As Christmas comes, the poor will be left to turn to legal loan sharks to pay off debts

Legal loan sharks take advantage of those who need money most - a cap is desperately needed before debt for some people is out of their control.

Stella Creasy@stellacreasy
Thursday 08 November 2012 01:00

Christmas is coming, but for many the ghost of Christmas past has yet to leave as they struggle to pay bills from last year.

In economic crises the focus is often on the big picture, at the expense of the everyday. Commentators discuss how many jobs are lost, how many big household names go to the wall, how much Government is spending to turn things around. But if the macro matters, the micro is where we see the individual consequences of a downturn. The fears of repossession, the arguments over bills, the hunger and poverty from being penniless.

When families made it through the last recession no one asked how they survived. Britain just breathed a sigh of relief. We ignore how people are managing to live through this recession at our peril. Evidence shows families are being squeezed much more this time than in previous eras, as they experience a toxic combination of falling household incomes and rising inflation. Predictions are wages will stay flat for years to come, offering little respite to which to look forward.

Telling families to ‘live within their means’ fails to understand the pressures they face or the choices they can make. This is not about taking fewer holidays or eating out less.  Deciding between heating and putting food on the table is something many now do, as they also struggle to hold down multiple shift jobs and keep their kids together. And if we think it’s tough now, it’s going to get even worse next year, as energy companies withdraw cheap deals and Government cuts bite.

In my own area, nearly 1000 families have been told they face a shortfall in rent as housing benefit is capped from April 2013. Across London, 125,000 households are affected. With a lack of cheaper alternative properties or paid jobs in our capital - 4,500 are out of work in Walthamstow alone- options to keep a roof over their head that don’t involve further personal borrowing are few and far between.

"It is in this space legal loan sharks flourish"

It is in this space legal loan sharks flourish, egged on by a Government that stubbornly refuses to regulate them, as most other countries have, to limit the charges they can levy. I began campaigning for caps on the cost of credit because I feared how families were coping with less money. Two years on, the financial health of my constituents and my community is even more terrifying. Like many Citizens Advice Bureaus, personal debt is now a priority for my local branch – over the last few years it has gone from being one in every five clients, to a third of all their caseload, equating to 3,200 people. In the last eighteen months they have helped manage debts close to £3 million in just one small corner of a city supposed to be one of the most prosperous in the world.

As we pore over GDP numbers and employment statistics, Westminster must not be blind to the long term problems building for Britain. This is not just about the role of the welfare state. It is about the economic and social effects of having whole towns and communities saddled with debts impossible to escape. Those not claiming benefits tell me they find increasing utility and travel costs difficult to manage. All worry about what they would do if their cooker or washing machine breaks down. 

We must offer more than sympathy of the horrors to come. The opportunity of employment with a living wage would transform the lives of many and so should be a national priority for all. We must also restate the progressive case for consumer activism- recognizing the best deals on finance and services are also unequally distributed and so a source of inequality in outcomes too. Whether ignoring high cost credit companies engulfing our high streets or the shambles over energy bills, this Government is making it very expensive to be poor.

In the face of a Coalition seemingly unmoved by human misery, we must draw strength from each other to fight back. That’s why as a Walthamstow community we are pooling our time and expertise to run a ‘family finances fair’ to help locals cut household costs and so survive into the New Year. It is also why in Westminster we will be unrelenting in challenging the conduct and costs of legal loan sharks. This isn’t just moral righteousness; its good economic sense too. A nation where families carry personal debts they can never hope to repay is not one that can make the long-term decisions needed on education, housing and social care costs. This Government’s failure to help British consumers is a threat not just to Christmas present, but all our Christmas futures too.

Stella Creasy is Labour and Co-operative MP for Walthamstow. She is also Shadow Home Affairs Minister for Crime Prevention. Her website is and her twitter is @stellacreasy. 

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