Payday loans cap: George Osborne caves in following intervention led by Archbishop of Canterbury - UK Politics - UK - The Independent

Payday loans cap: George Osborne caves in following intervention led by Archbishop of Canterbury

 

George Osborne caved in to demands to impose a cap on payday lending costs to avert a parliamentary rebellion backed by the Archbishop of Canterbury, The Independent has learnt.

Senior Conservatives were understood to have been fearful of losing a vote on a hostile amendment in the House of Lords on Tuesday which would have set a charge cap of 10 per cent on all short-term loans and placed other restrictions on their sale.

The amendment to the Banking Reform Bill was being backed by Archbishop Justin Welby, who was considering speaking out in its favour in the Lords debate. His support was expected to garner the backing of a significant number of cross-bench peers and inflict an embarrassing defeat of the Government.

“As you know, a large proportion of cross-benchers tend to be swayed by the idea of having God on their side,” said one Lords source in favour of the amendment.

“George Osborne’s change of heart had more to do with politics than conviction.”

Archbishop Welby has previously spoken out against payday lenders such as Wonga. Liberal Democrat ministers, who have been lobbying the Treasury for a cap on payday loans for more than a year, were furious that Mr Osborne sought to grab the political credit by announcing a move he had strongly opposed until the weekend.

Vince Cable, the Liberal Democrat Business Secretary, and Jo Swinson, the Liberal Democrat minister responsible for consumer affairs, have both argued for a cap in private but had been forced to toe the Treasury line that such a ceiling would not tackle the problem. 

A Liberal Democrat  source said: “The Liberal Democrats have been pushing for tougher action on payday lenders for over a year. At every step of the way this has been met with strong resistance from Conservatives in the Treasury.

“It seems the Tories read the runes on this one and realised that increasingly the evidence and political tide were against them. Their change of heart is welcome but none of this would have happened without the Liberal Democrats in government.” Liberal Democrats believe the Chancellor was swayed by the prospect of a government defeat in the Lords at the hands of a powerful coalition of Labour, Liberal Democrat, cross-bench peers and bishops.

“He saw the writing on the wall,” said another insider. “There was a head of steam building up in favour of a cap.”

Labour claimed Ed Miliband’s campaign on the cost of living had forced Mr Osborne into “an intellectual U-turn” after the Tories branded Labour’s calls for intervention in the economy as “Marxist”.  

Lord [Stewart] Wood, a member of the Shadow Cabinet, said: “When Labour calls for government action in failing markets, it is flirting with Communism; when George Osborne does, it’s the epitome of good old-fashioned common sense.”

However Treasury sources denied any suggestion that political pressure had swayed Mr Osborne or that the Chancellor was concerned about being on the wrong side of the cost-of-living debate.

Mr Osborne also rejected claims of a U-turn, or that he was aping Labour by intervening in markets. “I don’t accept it’s a departure from any philosophy,” he said.

“The philosophy is we want markets that work for people, and people who believe in the free market, like myself, want that free market to be properly regulated.”

The Government will bring in powers to impose the restriction through an amendment to the Banking Reform Bill, but the level of the cap will be set by the new Financial Conduct Authority.

Q&A: What should be done?

Q: Will a cap on the loans help people avoid falling into debt problems?

A: No. The key issues surround the widespread lack of  responsible lending.

Q: How could payday lenders be more responsible?

A: One option would be to  introduce compulsory  affordability checks. Lenders often make greater profits from rolling over loans than from the original deal.

Q: How should they be stopped?

A: The regulators have already announced plans to cut back the number of rollovers allowed and the number of times lenders can try and recover their cash from  people’s bank accounts. But their advertising also needs to be restricted.

SIMON READ

Life and Style
tech
Arts and Entertainment
Robin Thicke's video for 'Blurred Lines' has been criticised for condoning rape
music
News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Matt Damon as Jason Bourne in The Bourne Ultimatum (2007)
filmMatt Damon in talks to return
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
Life and Style
tech... and together they're worth at least £100 million
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig is believed to be donning skies as 007 for the first time
Arts and Entertainment
Fringe show: 'Cilla', with Sheridan Smith in the title role and Aneurin Barnard as her future husband Bobby Willis
tvEllen E Jones on ITV's 'Cilla'
Life and Style
Bono and Apple CEO Tim Cook announced U2's surprise new album at the iPhone 6 launch
tech(but you can't escape: Bono is always on your iPhone)
Sport
Tim Wiese
sport
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Programme Test Manager

£400 Per Day: Clearwater People Solutions Ltd: Our client are currently seekin...

IT Network Manager - Shepherd's Bush, London

£28000 - £30000 per annum: Ashdown Group: IT Network Manager - Shepherd's Bush...

Secondary supply teachers needed in Peterborough

£21000 - £35000 per annum: Randstad Education Cambridge: Secondary supply teac...

Modern Foreign Languages Teacher

£100 - £110 per day: Randstad Education Group: Full time German Supply Teacher...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week