Labour leader Ed Miliband declares tax war on payday lenders

The lending companies would fund credit unions under a Labour government

Payday lending companies would be hit by higher taxes under a Labour government, with the money raised used to build up their credit union rivals, party leader Ed Miliband will announce today.

Labour would raise about £20m a year from controversial lenders such as Wonga – either from a 1 per cent levy on their balance sheet or a 10 per cent profits tax.

The revenue would double the £13m a year currently provided by the Government to expand credit unions, alternative non-profit groups which lend money with a maximum interest rate of 26 per cent annually.

Mr Miliband’s intervention will put pressure on the Coalition to rein in payday loan firms, amid mounting concern about their sky-high interest rates, sometimes of more than 5,000 per cent APR.

David Cameron insisted yesterday that the Government had not ruled out imposing a cap on the rates the companies can charge, but said such ceilings had not always worked in other countries.

Labour accused the Coalition of dragging its feet on a cap. If Mr Miliband wins power in 2015, he would bring in a maximum interest rate to prevent the lenders passing on  Labour’s higher taxes to their hard-pressed customers.

He will extend his drive on Britain’s “cost of living crisis” by asking Stella Creasy to head a Labour campaign against loan sharks. The MP for Walthamstow, who has exposed problems caused by the lenders, was appointed shadow minister for competition and consumer affairs in his frontbench reshuffle last week.

Mr Miliband, who will meet “victims” of payday lenders with Ms Creasy today, will say: “The cost of living crisis afflicting millions of Britain’s families is so bad that it is creating a personal debt crisis too. The prices families have to pay keep on rising faster and faster than the wages they are paid. And, as a result, the market in payday lending has doubled in just four years.

“Almost a third of the payday loans taken out in Britain at the moment are to cover the cost of people’s gas and electricity bills.”

The Labour leader will pledge that his party would act to help prevent people falling into unpayable debt.

“We would cap the cost of credit, halt the spread of payday lenders on our high streets and force them to fund the credit unions that can offer a real alternative for people in desperate need,” he will add.

“We must protect the most vulnerable people in our society from the worst of exploitation by payday lenders. And it is right that the companies that benefit from people’s financial plight, accept their responsibilities to help ensure affordable credit is available.”

Ms Creasy will say: “We are determined to see a cap introduced in the UK so that we can see an end to this legal loan sharking and give consumers the protection they deserve.”

Labour’s proposals would leave the level of the cap to be decided by the Financial Conduct Authority. However, they would force payday lenders to pay higher levies than other financial companies to fund services for consumers such as debt advice.

The Archbishop of Canterbury, who has vowed to put companies like Wonga out of business, has written to all clergy in the Church of England urging them to become “actively involved” in supporting local credit unions. On the eve of International Credit Union Day, the Most Rev Justin Welby called on vicars to support “real” alternatives to payday loans, which he warned could plunge the one million families taking out loans every month  into a crippling spiral of debt.

The Rev Malcolm Brown, director of the Church of England’s mission and public affairs division, said: “Credit unions aren’t just for hard-pressed communities – all sorts of people could use credit unions to save and to take out loans at manageable interest rates.”

Wonga insists it welcomes competition from credit unions, saying it favours consumer choice.

In the Commons yesterday, Labour MP Paul Blomfield urged Mr Cameron to back a new charter, drawn up by debt and consumer organisations, calling for tough regulation of payday lenders. The Prime Minister replied: “We are still considering the issue of a cap, and I do not think we should rule it out, although we must bear in mind what has been established in other countries, and by our own research, about whether a cap would prove effective.

“It is absolutely right for us to regulate this area properly.”

Mr Cameron dismissed Labour’s promise of a 20-month energy price freeze as a “price con”. He said the best way to address the cost of living was to give people money back through tax cuts. He also pleased Tory MPs by raising the prospect of tax cuts for middle-income earners in the long run. “I want to see tax cuts for all,” he said.

He was replying to Tory MP Dominic Raab, who asked: “As he pursues the Tory mission to take the low-paid out of tax, may I urge him to deliver it by cutting government spending so that we can also ease the squeeze on the middle classes?”and will announce today.

Labour would raise about £20m a year from controversial lenders such as Wonga – either from a 1 per cent levy on their balance sheet or a 10 per cent profits tax.

The revenue would double the £13m a year currently provided by the Government to expand credit unions, alternative non-profit groups which lend money with a maximum interest rate of 26 per cent annually.

Mr Miliband’s intervention will put pressure on the Coalition to rein in payday loan firms, amid mounting concern about their sky-high interest rates, sometimes of more than 5,000 per cent APR.

David Cameron insisted yesterday that the Government had not ruled out imposing a cap on the rates the companies can charge, but said such ceilings had not always worked in other countries.

Labour accused the Coalition of dragging its feet on a cap. If Mr Miliband wins power in 2015, he would bring in a maximum interest rate to prevent the lenders passing on  Labour’s higher taxes to their hard-pressed customers.

He will extend his drive on Britain’s “cost of living crisis” by asking Stella Creasy to head a Labour campaign against loan sharks. The MP for Walthamstow, who has exposed problems caused by the lenders, was appointed shadow minister for competition and consumer affairs in his frontbench reshuffle last week.

Mr Miliband, who will meet “victims” of payday lenders with Ms Creasy today, will say: “The cost of living crisis afflicting millions of Britain’s

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
On set of the Secret Cinema's Back to the Future event
filmBut why were Back to the Future screenings cancelled?
News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Lewis Hamilton walks back to the pit lane with his Mercedes burning in the background
Formula 1
Arts and Entertainment
The new characters were announced yesterday at San Diego Comic Con
comic-con 2014
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
Arts and Entertainment
No Devotion's Geoff Rickly and Stuart Richardson
musicReview: No Devotion, O2 Academy Islington, London
News
i100
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
News
i100
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
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

Commercial Litigation

Highly Attractive Salary: Austen Lloyd: CITY - SENIOR COMMERCIAL LITIGATION SO...

BI Developer - Sheffield - £35,000 ~ £40,000 DOE

£35000 - £40000 per annum + competitive: Progressive Recruitment: My client is...

Employment Solicitor

Highly Competitive Salary: Austen Lloyd: MANCHESTER - Senior Employment Solici...

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

Day In a Page

Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

The BBC’s wolf in sheep’s clothing

What will Evan Davis be like on Newsnight?
Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

Finding the names for America’s shame

The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

Inside a church for Born Again Christians

As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

Olivier Rousteing is revitalising the house of Balmain

Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
Cancer, cardiac arrest, HIV and homelessness - and he's only 39

Incredible survival story of David Tovey

Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride