Royal wedding cannot hide suffering in Wales

It can’t be a coincidence that the announcement of the engagement of Prince William – “Baby Wales” as his mother called him - to Kate Middleton, after a ten-year relationship, is made on the day before the Wales Assembly Government reveals its budget cuts.

No doubt the months of preparation for the wedding are aimed at taking people’s minds off what’s happening in the real world of ordinary people’s lives. But it won’t do anything to lessen the impact of the deepening global crisis on the people of this small country.

As the people of Wales braced themselves for a savage assault on jobs, public services and living standards hundreds of thousands are already drowning in debt. Over 38,000 sought help from Citizens Advice Bureaux in the last year – an increase of 20% over the previous year. Rent arrears to landlords are up 88%, and 42% to housing associations. People with arrears in their water rates have increased to 59% and cases involving private bailiffs are up 88%.

Like many others, Kate – not the would be-princess but a young mother who was desperate to buy Christmas presents for her children – felt her only option was to approach an illegal money lender. Operating on estates across the country, they charge interest rates as high as 5,000% and extract payments using threats and intimidation.

Fear of the consequences of failing to make a payment meant that household bills went unpaid and there was no money left to feed the children. Kate said: "Everything runs round in your head - are they going to burn my house down? Am I going to end up getting murdered over this? It was a constant worry, every single day."

She has joined the 14,000 people in Wales in the last year granted a debt relief order - a form of insolvency for people that have a certain amount of debt, little disposable income and few assets. Shelter Cymru is warning that for many poorer families, things will get a lot worse as the recession deepens.

Dave Sheridan, a senior debt specialist at the charity, said: "With the changes that are coming, I think we're in for a major storm. Things are going to get a lot worse - at the moment it's only the tip of the iceberg. It's difficult for agencies to provide face to face advice to meet demand as it stands, let alone with the cuts coming down the line."

Across the water in Ireland, as the government tries to negotiate it way out of state bankruptcy, a gang of legalised loan sharks from the European Union and International Monetary Fund officials will visit Ireland for a “short and focused discussion” on the country’s debt crisis, in advance of its budget announcement on December 7. They are desperately trying to prevent Ireland’s incipient bankruptcy spreading to Portugal, Greece and Spain, which would almost certainly end the euro’s viability as a trading currency.

Like their counterparts across the world, the EU-IMF group’s mission is to ensure that everything possible is done to ensure that payments on the debt’s incurred in rescuing the banks are extracted from ordinary people. These relentless attacks can’t be allowed to continue.

Detailed plans of action and support are needed to occupy and defend all places of work at the first suggestion that they may be slimmed down or closed. Empty houses, like the brand new ghost estates in Ireland, should be taken over and occupied by homeless families and individuals. Communities in Wales, England, Scotland and Ireland have to unite in People’s Assemblies and start the struggle to terminate a system that heaps misery upon misery on the backs of ordinary people.


Gerry Gold
Economics editor

Banks a millstone round society's neck

Nine million people in the UK don’t have access to credit from banks, so have no choice but to use rip-off lenders. The cost of a £100 loan with a company such as Provident Financial can be £49.50 – nearly 50% of the amount borrowed, or an APR of 545.2%.

A loan from a payday lender costs even more; to borrow £100, lenders charge £25 for one month – an annual percentage rate of nearly 1,300%. These lenders charge whatever they want – the sky is the limit, according to a new report from the New Economics Foundation (NEF) launched today.

Two thousand people from more than 150 civil society organisations will gather at the Barbican Centre in the City of London this evening to call for a cap on interest rates and the extension of the London “living wage” (a paltry £7.60 an hour). Concerned at the impact of the financial crisis on ordinary people, the capital’s largest civic alliance is calling for the measures in order to “soften the impact” of the financial crisis.

Among those responding to the five-point call by London Citizens will be politicians from the main parties (Stephen Timms, New Labour's Financial Secretary to the Treasury, Greg Hands, Tory Shadow Treasury Minister, Vince Cable, Lib Dems, Shadow Chancellor of the Exchequer), representatives of leading financiers (the British Bankers’ Association, the Corporation of London, Barclays, KPMG) and bodies such as Fair Finance and moneysavingexpert.com.

The NEF study by Veronika Thiel reveals that three million UK households pay hundreds of thousands to “legal loan sharks” because of lack of access to credit from banks. London Citizens and NEF argue that the UK should follow the example of major European countries and introduce a 20% cap on the cost of lending by financial institutions, thus making borrowing at interest rates of 50% or 500% illegal.

“Despite historically low interest rates and a massive taxpayer bailout of the banks, ordinary people across London have been forced into the hands of legal loan sharks in order to gain access to credit,” says Paul Regan, London Citizens trustee. “It’s time to restore responsibility.”

When was this golden age of “responsibility” to which we should return, you may ask? Forget about loans sharks for a moment, who have existed since time immemorial. Mainstream bankers do not hesitate to repossess homeowners behind with their mortgages, refuse small businesses vital bridging loans, impose harsh penalties on those who stray into overdraft territory, sack their staff, speculate with other people’s money and generally act as a millstone around society’s neck.

The state’s “responsibility” is to the bankers and whatever cosmetic changes may be promised in relation to loan sharks, that won’t change. In fact, it’s about to get a whole lot worse as politicians of all parties busy themselves preparing plans for an historically unprecedented assault on public expenditure.

Only hours before the London meeting more evidence of New Labour’s real priorities was revealed. One year ago, at the direst moment of the financial meltdown they approved £61.6bn in emergency funds to the Royal Bank of Scotland and HBOS. The banks and the authorities decided to keep the operation secret. Alistair Darling, chancellor, said he had shared the Bank’s assessment that disclosing details of the lending to the two banks “would seriously jeopardise the financial stability of the system as a whole”. There's clearly no lack of credit for the bankers.

London Citizens are well meaning in their bid to curb the loan sharks. But the system is broken and now is the time to ask the bigger questions: What exactly is the capitalist financial system for? What benefits, if any, does it bring to the majority of people? Why should it be bailed out? Why not close it down and start again on the basis of mutually-owned and run banks that serve society?

Gerry Gold

Economics editor