Julian Knight: Drop in storecard use proves public is credit savvy

Latest figures show that consumers have had their fill of retailers' 30% interest rates

There is an attitude in this country that consumers are perennial victims, unable to make correct decisions and forever being hoodwinked by clever marketeers. Take the select committee discussions on payday lending, for instance, which possessed no understanding of the fundamental point that if there wasn't a demand for short-term lending it wouldn't exist.

The public is not as dense as painted by politicians and some commentators. Take the recent consumer credit figures from the Finance and Leasing Association. It shows some heartening stuff for those who, like me, generally think the British public gets many of its choices about right – in the long term at least.

Granted, consumers are not paying back debts as quickly as we should – considering the relatively low mortgage rate – but at least we're not racking up huge new borrowings.

But, for me, one of the most encouraging signs from the credit market is the decline of the storecard. Debt on these is down 12 per cent year on year. Set against personal loans, credit cards and car finance this sector is negligible, but it seems, finally, that high rates – over 30 per cent annual rate is the norm – lack of flexibility and the more general move away from the high street are sending storecards into retreat and perhaps even terminal decline. No bad thing at all.

Societies in flux

Coinciding with the Building Society Association shindig in Manchester, Deloittes said it thought that the mutual sector was seeing a "revival".

The raw figures seem to support the analysis with both lending and savings balances up. But the sector itself has been subject to a host of mergers in the past year with the big beasts swallowing up their medium sized brethren. We now have three big players – Nationwide (as ever), the Co-op and Yorkshire – with a couple of medium-sized societies hanging on. But for how long?

We could end up with three super-mutuals, banks in all but name, and a smattering of tiny societies serving local often non-metropolitan communities – little more than souped-up credit unions.

It's ironic that a banking crisis has led to greater changes in the number of players in the building society sector. This is hardly a sector seeing a "revival" more still in a state of flux.

Indirect tax sham

If you wanted more evidence that our tax system favours the rich, it came via Bloomsbury Professional this week.

Its analysis shows that since the financial crisis the percentage of government revenue from indirect taxes has soared on the back of VAT and "sin" tax increases. The fact is that indirect tax rises proportionately hurts those on middle to low incomes the hardest as they spend more of their earnings.

The great confidence trick that is being played by all three major parties is not to touch the sacrosanct basic rate of income tax at 20p and to fund this we have the indirect tax hike and the putative freezing of the 40p rate band – which crushes the initiative of many middle to above average income people to work extra and earn more.

Who escapes? Well it's those who were above the 40p tax rate when this financial crisis started but below the new 50p top rate of tax or those who can afford a good accountant.

Support Jeff and Brathay

Just a quick shout out for fellow financial journalist Jeff Prestridge who is running a staggering 10 marathons in 10 days in the Lake District as I write, in aid of the Brathay trust which helps vulnerable and disadvantaged kids. It's a truly staggering undertaking, so if you can give something please do at justgiving.com/jeff-prestridge It is a great cause.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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