As many of Britain’s young people start university or further education, it’s hard not to worry for how many debts will make finishing a distant dream. Research shows nearly 50 per cent of students having to draw on their own earnings or turn to their family for support to finance college or university. Little surprise then such worries are pushing many to the verge of dropping out altogether. Financial misery is now a fact of life for most in Cameron’s Britain. Half of us are worried about the debts we have with two-thirds of those struggling pushed into debt just because of the spiralling cost of putting food on the table and a roof over their head. Rainy day money is a thing of the past – one in five Brits would have to turn to borrowing if they needed £200 to fix a broken washing machine or car. Those that can afford to finish their education may be blessed, but they face a jobs market where, as the cost of living has gone up, so wages have stagnated. It is a sobering thought that Office of Budget Responsibility figures show people will be £6,660 worse off in real terms by 2015. Whether you are starting out or saving up, there are too many for whom there is more month than money to be able to make ends meet.
Addressing these challenges means making sure all Britons can borrow in a way that is an investment in their future, not a millstone dragging them into further debt. The government’s failure to understand this and reform our consumer credit market is not only failing students but feeding the legal loan sharks. These companies offer loans and credit at extortionate rates of interest to cash-strapped Britons. Now worth billions of pounds a year, legal loan sharks claim they act responsibly – in their eyes offering loans to ‘intelligent financially-savvy consumers’ – yet 40 per cent of those who took out a payday loan say the loan made their financial position worse. NUS have shown a £8,566 difference on average between the cost of being an undergraduate and the support for which students qualify. With accommodation costs already doubling in the last 10 years and 50 per cent of all undergraduates regularly worrying about meeting basic living costs it is no surprise to see these predatory lenders are circling students. With as many as 10 per cent of students from vulnerable groups – including carers and learners over 21 years old having accessed high risk credit – it is vital we make our campuses legal loan shark free zones until there is reform of this industry.
Other countries have capped what these firms can charge, limiting the debt that taking such loans can cause. Yet here Cameron has resisted all efforts to reform this industry and give British consumers the same protection from these firms others around the world enjoy. With credit unions not able to expand to cope with the demand the continued squeeze on living standards is creating, it is little wonder this industry is booming under Cameron’s watch. That’s why I’m delighted Labour Students have voted to become Sharkstoppers in 2013. As the Sharkstoppers campaign pack shows, we can all take action to help challenge this industry – from asking celebrities to commit to not to promote these firms, to lobbying local shopping centres and councils to remove their misleading adverts from view and promoting credit unions instead.
It is because of the campaigning of organisations like Labour Students, Movement for Change and the NUS that we can make sure that the government is finally forced to act. Britain needs to cap the total cost of credit to prevent people getting into further financial difficulty and build a thriving network of local credit unions providing a real alternative to those who need affordable credit. While we push for these changes, we must make sure that in 2013 no one is left in a worsening financial position because they cannot afford to pay the rent at university or ends up leaving college because of the stress of their financial difficulties. By taking action now and kicking the loan sharks off our campuses and out of our communities we can send a message to the government that, even if they won’t take action to end legal loan sharking in Britain, together, we will.
For more information on the Sharkstoppers campaign you can download the local campaign pack from the website or visit Movement for Change.
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Stella Creasy MP is a shadow Home Office and MP for Walthamstow. She tweets @StellaCreasy
I used to work, based in London, for a French-owned bank. This gave me an opportunity to find out about the French financial system.
One of the things that fixed in my mind was that there were very strict regulations as to affordability of a loan. This had to be properly documented – otherwise the loan would not be repayable.
This meant that the consumer credit industry was difficult for lenders in France and did not develop in the way that has happened in Britain. None of this instant credit stuff, and even private lending was covered by the regulations. The French had no qualms about strictly regulating the cowboys in the financial world.
Of course, that approach to finance is anathema to the “anglo-saxons”, to the free-marketers and all the snake-oil merchants of our own over-blown financial services industry.
It is unfortunate that we are where we are. People’s individual finances need to be stabilised wherever possible and, over time, the amount of borrowing in the system needs to be shrunk. It should be only in special circumstances that people need to borrow – routinely borrowing for university fees, for example, where the purpose might be to get an education, not training for a specific job, is absurd.
Part of the remedy for the present disgraceful state of affairs, beyond the sharkstoppers campaign, will be stabilising employment, to adopt the living wage, to re-think the zero-hours contracts legislation and, I suspect, to kill off the payday loan industry.
Credit unions are all very well, but people cheat, and lending has to be a job for professionals, or within a closely-knit community, where people trust each other. Stipulations as to affordability of repayment are important, but “know your customer” is crucial.
All the computer algorithm technology that the financial services industry is addicted to, because most of its operators are “too big to fail” and so as to save on staff costs, got us into the mess in which the Wongas of this world thrive. We now need to restore human values into business dealings.