Monday, 8 April 2013

Labour's attack on payday loan companies ignores the underlying culture of irresponsibility

As the Labour Party strives to become popular, and be seen as new, dynamic and able to "think differently", it shows itself to be anything but that.

The announcement that it wants to increase the power of local authorities to ban a type of business that it doesn't like just shows Labour has really only got one answer to everything - more statism.  It discourages individual responsibility, and I don't just mean by those whose behaviour is self-destructive, but by those wanting to change their behaviour.  Passing laws to stop people harming themselves or selling goods and services to a few people who do so, does not promote better behaviour.  It's the uncivilised tool of the big brother bully saying "do as I say or else" rather than convincing people to change on the merits of your argument. 

The BBC reports that Ed Miliband wants councils to be able to ban bookmakers, payday loan shops and pawnbrokers, motivated no doubt by the desire to want to reduce gambling, borrowing and sales of assets by the poor.

Yet there is little doubt that plenty of people on low incomes waste their money gambling and foolishly take out payday loans (although I am far from convinced that pawnbrokers are necessarily thriving on poor decisions, except of course offering thieves a chance to cash in their gains).  Given the increasingly prevalence of online gambling and online and mobile phone based payday loan companies, shutting down the retail fronts is hardly going to do much to limit access, but it will cost jobs.

It thinks that by reducing the supply and availability of such businesses, it will reduce demand and save people, but it will do little to do any of that.  Indeed it smacks of middle class champagne socialist distaste for such shops in the local high street, and the people who go into them.  You can't really imagine anyone on the Labour front bench going to any of them.

Which is what Labour means when it says when "people" say "no, enough is enough", he actually means middle class do-gooders.  Because if people, generally, didn't want those businesses, they wouldn't exist, they wouldn't be viable.   It's the flipside to HS2, because people aren't actually willing to pay for it, but politicians say people want it.

People go to bookmakers for recreation, and yes often with a misguided sense of hope that it might change their fortunes (albeit in most cases relatively modestly).  The do-gooders who want to shut down those businesses could take responsibility for promoting their point of view, by buying advertising time explaining the poor odds of winning and the alternative of saving (although the QE mainstream means that saving in a bank account is a losing battle with inflation).  They could actually take the initiative instead of using force to shut down shops that people evidently want to patronise (which also employ people).  Taking responsibility for promoting responsibility would be a positive move, but not one that Labour even recognises.  It is addicted to using force.

Payday loan companies exist for a reason.  Banks wont loan to the people who take out these loans, because they are a bad risk (and there is a broad consensus that the state backed banking system should be highly risk averse).  This is something endorsed by the Labour Party.  It doesn't want banks lending to people who can't pay the loans back.  So now it wants to stop those who risk their own money lending to such people, for potentially high returns.   The implication is that nobody should take out payday loans.  However, people with few alternatives do so for a range of reasons.  Of course those who do so to fund whimsical consumption (like a night out, or a holiday) are just plain stupid.  They eventually will reap the consequences of their behaviour, and learn from that.  However, some take up such loans for other purposes, such as paying for emergencies like car repairs (which in some cases means being able to get to work or not), or to replace an appliance or pay the excess on an insurance claim. Restricting such loans would harm those people, and drive some into the real loan shark industry of informal loans from gangsters willing to use violence to extract their repayment.  That's the real risk of limiting pay day loans.

However, once again, the responsible approach would be to counter-advertise.  Why don't those who oppose pay day loans produce ads that explain the consequences of borrowing for consumption?  If you care so much for those who get harmed from such loans, then reach them directly.  In fact, why not set up your own pay day loan company offering loans at far lower interest rates, to help out people.  Of course the latter wont happen because anyone doing that would be flooded with applications and it would cost a lot to work through them to find the cases that were thought to be "justified".   So most people would simply revert to the high interest pay day loan companies.

The bigger problem across all of this is the culture of irresponsibility.  This is promoted by a state, and a political culture that implies that it will "save you from yourself" and ban things that tempt you to doing the "wrong thing".  The only way to change that is to promote the opposite, and for the state to stop saving people from themselves.  

I think, on balance, that most people would be better off not taking pay day loans, or gambling or pawning goods for far less than their value.  I also know that I actually don't know any better about anyone's individual circumstances, and so I shouldn't be forcing others around, including those doing business with them legitimately, without fraud.

Moreover, if you really do want to help the poor, the first steps ought to be reducing the tax burden upon them (raising the income tax free threshold to the minimum wage, resisting increases in retail taxation) and getting rid of measures that increase the cost of living and reduce employment (e.g. green levies on energy, restrictions on shop trading hours and other measures that reduce employment, opposing further QE and supporting freer trade).  

The next step is far more pervasive, and that is to change the culture of entitlement and short term whim worshipping that has been prevalent for several decades.  That means transforming the welfare state into a system of personal catastrophe insurance, scrapping benefits that encourage irresponsibility and opening up the education system beyond those who teach the culture of statism.

It's about returning to the poor and needy a sense of esteem, of belief that they can transform their lives, and that the answer is not to expect the faceless, amoral state to give it to them, but for it to get out of the way.   

All Labour is selling the poor is a patronising nanny state, that shuts down the things they like, keeps paying them to do nothing and rewarding them for breeding more, and telling them the reason they are poor is because they are big bad businesses out there ready to exploit them, and are not hiring them or paying them enough.  It's a malignant attack on personal responsibility and aspiration that keeps people addicted to the state, and it nobody any good except the politicians whose careers are built on pandering to it.

No comments:

Post a Comment