Tuesday, 6 November 2012

Bradford and Provident: Good news/bad news

I have just read an article in Bradford's local newspaper, The Telegraph & Argus with the headline: "250 new jobs as loans giant Provident Financial expands"


I must confess to experiencing mixed emotions about this news. On the one hand, in August 2012 there were 20,056 Jobseekers Allowance claimants in Bradford. This rate is higher than the Yorkshire & Humber regional and UK averages. Bradford's unemployment rate is c.10.9 per cent. So any news about an increase in employment opportunities in the city must be welcome, right? Apart from the fantastic museums (Bolling Hall, the Industrial Museum, the National Media Museum) and the glorious Alhambra Theatre the city is a rather depressing place to visit and certainly enjoys little in the way of retail opportunities. Manufacturing has long gone and Bradford's status as the world capital of the wool trade - Worstedopolis - is an historical footnote (its legacy can still be found in the wonderful old Wool Exchange that now houses what I think is the most delightful and charming branch of the Waterstones bookshop chain ). Hence the expansion of service industries, including finance, should be appreciated by such a tired old city.

However, Provident's growth in Bradford makes me nervous because they are providing minimum effort, high-cost loans. The operations of such firms are well documented, most recently in a BBC Panorama programme. In his wonderful but disturbing 2011 book, The Road to Wigan Pier Revisited (http://www.amazon.co.uk/Road-Wigan-Pier-Revisited-The/dp/1908238011/ref=sr_1_2?ie=UTF8&qid=1352215364&sr=8-2Stephen) Stephen Armstrong charts the rise of the mainstream moneylenders and has this to say about Provident Financial:

"A £500 loan ... means paying back £910 at an APR of 272.2 per cent. People borrow for little things - food and kids' clothes, racking up debts for everyday items. Agents offer fresh loans a couple of weeks before old loans are paid off and - although technically they are not supposed to let loans stack up - are quite happy to run two or three loans side by side. They're pain on commission, after all. ...
   ... Provident's hugely successful financial results link two groups of people: the 2.4 million desperately poor who have to borrow short-term cash loans on their doorstep at enormous interest rates (a number slightly larger than the population of Paris or Toronto); and Provident's shareholders who, with corporation tax falling from 28 per cent to 26 per cent in April [2011], saw their earnings rise 16 per cent." 

(Armstrong spent a long time in Bradford and writes passionately about the problems which the city and its people face. The book is highly recommended as a worthy successor to George Orwell's masterpiece.)

Now, it is all too easy to say that Provident and other mainstream lenders (Armstrong discovered that Wonga.com has an APR of 4,124 per cent) are merely offering a convenient service. If there was no demand, there would be no supply.

However, I would argue that it is important to look at the reasons for demand in the first place. Why do we find it so acceptable to read statistics that in 21st Century Britain there are 2.4 million desperately poor? Again, I turn to Stephen Armstrong:

"According to the Organization for Economic Development (OECD), children in the UK have the lowest chance of escaping poverty out of twelve rich countries that were studied. In the UK 3.5 million children live in poverty - 1.6 million in severe poverty. Almost half the children in the UK with asthma come from the poorest 10 per cent of families. More than one million homes in the UK are currently classified as being 'unfit to live in'. These are all the deserving poor - in that they deserve better."

Making it easier for them to take out high-interest loans to meet short-term cash-flow problems is not a long-term solution. Poverty on such a scale is everybody's problem, everybody's responsibility. It is ultimately the responsibility of a government which should be spending, not cutting during a recession: public sector investment means people in work with money to spend.    

Moreover, the people who take out these loans are just as likely to be in  employment as on the dole, but their income is unable to keep up with their expenditure on necessities. Food and fuel account for the biggest proportion of expendtiure by poorer households (at a time when the prices of food and petrol have seen some of the biggest increases), while they also spend the most on high tarrif pre-paid gas and electicity meters and must depend on Hire Purchase (it is not known as 'The Never Never' for nothing) for basic household goods such as televisions and washing machines. As Armstrong notes, 'Item for item, its costs more to be poor'. Save the Children call this the 'poverty premium', meaning that the poorest families often pay the highest prices for food, gas and electricity. This is why it is so vital that Britain now goes beyond the minimum wage (which was one of the greatest acts introduced by the  Labour government since the welfare state and National Health Service) and adopts the Living Wage which will help to ensure that working families are able to maintain a decent standard of living. 

What is most ironic about this news in The Telegraph & Argus is that the Conservative Party enjoys, like Wilkins Micawber, lecturing us about the economy, and that balanced books and deficit reduction is the means to achieve financial bliss. Mrs Thatcher always claimed that she ran Britain like a household. And yet it is this government's policies that are increasing personal debt and forcing people into a situation where they must turn to money lenders for help. Perhaps I am missing the joke here.

I also force a nervous smile at the fact Provident's new location will be in the former Sunwin House department store building and which was recently the home of discount clothing store, TJ Hughes. It may expand into the adjacent building that currently houses the travel agent Thomas Cook which is due to close. Where major retailers once stood tall and proud (I have fond memories of visiting Santa's Grotto in Sunwin House in the 1970s) money lenders now make their home (the term "carpetbaggers" springs to mind.)  

Bradford does need jobs. It need investment. It needs some TLC. It needs to attract organisations that will make a valuable contribution to its economy and not encourage more personal debt. Money lenders are not providing real investment; they are preying on the vulnerable and weak, and making them even more vulnerable and weak. It is a sad reflection of the times when we are asked to rejoice when a high-interest money lender is expanding its operations in an already depressed city.             

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