Comment: Welby deserves credit for taking on lenders

FIRST it was the banks, then Conservative ministers. Now Justin Welby, Archbishop of Canterbury, is aiming his ire at the payday lenders.

Terry Murden. Picture: TSPL

The Church of England primate says he wants to put Wonga and other short-term money lenders out of business. Such fighting talk has pushed him and the church to the top of the headlines, but Welby is not simply looking to grab some cheap publicity. He is putting the church in the frontline of the battle to help those in financial need.

His plan is to use the church to build up Britain’s network of credit unions. The church will not provide money; instead it will offer its facilities.

Already the Department for Business, Innovation and Skills is supporting the credit union movement with £35 million, but the intervention of the church has given extra spice to the debate over the morality of lending at the bottom end of the market.

Payday lenders are accused of charging interest rates as high as 5,000 per cent, although they claim these are annualised rates and that most people repay loans within days or weeks.

Even so, Welby and his supporters believe credit unions – popular in other countries such as Ireland and the US – are a preferable means of supplying small loans with interest rates that are competitive with the banks. He does not want more legislation, preferring instead to win the battle through competition. This process of mending the lending industry can count on the support of numerous organisations including charities, housing associations, universities and social enterprise organisations including co-operatives.

Welby. a former oil industry executive, is no stranger to controversy. He was a member of the Parliamentary Commission on Banking Standards and did not resist the opportunity to speak out. Last month he urged the banks to act for the benefit of the country. He has also attacked government ministers for dividing the nation into “scroungers and strivers”. Sceptics question Welby’s ability to fulfil his promise to Wonga chief executive Errol Damelin, but few should doubt his determination or the power of the church when it is galvanised around an issue.

More evidence that Britain is on the mend

The consensus response to the latest GDP figures was that the economy appears to be on the mend. There was also broad agreement that second-quarter growth of 0.6 per cent is more of a step in the right direction rather than a guarantee that the recovery has taken permanent hold.

The markets were unimpressed and the FTSE 100 fell, though much of the fall was attributed to disappointment with a series of results from some big corporates.

Growth may be tepid but this is still a fairly strong reading and encouragingly all four major sectors are advancing for the first time since the third quarter of 2011.

The rate of growth is likely to force the Bank of England to resist any temptation to start the money presses again next month. Greater focus will now be placed on the medium to long-term forecasts on interest rates. Not so long ago there was talk of a zero or even negative rate. Now it looks odds-on that the next move on basic rate will be upwards.

All the more reason to welcome new governor Mark Carney’s “forward guidance” which will be introduced next month, providing markets with a longer-term outlook.