“The cuts in benefits, benefit cap, bedroom tax, brutal sanctions regime, housing crisis & pay freezes under the Tories have driven people into hardship & debt.”John McDonnell MP.
The Growing Burden of Personal Debt has to be an Issue for the Left writes John McDonnell MP
At the moment the Tories are pushing quietly through Parliament a little known and barely discussed piece of legislation called the Financial Services Bill.
It’s part of the process of maintaining a regulatory structure for financial services after Brexit.
A lengthy and hard fought lobbying campaign exposing the treatment of people facing the growing levels of debt has forced the government to include in the legislation a welcome but minimalist respite scheme.
This provides a breathing space for people in debt but doesn’t tackle the underlying causes of why so many people find themselves struggling with unmanageable debt burdens.
The Bill provided an ideal opportunity for major reforms to tackle the growing burden of personal debt but also to introduce effective regulation of the financial services sector which in recent years has been exposed as scandal ridden.
At the end of last year Nearly 1.6 million households were behind on water bills. 1.5 million households were behind on energy bills. Over 1.4 million households were behind on their council tax. Estimates also range from half a million to 800,000 households behind on their rent. The number in severe problem debt has doubled to 1.2 million.
Research from Step Change, the debt charity, estimated that 100,000 a year either consider or commit suicide because of their debt problems.
The Government has considerable responsibility for the mounting debt crisis in this country.
The cuts in benefits, benefit cap, bedroom tax, brutal sanctions regime, housing crisis and pay freezes under the Tories have driven people into hardship and debt.
The 20% cut in wages under the Furlough Scheme, appallingly low level of sick pay and now rising joblessness are pushing more and more people into debt that they have little or no chance of paying off.
Paying off debt becomes an impossible mountain to climb for many because the system is rigged against them,
The Bank of England base rate is currently just 0.1% but that is not the rate for many consumers, who are paying 25% interest on credit card debt, 40% on overdraft debt and for those having to use payday lenders who can charge up to 0.8% per day, equivalent to 292% annually or nearly 3,000 times the current Bank of England base rate.
In the debate on the Bill in Parliament I asked the Government to at least publish a report assessing the scale of the debt problem, the effectiveness of current mechanisms and the potential ways of tackling the mounting debt crisis.
Of course the Government refused but the issue of debt is not going away and more people are now willing to campaign not just to expose the levels and reasons for mounting debt but also to demand action.
In the USA the Debt Collective was formed mobilising campaigns of people in debt to demand debt write offs. In a number of states the Collective is having significant successes.
Debtors unions are now coming into place in the UK and there are talks about firming a similar UK Debt Collective.
When debt was a problem for the banks In the financial crash of 2008 the Government intervened to lift the burden of the bad debts.
If this was good enough for the banks then it’s good enough for the people. In her recent book “Should we abolish household debt?” Johnna Montgomerie calls for a similar Long Term Refinancing scheme now to lift the debt burden from our people.
Bryn Davies, one of the Socialist campaign Group members in the Lords, has called for a debt jubilee in this country that would wipe out the unmanageable debts that so many now face.
It isn’t just a critically important humanitarian gesture to alleviate the poverty and hardship so many are experiencing, it is also sound economics. Lifting this burden of debt will ensure that the money that would have been spent on interest payments is now spent in the wider economy.
Now is the time for the Labour Party to seize the lead on the issue of debt to help transform the lives of so many of our people hit so hard by the pandemic. A People’s Debt Write Off is an idea whose time has come.
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