Justin Welby is a clever man. His comments about payday loan companies in Total Politics have managed to please both the left and right, which is no mean feat on such a controversial issue. How has he managed to do it? Well, the Archbishop has identified a social problem, of people accessing high-cost credit that they can’t always afford to repay, and offered an intelligent solution, rather than that offered by politicians suffering from dosomethingitis, which is normally to ban stuff they don’t like.
Welby clearly doesn’t like payday loan companies. They do charge high rates of APR, but only on short-term loans, which makes Wonga’s 5,853 per cent APR look a lot worse than it is because the loan isn’t taken out for the year. But debt advice charities worry that many of those who take out the loans cannot pay them back: 28 per cent of loans are rolled over beyond their payback date at least once, according to the OFT. They might be easy to take out, but they aren’t always a good thing for the people who need that cash.
But instead of trying to use the law to ban payday loan companies (when illegal loan sharks already cause a huge amount of misery), Welby wants to use the market. He tells Total Politics that his plan is to compete with Wonga by offering an alternative.
‘A plan for the church to develop credit unions has been floated, with Welby proud that the church is “putting our money where our mouth is” in developing an alternative to payday money-lenders. The plan, he says, is to create “credit unions that are both engaged in their communities and are much more professional – and people have got to know about them.”
‘It will, he adds, be a “decade-long process”, but Welby is ready for the battle with the payday giants. “I’ve met the head of Wonga and I’ve had a very good conversation and I said to him quite bluntly we’re not in the business of trying to legislate you out of existence, we’re trying to compete you out of existence.” He flashes that smile again. “He’s a businessman; he took that well.”’
Credit unions aren’t perfect, it’s true: James Quinn makes some thoughtful points about them here. But the Church of England’s latest plan to offer an alternative to Wonga is an excellent one because it shows an understanding of the value of competition, rather than a belief that state intervention is always the best solution. I wrote about the need for Welby to shift the church’s thinking on the latter in the Telegraph recently. His Total Politics interview shows just how capable the Archbishop is of changing the debate in his own organisation. But it also shows that he can take both sides of the political debate along with him. James recently reported that both Labour and the Tories were thrilled when Welby was selected as Archbishop as they both saw him as someone who could help move public debate in their direction. Today George Osborne, Vince Cable and Stella Creasy have welcomed Welby’s comments, which surely makes him a magician as well as an Archbishop.