James Moore: Pull out of the EU? We’d just be trading one set of problems for another

Outlook: The cost of payday loans today means that they are a thoroughly bad thing for most people

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The Independent Online

To listen to eurosceptics, you’d think pulling Britain out of the EU would overnight turn it into the land of milk and honey. Au contraire, says the Engineering Employers Federation, the manufacturers trade body that enlisted the help of Ken Clarke to put its case yesterday.

Not the best move it could have made, that one. Mr Clarke may be a heavyweight, but he has been ploughing a lonely furrow in the Conservative Party for years now.

Those arguing for Britain to stay in could use a fresher advocate from the Right, because it is a case that needs making.

Today the Government’s Business Task Force will publish a report, Cut EU Red Tape, under the auspices of Michael Fallon’s bit of the Department for Business Innovation and Skills.

Good, you may say. But a central point made by the EEF still needs to be heard amid the increasingly ferocious assaults on Brussels and its bureaucrats coming for the other side. It is that the EU is still Britain’s major trading partner and, despite what sceptics would have you believe, pulling out won’t magically create billions of pounds’ worth of deals with the tigers in the East.

Meanwhile, if the UK pushed the button, it would presumably still want to negotiate access to the European single market as a member of the European Economic Area à la Switzerland and Norway. Which have to comply with all sorts of EU rules to get that access, without getting a vote on any of them. It’s true that they have a seat at the table, but nobody listens to them.

As for regulations and red tape the businessmen want rid of? It’s a fact that the EU is rather good at coming up with all sorts of unnecessary rubbish. Reforming it would be a good idea, although Britain has seldom helped itself on this front by shouting and screaming from the sidelines as opposed to building alliances with those of a similar mind.

But Whitehall, responsible for much of the gold-plating of EU rules that has gone on in the past, is also a dab hand with red tape.And the business community would still have it to deal with whatever the result of an eventual referendum.

Capping payday loan charges the way ahead

The Payday loans industry scented a PR coup over the weekend. Which? magazine, you see, launched a broadside against bank overdraft charges.

Hear, hear, said the Consumer Finance Association without a trace or irony or any recognition of the fact that Which? has hardly been a fan of its members – as evidenced by it being a notable supporter of a cross-party charter launched yesterday to “stop the payday loan rip-off”.

The charter calls for an end to payday lenders handing out loans to people who can’t afford to pay them back. It includes demands that lenders stop loan rollovers and “hidden or excessive charges”. It also wants an end to the practice of lenders raiding bank accounts without clients’ knowledge, no more “irresponsible advertising”, and calls on  lenders to promote free, independent debt advice.

The CFA would probably say it agrees with some of those, although it would be interesting to see just how irresponsible advertising is defined. However, while the charter is all very well, and has garnered a lot of support, it stops short of calling for most obvious way to curtail any “rip-off”. That is to follow the lead of other countries and impose a cap on what lenders (and this could include the banks) charge. Such a measure is anathema to free marketeers, but then the payday loans market isn’t anything like an effectively functioning market, as the Office of Fair Trading has made clear.

Some worry that a cap would restrict the supply of credit to those that need it. But in reality, the cost of payday loans today means that they are a thoroughly bad thing for most people. They’re also extremely easy and quick to access, which isn’t necessarily a good thing. Today, the industry makes vast profits, fuelling more ads, driving rapid growth and more profits, fuelling yet more ads and so on.

Something that would halt this cycle is overdue. The charter, while not unwelcome, isn’t it. But a cap on charges might be.

Markets show maturity in face of the US crisis

The FTSE 100 index opened the week by jogging along happily enough, which is basically what it’s been doing for the past three months. Most of its peers kicked off the week by slipping a bit, but only marginally.

All this despite the fact that the world’s biggest economy is spiralling towards the world’s biggest default as its politicians indulge themselves in a game of the economic equivalent of Russian roulette.

The prevailing wisdom is that, faced with a situation like this, markets inevitably grossly overreact, with prices swinging violently up and down as panic takes hold.

What’s going on?  Well, while the political turbulence Stateside is hardly welcome, it is not at all unexpected. The character of the fundamentalist Tea Party Republicans who have caused it all (and polls suggest that while the American people don’t exactly love the Democrats, they know who they blame) is not new. The big dates are all in the diary. Markets dislike surprises and the only real surprise here would have been if Congress didn’t decide to indulge in a Mexican stand-off.

Markets basically believe that a deal will be done even if it goes down to the wire. They are showing a surprising maturity, one that is in stark contrast to the behaviour of American politicians. Whether their confidence is justified is another issue. Those with spread-betting accounts could be forgiven for taking out short positions were they do conduct a little research on Texas senator Ted Cruz, the Tea Party fundamentalist and leading figure in the US Government shutdown.