policy in the same period, for the same reasons: to solve the shortage of housing caused by the First World War.

What’s needed isn’t the Bedroom Tax, which is really an excuse to cut Housing Benefit by pretending to withdraw a subsidy that never in fact existed, if tenants of supposedly under-occupied properties don’t move out to suitable homes, which also don’t existed. What is needed to solve the problem is simply building more social and genuinely affordable housing, which the Conservative actively seem to oppose. When the ‘right to buy’ legislation was passed, councils were forbidden from building more council houses, and ‘affordable’ properties are only pegged at 80 per cent of the market worth, which means that in many parts of the London houses are well out of the price range of the very poorest, who need them. It’s possible that cooperation schemes, like those enacted by the Bulgarians, might be part of the solution.

Something like the Bulgarians’ legislation limiting the maximum amount of space families can occupy could also be applied to private housing. The Bulgarian policy was based on the view that you should only possess what you can actually work yourself. Thus there was a maximum amount of land allowed to be cultivated by peasant farmers. Large landowners were forced to sell the excess land to the smaller peasants, so that each peasant farmer had just enough for his needs and those of wider Bulgarian society.

The great French anarchist, P.-J. Proudhon, had a similar view. Much of his Mutualist anarchist system was based on his experience of peasant society in the Jura, where he grew up. While he didn’t set the maximum amount of space people could occupy in their houses, he did recommend that people should lawfully own only what they could actually practically use themselves. Thus, landlords, who held multiple properties, which they rented out, should have all but the property they themselves lived in expropriated and given to the people, who needed them.

I believe a similar policy could be usefully implemented today. Perhaps we need the ‘right to buy’ principle extended to all the private tenants, now forced to rent homes at exorbitant rents because of the way available housing was bought up by people seeking to rent them out later in the housing boom of the 1990s. I also believe that there are many under-occupied private homes, with considerable space going without tenants, in certain parts of London, such as Knightsbridge, Kensington and Westminster.

And possibly Chipping Norton. I can’t see how Dave Cameron, whose government is responsible for the Bedroom Tax, and who has said repeatedly that ‘We’re all in it together’, would possibly object to having to share his home with a couple of crusties.

Radical Balladry: Folk Protest Songs against the Credit Trap

May 31, 2014

On Thursday I published a post about the way the Bulgarian peasants’ party, BANU, attempted to provide reasonable credit from banks lent to peasant credit cooperatives as a way of destroying the moneylenders that had plagued Bulgarian rural society, as a result of whom hundreds of villages had found themselves in serious debt. I suggested that we needed something similar to act against usurers, such as Wonga and the other payday loan companies. Thousands of people in Britain have now also found themselves heavily in debt because of the way they have been forced to rely on such companies, as well as criminal loan sharks, because of low wages and the repeated slashing of benefits by successive governments. People have also been caught in the credit trap through the absurdly easy terms on which it was available during the boom years. Advertisers must share their responsibility for this, has the television adverts for the services of Wonga and the various credit cards suggest that this is all free money, which the borrower doesn’t need to worry about paying back. It’s a seductive message, and all too many people have been taken in and deceived by it.

Jess has also commented on this post with her encyclopaedic knowledge of the long tradition of radical British folk music. She notes that there was an outcry at the way many people were finding themselves in debt through hire purchase when this was introduced in the 1950s. Then as now, Right-wing think tanks attempted to justify the creation of easily available credit, which could lead the poor and vulnerable into a never-ending cycle of debt. This indeed occurred, and was bitterly criticised in song by Graham Gouldman and Jeff Beck. Jess writes

“Britain too in the 21st century has seen the return of the loan shark and moneylender as thousands, perhaps millions, have got into serious debt. Some of this has been through the absurdly easy credit that was offered in the boom years, ”

The availability of ‘absurdly easy credit’ was one of the cornerstones of the neo-liberal agenda.

Way back in 1958 the IEA published their apologia for the money-lending industry ‘Hire Purchase in a Free Society’ [Harris, Naylor & Seldon]

A typical IEA publication of the period, it contains a few gems;

“Social Impact;
Criticism of hire purchase has not come only from moralists who condemn the practice on the grounds that it ensnares people into debts they cannot afford to repay’ morphs into, with an aside from Walter Greenwood’s condemnation of ‘tick’ in ‘Love on The Dole’ to the assertion that;

“Harry [the character condemned by supposedly old-fashioned notions of debt as a weekly ‘mill-stone around the debtors’ neck’ got his new suit…”

Just how deeply the tally-man was disliked, generally, is suggested in this song from Graham Gouldman, (recorded with great reluctance by Jeff Beck)

“To our house on a Friday
A man calls every week
We give him a pound
When he calls on his round

To our house on a Friday
A man calls every week
We give and we get
And we’re always in debt

With his plan he carries all we’re needing
With his plan most anything is ours
He’s the Tallyman, oh yeah
He’s the Tallyman

Shoes and socks, hard wearing for the children
Village frocks all in the latest style
From the Tallyman, oh yeah
From the Tallyman

To our house on a Friday
A man calls every week
We’ve made him a friend
So he’s here to the end

From cradle to grave
We expect him to say
Here’s tick to the end
So we’ve made him a friend
Here’s tick to the end
So we’ve made him a friend”

[Beck objected to Mickie Most’s insistence on a ‘catchy’ follow-up to ‘Silver Lining’ and hated the production, rather than Graham Gouldman’s lyrics]

The debt problem is likely to become even more severe with the government’s cuts to the buffer amount of money allowed to families before they are considered to have been overpaid tax credit, and the use of private debt collectors to pursue the poor, who have been mistakenly overpaid. So this is another song that could reasonably be revived and adapted to suit the new conditions created by Wonga and the like, and now the Inland Revenue.

As for the latter, one of the experts on Japanese monster movies on TV – I think it may have been the great Phil Jupitus – once said that the only time you ever heard cheering during a Godzilla movie was when the epic fire-breathing radio-active dragon from the depths trashed the headquarters of their Inland Revenue in Tokyo. If only something similar would happen to the house of whichever vicious Tory apparatchik dreamed up this bill.

Godzilla

Godzilla: First the Japanese Inland Revenue offices in Tokyo, but will he trash Osbo? We live in hope!

Book of Interest: Guy Standing’s A Precariat Charter: From Denizens to Citizens

May 3, 2014

Precariat Cover

I found Standing’s A Precariat Charter (London: Bloomsbury 2014) going through my local branch of Waterstone’s. It’s the sequel to his earlier The Precariat. The precariat is the term he uses for the class of people trapped in low-paid, insecure work, with frequent withdrawals from the job market due to unemployment or the need to look after or raise a family. They are the people trapped on short-term or sero-hours contracts, humiliated by the DWP and its regime of benefit sanctions and endless means tests. They are often overqualified for the menial and low-status jobs they are forced to perform. Thus they include the graduates flipping burgers in the local McDonalds or signing on with the employment agency to do some kind of clerical work. They have been created by the policy of successive governments of creating flexible labour markets. They include large numbers of women and also immigrants and asylum seekers, who find themselves excluded from more secure jobs.

Standing calls them ‘the precariat’ because of their precarious employment position, which also excludes them from enjoying full citizenship. As well as Neoliberalism, he also criticises the Social Democratic parties for their exclusive concentration on securing rights for the labour – meaning primarily male breadwinners in secure employment – while ignoring other kinds of work.

He describes the way the Neoliberal capitalism of the late 20th and early 21st century invaded and overturned the automatic link between residence in a country and citizenship. On pp. 2-3 he writes

It fell to T.H. Marshall (1950) writing after the Second World War, to define citizenship in its modern form as ‘a status bestowed on those who are full members of a community’. To be a citizen meant having ‘an absolute right to a certain standard of civilisation which is conditional only on the discharge of the general duties of citizenship.’ While Marshall’s later conception of the ‘duties of citizenship’ included a duty to labour, with which this book takes issue, he recognised the tension between rights and capitalism, noting that ‘in the twentieth century, citizenship and the capitalist class system have been at war.’ Citizenship imposed modifications on the capitalist class system, since social rights ‘imply an invasion of contract by status, the subordination of market price for social justice, the replacement of the free bargain by the declaration of rights’.

That was roughly correct in the ‘re-embedded’ phase of Karl Polanyi’s The Great Transformation ((1944) 2001), the period of social-democrat supremacy between 1944 and 1970s. In the subsequent ‘disembedded’ phase, contract has invaded status, and social justice has been subordinated to the market price.

On pp. 8-9 he further describes the way residents in nations across the world have been stripped over their rights as citizens.

Until the 1980s, the conventional view was that over the long run, in a democratic society, residence and citizenship should coincide (Brubaker 1989. This would not be true today. Many residing in a country never obtain citizenship or the rights attached to it; others who have resided since birth, lose rights that supposedly go with citizenship.

Many denizens not only have limited rights but also lack the ‘the right to have rights’. Asylum seekers denied refugee status are an example; migrants who cannot practise the occupation for which they are qualified are another. Often, they do not have the means or the procedural avenues to contest their marginal status. Many lack the capacity to claim or enforce rights, or fear that the act of asserting a claim right would have a high probability of retributive consequences or disastrous costs. Others have no avenues at all for pursuing nominal rights.

… There a six ways by which people can become denizens. They can be blocked from attaining rights, by laws, regulations or non-accountable actions of state bureaucracies. The costs of maintaining rights can be raised. They can lose rights due to a change in status, as employee, resident or whatever. They can be deprived of rights by proper legal process,. They can lose rights de facto, without due process, even though they may not lose them in a de jure (legal) sense. And they can lose them by not conforming to moralistic norms, by having a lifestyle or set of values that puts them outside the range of protection.

He mentions the way people can be stripped of their rights through being convicted as criminals. This is an important point. While I have absolutely no objection whatsoever to crims in prison losing their right to vote as part of their punishment, in America the process has gone much further than that. In some states, if you have committed a crime, you automatically lose your right to vote in perpetuity, even after you have served your sentence and been released as a free man or woman. He summarises the situation thus

In sum, denizenship can arise not just from migration but also from an unbundling of rights that removes some or all of the rights nominally attached to formal citizenships. The neo-liberalism that crystallized in the globalization era has generated a ‘tiered membership’ model of society. Worst of all, the unbundling of rights has gone with a class-based restructuring of rights. This is the ground on which the precariat must make its stand. (p. 10.)

In discussing the varieties of the precariat, he describes deprived members of the working classes, who may because of their lack of opportunities or education become attracted to Fascistic ideologies that blame others for their misfortune, and demand that other groups have their benefits cut, even when they themselves need them. IN my opinion, this describes a certain type of Tory voter – the working class Conservatives on whom Johnny Speight based in the famous Fascist git, Alf Garnett. He goes on to explain why the precariat is a dangerous class:

The precariat is dangerous for another related reason, because it is still at war with itself. If populist demagoguery had its way, the first variety [the dispossessed working class] would turn vicious towards the second [migrants and asylum seekers], as has been happening in Greece, Hungary and Italy. It is also dangerous because as predicted in The Precariat, the combination of anxiety, alienation, anomie and anger can be expected to lead to more days of riot and protest. And it is dangerous because stress, economic insecurity and frustration can lead and are leading to social illnesses, including drug-taking, petty crime, domestic violence and suicide.

Finally, the precariat is dangerous because it is confronted by a strident divisive state. Many in it feel commodified, treated as objects to be coerced to labour, penalized for not labouring, exhorted by politicians to do more. Nobody should be surprised if they react anomically. But since the precariat is emotionally detached from the labour it is expected to do, it is less inclined to imagine that jobs are the road to happiness or that job creation is a sign of social progress. The precariat pins its hopes and aspirations elsewhere. Quite soon, it will echo a slogan of 1968: ‘Ca Suffit!’ p. 32).

As well as the chapter describing the emergence of the precariat, and the social and economic forces that have created and exploit it, he presents a charter for improving their conditions in Chapter 5. This includes the following articles

Article 1: Redefine work as productive and reproductive activity (basically, it isn’t just work outside, but also inside the home).

Article 2: Reform labour statistics.

Article 3: Make recruitment practices brief encounters.

Article 4: Regulate flexible labour.

Article 5: Promote associational freedom. (This means developing new forms of unions and work associations that are able to act for the precariat).

Articles 6-10: Reconstruct occupational communities.

Articles 11-15: Stop class-based migration policy. (This, presumably, means ending the double standards that allow the massively wealth to go wherever they want, while excluding the poor, who may desperately need sanctuary or the job opportunities available in the countries to which they wish to migrate).

Article 16: Ensure due process for all.

Article 17: Remove poverty traps and precarity traps.

Article 18: Make a bonfire of benefit assessment tests. (Yaay!)

Article 19: Stop demonizing the disabled. (Also Yaay!)

Article 20: Stop workfare now! (Definitely yaaay!)

Article 21: Regulate payday loans and student loans.

Article 22: Institute a right to financial knowledge and advice.

Article 23: Decommodify education.

Article 24: Make a bonfire of subsidies (in other words, stop state support for over-paid exploiters and slave masters like IDS).

Article 25: Move towards a universal basic income.

Article 26: Share capital via sovereign wealth funds.

Article 27: Revive the Commons.

Article 28: Revive deliberative democracy.

Article 29: Re-marginalize charities.

This effectively means stemming the various Neoliberal polices that have led to the emergence of this new class of the dispossessed, as well as democratic deficit in which parliament has been side-lined in favour of a presidential style of politics, and social and economic policies formulated by think tanks and corporations.

I haven’t read the book yet, and intend to write a fuller review when I do so. I have, however, glanced at some of it, particular the attack on workfare, and have been impressed by Standing’s analysis and arguments.