Tag Archives: loan shark

Thatcher disdained sanctions. Why do her heirs love them so much?

austeritydolequeue

Vox‘s article on Nelson Mandela stirred up a huge amount of comment. As you might expect, much was complimentary; some was not.

One of the critics sought to alter the stated opinion of David Cameron and his Conservatives by pointing to a letter from Margaret Thatcher to then-South African President PW Botha in 1985, seeking Mr Mandela’s release from prison. This part of the letter didn’t sway yr (dis-)obdt srvt, as the suggestion seemed to be made as part of advice on how Mr Botha could gain political advantage from the situation, rather than from any genuine moral standpoint.

The letter did feature comments that are of considerable interest and relevance at this time – relating to sanctions. Mrs Thatcher wrote: “The Commonwealth meeting opened with forty-five countries seeking extensive trade and economic sanctions against South Africa… My rebuttal of the case… rested on two main premises: that sanctions do not work, indeed are likely to be counter-productive and damaging to those they are intended to help: and that it was inappropriate to take punitive action against South Africa at the very moment when you are taking steps to get rid of apartheid and to make necessary changes in the system of government in South Africa.”

Let’s take these comments back home and apply them to people who are unemployed in the UK today.

The Department for Work and Pensions, under Iain Duncan Smith, imposed a tough new regime of sanctions against Jobseekers’ Allowance claimants in November last year.

Now, sanctions can be imposed for a month if a claimant is judged to be not actively seeking a job or being available for work. Subsequent misbehaviour along these lines would mean a 13-week period without benefit. The claimant must then reapply for benefit in both instances.

Benefit may also be lost for 13 weeks if a jobseeker fails to attend an interview with a Job Centre advisor, although it restarts automatically at the end of this period.

The highest sanction withdraws JSA for 13 weeks if a person leaves their job voluntarily, rising to six months for a second “failure” and three YEARS for a third.

In the eight months between the application of the new rules and June this year, nearly 600,000 JSA claimants were sanctioned. Employment Minister Esther McVey claimed that this affected only a small proportion of jobseekers – “The vast, vast majority of people don’t get sanctions” – but when you compare the actual number of sanctions (553,000) with the number of people on JSA (1,480,000) it becomes clear that this is not true.

In September 2012, 1,570,000 people were on JSA. The government has been claiming that the figure has dropped because people are getting jobs but from these figures it seems far more likely that they have had their money stopped instead.

Ms McVey also said: “The people who get sanctions are wilfully rejecting support for no good reason.” Let’s have a look at that with the help of this website. All the sanctions it describes were really imposed on real jobseekers by Job Centre Plus employees, and these are just some of them:

“You apply for three jobs one week and three jobs the following Sunday and Monday. Because the job centre week starts on a Tuesday it treats this as applying for six jobs in one week and none the following week. You are sanctioned for 13 weeks for failing to apply for three jobs each week.”

“You have a job interview which overruns so you arrive at your job centre appointment 9 minutes late. You get sanctioned for a month.”

“Your job centre advisor suggests a job. When you go online to apply it says the job has “expired” so you don’t apply. You are sanctioned for 13 weeks.”

“You are on a workfare placement and your job centre appointment comes round. The job centre tells you to sign on then go to your placement – which you do. The placement reports you for being late and you get sanctioned for 3 months.”

The victims of these sanctions were clearly people who were trying to take steps to rid themselves of their unemployed status and get a job – but they were sanctioned by our Conservative-led government under a policy created by former Conservative leader Iain Duncan Smith. Draw a parallel with what Mrs Thatcher was saying about South Africa and it is clear that she would call that “inappropriate”.

But do they work? No.

According to Liam Purcell, writing in the Church Action on Poverty blog: “Where there are few jobs available, as in the North West of England, taking money away from people is hardly going to help them find jobs.

“Many of the unemployed despair of getting help and meaningful training. For most people who are sanctioned, it does nothing to help them acquire skills that would help them compete in the labour market.

“Having to apply online for dozens of inconvenient, unsuitable jobs for which they are poorly qualified, and which they may be physically or mentally incapable of holding down, is hardly a profitable use of time… Yet failure to comply can mean an end to even the minimum income produced by benefits.”

And the result? “Destitution, which follows, merely helps the poorest to learn how to survive by ducking and diving, by applying to charity, by falling into the clutches of payday lenders and loan sharks, by begging and sometimes stealing. Increasingly we come across people who find the whole process of claiming out-of-work benefits so demeaning and stressful that they just can’t be bothered to apply, and conveniently disappear from the official register of the unemployed.”

And conveniently disappear from the official register of the unemployed.

For those the system was originally “intended to help”, as Mrs Thatcher put it, her letter of 1985 was absolutely right: “Sanctions do not work [and] are likely to be counter-productive and damaging.”

But for a government that is desperately trying to claim that its policy on jobs is succeeding, sanctions that “conveniently disappear” people work very nicely indeed.

 

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‘Barefoot banking’ to support people on the edge

usury

This is a piece I wrote for the local credit union in my part of Powys, following on from the Archbishop of Canterbury’s vow that the Church of England would fight payday lenders. Quite right – usury is an evil that religious organisations traditionally oppose. I’m publishing it here because the main information is relevant nationwide (and also because today appears to be quite slow for political news).

Credit unions must rise to the challenge created by the Archbishop of Canterbury’s stand against payday lenders, according to a leading figure in a Mid Wales organisation.

Richard Bramhall of Red Kite Credit Union said the main issue facing credit unions was how to bring affordable credit to “people on the edge”.

Last month, the Most Reverend Justin Welby announced that he planned to help community-based credit unions by allowing them to use Church of England premises as bases, to put firms like Wonga.com, which charge huge amounts of interest for their loans, out of business.

“His idea is very constructive,” said Mr Bramhall.

“Instant credit is a difficult sector to service because of high rates of defaulting. Payday lenders, door-step lenders and loan sharks – and to a lesser extent banks and credit card companies – answer the threat of bad debt by charging monstrous interest rates.

The Credit Union approach is responsible lending, careful interviews, getting guarantors where possible and working with the member to develop financial competence.

“The ethos always was to save; build a relationship with the credit union through saving – becoming a shareholder – and borrowing using the shareholding as security. They pay low interest and benefit by keeping and growing their shares.

“We do not want to lend at high rates,” he said. “Our standard rate is 12.68 per cent, or one per cent per month. If you borrowed £100 over a year and paid it back without interruptions, it would cost you £6.60 in interest, with no extra charges and no penalty for early repayment.”

But he warned: “The population density here is so low and the conceivable number of members so small that, even if everyone joined, our income from loan interest would not be enough to pay for bank-type premises or employees.”

The Credit Union’s solution is what Mr Bramhall calls ‘barefoot banking’. He said “The Herb Garden Café, in Llandrindod Wells, is an example. You can access credit union services six days a week, 12 hours a day – not just when we’re open but any time we’re in the building. People can pick up leaflets, ask about the credit union, leave messages, make payments and collect cheques. It costs the café nothing.

“If people want to help, they could develop the sort of access point we have here. Our greatest need is for self-motivating volunteers and casual drop-in service points in shops, churches, cafes and even private homes all over Radnorshire and north Brecknock.”

He added that credit unions also needed to establish themselves in schools, teaching responsible money management to youngsters.

A tale of two plans

Both the Labour Party and the Conservatives have unveiled new plans to revive the UK economy, in the wake of last week’s deeply unimpressive Cabinet reshuffle. Let’s take a look at them.

Labour is offering us the impressively-titled ‘Pre-distribution’ – a system which asks employers to pay their staff more money in wages, in order to eliminate the need for the government to take higher taxes and then redistribute the wealth, thereby lessening the huge differences between the benefits enjoyed by the very wealthy and the privations suffered by the very poor.

Labour leader Ed Miliband, announcing the policy, called for firms to be responsible in their attitude to wages, and to focus on the long-term.

He said it would require a major shift in philosophy for the Labour Party, as many redistribution options – for example, increasing tax credits – will not be possible when Labour next returns to power, although redistribution of tax wealth will always be necessary.

He said pre-distribution – a term he has taken from US economist Jacob Hacker – is about lifting the UK away from being a low-wage economy, because this has made us unable to pay our way in the world. We must have higher wages – and therefore our workforce needs higher skills.

In fact, this is just an impressive title for something Labour has already spent a considerable period supporting – the ‘Living Wage’. The idea is that, while the minimum wage went some way towards lifting people out of poverty, it did not finish the job.

Consider workers who do 29 hours a week on minimum wage. They do not qualify for tax credits and the amount they earn may not cover their outgoings. How do they survive?

Under the current government, the only choice is to borrow, if they don’t have savings. So they go to richer family members and ask for a handout (a humiliating experience, made worse if a person is working full-time) or, much worse, they go to loan sharks.

Recent reports have indicated that people working full-time – 37 or more hours a week – are still not earning enough to cover their overheads and are having to do the same.

The current system therefore makes it possible for people to get into phenomenal amounts of debt, and we know that debt is what caused the global credit crisis of 2008. As more and more people go overdrawn, banks will fall into trouble. The amounts might not be as much – individually – but cumulatively they become a problem.

Also, consider the working atmosphere created by the current attitude to wages. Employers have enjoyed wage increases that have multiplied their earnings by – what is it – eight and a half times over the last 30 years. Employees have seen theirs rise by something like 27 per cent – less than the rate of inflation. Therefore their earnings have dropped in real terms, and that’s why we see the problems I have outlined above.

As a result of this, workers become demoralised. What’s the point of going to work for a business where the bosses make out like bandits and the people who actually create the wealth are treated like dirt? As a result, productivity slumps. Of course it does. Where’s the incentive to produce high-quality work at high speed? This leads to a drop in sales as orders fall off due to dissatisfaction. If the trend continues, the company fails. I have seen this happen to a major employer in the town where I live. It has been forced to remodel itself, cutting back and back, but still fell into receivership and may now be under its second new owner within 10 years. The problem for managers is they never decide to cut back on the source of the problem – poor managers who take too much of the profit; they always cut down the workforce, reducing their chance of profitability still further.

This is also what happened with my last employer – a newspaper company that is struggling because it is top-heavy. I left because bosses ignore my advice and went ahead with a plan that I knew would harm sales of the edition where I worked. Sure enough, within a few months it had merged with another edition. The solution from management? Cut down on anything other than management. Ridiculous.

And, by the way, British industrialists: A saving is not a profit. If you cut back one year in order to keep your head above water, what do you do when it doesn’t carry over into the next?

Labour’s alternative would pay workers enough money to have something left over, after they have covered their costs. They will have spending power. This means they will be able to buy more, invest more – they will have breathing space, and a sense of personal worth. From that will come a sense of pride in their work and a feeling that they are valued by their bosses. Productivity improves, as does the quality of the product. Orders increase. The company flourishes and is able to employ more workers. The cycle of growth then repeats itself.

Isn’t that better?

The plan also shows up the Conservatives’ lie that cutting benefits will ‘make work pay’. Forcing people off of a benefit system that doesn’t pay their costs and into a job that doesn’t pay their costs is no solution at all and any Tory who spouts this nonsense in the media is to be mocked and targeted for unseating at the next election (in my opinion).

In contrast, the Conservatives have announced that home owners will be allowed to build large conservatories and extensions without needing planning permission. The Tories hope a home improvements boom will stimulate the economy.

Don’t laugh; they’re serious.

They haven’t realised that this will only benefit those who, firstly, own their houses; secondly, have enough spare cash to pay for what has been described as a “large” extension to their dwelling and; thirdly, want one. Apparently there are around 200,000 applications a year – that’s a drop in the ocean when you live in a country of more than 60 million.

The relaxation of planning rules will only last until 2015, because the Tories want to persuade homeowners to get on and build these extensions as soon as possible – again, failing to realise that we are in the middle of a time of fiscal austerity, which they are enforcing, and we simply don’t have the cash.

Therefore, the solution proposed by the government is for private individuals to borrow more, in order to fund the scheme and pay the builders. Isn’t that what the Tories have been mocking Labour for proposing on a national level – even though Labour isn’t currently proposing that?

Also, what about the 20 per cent VAT that goes on home improvements?

And what about the increased aggro between neighbours, as our quiet leafy suburbs get turned back into construction sites?

So the choice seems to be: Pay workers more, see increased long-term productivity and less concern over debt; or get homeowners to put themselves in debt by borrowing to pay for home improvements they probably don’t need and create a short-term boost in the construction industry.

Which one gets your vote?