Is it really any surprise that cross-party MPs have lined up to attack Gordon brown and James Purnell over their proposals for interest charges on so-called crisis loans? I blogged a few weeks ago about how the uptake of these short term emergency loans had increased sharply, but I never thought I would see a Government propose pretty harsh interest charges on such things.
The whole point about a crisis loan is that you when you are up against the wall you are able to get some cash flow back thanks to a loan from the state. This is exactly the principle behind welfare, to provide a safety net. It is a short term interest free loan of a few hundred pounds which is then paid weekly as you sort yourself out. A hand-up rather than a hand-out.
At a time when the base rate of interest from the Bank of England is 2% and likely to head even further downwards, how in the name of Jehovah, Allah, Buddha or whoever, can the Government be proposing to apply a rate of 26.8% APR on crisis loans for the most cash strapped of people in society? As one Labour MP said, "Not even the Tories would try to do this".
As the graph above shows, the rate at which crisis loans have been agreed has rocketed in the last two years, and as the recession deepens, the likelihood of that rate falling is at best minimal. It's bordering on the immoral to charge store card interest rates on a loan of around £400 for someone who's back is up against the wall surely?
I'm not in the least bit surprised that Ronnie Campbell, Labour MP for Blyth Valley, is "ashamed to be a member of the Labour Party". I don't agree with Chris Grayling's comment that Brown and Purnell are "re-inventing themselves as loan sharks" because that is party political hyperbole that doesn't stand up to the scrutiny of the interest rates loan sharks actually charge.
However, what Brown and Purnell are doing is re-inventing themselves as even more complete bastards than one may or may not have thought they were before. Brown is heading for one hell of a row over this one I think, and if past performance is anything to go by he won't back down at first and will dig his heels in for a while.