Sunday, 21 December 2008

This time, Labour is right

Both Chris Grayling and Labour MP Terry Rooney, chairman of the Work and Pensions Committee, have excoriated James Purnell this morning for proposals to charge interest on social fund loans. But this time Purnell is right. There, I bet you never thought I'd ever write that.

Behind the row is the commendable aim of getting more people to join credit unions, to save small amounts regularly and thus have recourse to a loan fund in times of need. Credit unions don't make profits for wealthy bankers; they can pay out a dividend of no more than 8% to their savers, and are restricted from charging more than 2% a month interest on loans. Most charge 1%. Members need to have saved regularly for a while (usually about 12 weeks) before they can apply for a loan.

Politicians of both main parties have long stolen responsibility and self-sufficiency from the poorer classes. As the IEA's Arthur Seldon said in a conversation with Ralph Harris;
I was appalled by the insensitivity of governments to the efforts of the working classes to help themselves - the belief that they could not do all the necessary things. I began to sense a sort of anti working class sentiment in all parties. They wanted the State to do these things. They didn't like people to do things for themselves. They thought that ordinary people weren't capable. They forgot all the history of the working classes. The records are that the working classes were sending their children to schools by the 1860s. They were insuring for health cover and so on by 1910 - 11 when all parties in England, the main ones Tory and Liberal, with people like Lloyd George and Churchill and Beveridge at the centre, passed the infamous act of 1911 which forced the working class to insure with the State despite the fact that nine tenths of them were already covered by private systems. Politicians seemed to me to be saying you are not capable, you need us to ensure you take care of your families, which was nonsense.
Many Tories and Labourites committed to the role of the central State will, like Grayling and Rooney, condemn this move. Neither trust people with responsibility for their own lives. Encouraging people to save with credit unions - and cut their ties of dependence on the State - is a good first step in allowing our people to win back control of their own lives and futures.

Hayek would approve of Purnell's suggestion. And so do I.


Anonymous said...

2% interest for others--heading to zero--but 26% on a last ditch loan to people in dire straights?. This is a loan remember not a handout.They should be paying it back as soon as they can.They may not actually do so in many cases because of DWP laxity or incompetence. I am all in favour of credit unions etc but that is a diff issue. Social loans are supposed to be for emergency situations only. All this proves is that Brown and Purnell are scum.Hopefully this will prove another black eye for them. You Raedwald have an odd take on life at times.

Raedwald said...

How much would you charge now for risk, commercially, on a loan to someone with a 25% risk of defaulting, no assets, not in employment and living in rented accommodation? The interest rates each of us pay reflects the risk each of us represents. This isn't free money, it's our money.

Slowly replacing the social fund with membership of credit unions - maybe even with the requirement that a pound or two of benefit each week is paid into a credit union savings account - will impart a habit of inestimable value.

Anonymous said...

It is not a commercial loan--its humanitarian help for those who for whatever reason(and some of them are stupid feckless idiots no doubt but many others are in genuine need)have a roof over their head but don't have an orange box to sit on or any means of cooking a meal.If it were in my power I would ensure the loan was interest free but repaid a s a p making sure any money they get over survival needs went first to repay the loan. If DWP wanted to charge a small amount of interest to be put in a credit union account for the person concerned just to get them started on a more self reliant lifestyle that might be an idea.To hear, however, rotten political sewage, stuffed to the snout with cash stolen from the British people, wanting to charge loan rates on one time loans (they should be that) to the very poorest and most desperate makes me angry indeed.

Anonymous said...

Labour is never right in any situation ever.

If you think that Labour is right about anything in any situation ever, you have either had too much to drink or not enough to drink.

Bob's Head Revisited said...

The Arthur Seldon quote is excellent. I'm reading a book at the moment called Before Beveridge. What's clear from reading it is just how extensive welfare (through Friendly Societies etc), was before 1948, and even before 1911.
The idea, for instance, that pre-Welfare State healthcare meant poor people had nothing because it was only for the moneyed is utter nonsense.

Excellent blog, BTW.