Ed Miliband attacks Britain’s ‘hidden Wonga economy’ as payday lending bosses grilled by MPs
Labour leader criticises lenders for 'bullying, harassment and threats' towards families struggling with debt
Tuesday 05 November 2013
Ed Miliband has launched an attack on Britain's “Wonga economy”, saying the rise of payday lenders symbolised the squeeze on living standards facing millions of ordinary families.
The Labour leader accused the firms of preying on the vulnerable, creating a “quiet crisis” for thousands of households left with debts they were unable to pay off.
His intervention came as representatives of the three of the biggest payday lenders - including Wonga - were facing a grilling by MPs on the Commons Business, Innovation and Skills Committee.
In a speech delivered at London's Battersea power station, Mr Miliband took issue with claims by the boss of Wonga that he was speaking for a “silent majority” who were happy with the service they were offered.
He said the reality for many was “bullying, harassment and threats” from lenders after they racked up huge interest charges they could not afford to pay back.
“The truth is, he wants us to stay silent about a company where in one year alone their bad debts reached £120 million. An industry in which seven out of 10 customers said they regretted taking out a loan. With half saying they couldn't pay it back,” he said.
“Payday lenders don't speak for the silent majority. They are responsible for a quiet crisis of thousands of families trapped in unpayable debt.
“The Wonga economy is one of the worst symbols of this cost of living crisis.”
Mr Miliband stepped up his attack on David Cameron over living standards, and what he said was the coalition's failure to curb soaring energy bills.
He challenged Tory and Liberal Democrat MPs to back Labour's plans for a temporary freeze on electricity and gas charges in a Commons vote tomorrow.
He said that while former prime minister John Major - who called for a windfall tax on the profits of the energy firms - understood the need for action, Mr Cameron did not.
“His response to Labour's energy price freeze shows how out of mainstream is. He took issue with the whole idea of government intervention in a broken market,” he said.
“Ever since, on energy he seems to have had a different policy every day of the week. But what we know is that we can never expect him to stand up to the energy companies, because they are a large and powerful interest.
“It is not who David Cameron is. It is not what he does.”
Mr Miliband highlighted Labour's pledge to end the “scandal of poverty pay”, strengthening the statutory minimum wage and offering firms incentives through the tax system to pay the living wage.
“Make work pay contracts will raise wages, keep the benefit bill down and tackle the cost-of-living crisis. It is a good deal for workers, business and the taxpayer too,” he said.
“And by tackling low pay, we won't just strengthen our economy, we will strengthen our society as well.”
He said the next general election would present a “big choice”, with Labour offering a different future to the “Tory vision” of a Britain where payday lenders “prey on the vulnerable”, living standards stagnate, and the energy companies carry on “ripping off” consumers.
“We can run Britain in a different way,” he said. “Different from the past, building a different future for our country, where ordinary people feel the country is run for them in their interests and for their future.”
Conservative Treasury minister Sajid Javid said: “We want to secure a sustainable, long-term economic recovery for hard-working people. That means we must stick to our economic plan - growing the economy, helping business create jobs and cutting the deficit.
”And by controlling spending to cut the deficit, we can keep mortgage rates low and taxes low. Already we have cut income tax for 25 million people, frozen council tax and frozen fuel duty.
“But Labour's same old policy of more spending, more borrowing and more debt - exactly what got us into a mess in the first place - would mean higher taxes and higher mortgage rates. Even Ed Balls says Ed Miliband's latest policy would have a 'substantial extra cost'.
“Hardworking people would be worse off with Ed Miliband's short-termist, opportunistic politics.”
Wonga rejected Mr Miliband's accusations about the firm and offered to meet the Labour leader to discuss the issues he raised.
“We don't accept the picture of Wonga and our customers painted by Ed Miliband today, which rehashes many of the myths about our business,” a spokesman said.
“Our bad debt (the amount of money loaned that we don't get back) is around 7.5%, comparable to credit cards. As a responsible lender, we reject 80% of first-loan applications, while the successful 20% borrow an average of £178.
“While we recognise that there have been unacceptable practices in the sector, Wonga has been instrumental in raising standards and arguing for better regulation to protect consumers.”
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