Budget 2012

Budget decisions are moral decisions; the Government’s taxation and spending choices have a big impact on inequality and poverty.

Some principles from my Christian tradition suggest to me that we should have put consideration of the most vulnerable, marginalised and poorest as our priority.  How the rich and powerful, affluent and comfortable care for and show love to a neighbour is probably the hallmark of a society based on a Christian ethos.  Archbishop Desmond Tutu once said “If you are neutral in situations of injustice, you have chosen the side of the oppressor. If an elephant has its foot on the tail of a mouse and you say that you are neutral, the mouse will not appreciate your neutrality.” 

Budget decisions are moral decisions too when it comes to the fair sharing of the burden of paying for the Government’s tax and spending decisions.  Those blessed by affluence have a responsibility and a moral obligation to protect and support those who are in need. 

Fundamental to all these considerations has to be the question what is the purpose of economic activity?  A Church of Scotland Commission is soon to publish a new report into just this question which will highlight the need for our economy to reduce inequality, tackle poverty, ensure sustainability (both in terms of the environment but also how individuals and communities are respected in economic life) and in promoting mutuality (that is, increasing the trust and support we can offer to one another, for instance through the growth of credit unions and co-operatives).

So how does today’s budget relate to these principles for economic activity?  I’m afraid I am not in a position to offer an immediate response or a knee-jerk comment; the realm of fiscal planning, monetary policy and growth forecasts are not part of my day-to-day work as a parish minister in Gorbals.  The proof of the pudding, as they say, will be in the eating, and only time will tell if this budget and this Government will succeed in reducing inequality or increasing it, in tackling poverty or not.

 If it is difficult to make definitive statements about the detail of budgetary policy, I think it is possible to make some general points:

Tax avoidance and evasion are, in the words of George Osborne, “morally repugnant”.  I am interested that the Government will now consult on legislating for a General Anti-Avoidance Rule as recommended by the Aaronson Report.  The Church of Scotland has supported Christian Aid’s Trace the Tax campaign and the General Assembly this May will be invited to sign up to Church Action on Poverty’s Close the Gap initiative, both of which target tax dodging by wealthy individuals and institutions.

Tax rates need to be set in a way so the wealthiest, with the broadest shoulders bear the largest burden.  We must recognise that our social security system, which is one of the largest parts of Government expenditure can only be afforded thanks to the contributions in tax of rich wealth-creators.  Tax must be seen as a public good, rather like volunteering or contributing to a charity.  It is through tax that the society we want, with its safety nets and protections, is maintained and enhanced.  We need a culture shift, from complaining about how much tax we have to pay, to thinking about what do we as a society want to create and how will we pay for it, and what is my fair share of a social investment contribution?  An increase in personal tax allowance will benefit lower-paid workers.  A corresponding cut in the top rate of tax will leave many people asking questions about what is really fair.

It is widely understood that the driving principle of the UK Coalition Government is to reduce the size of the deficit so that in five or so years time the size of Britain’s debt will stop increasing.  However it is important that the cuts to spending do not fall heavily on those who are already on the edge of society.  Hearing an announcement of a further £10billion of cuts to the welfare budget by 2015/16, on the top of already deep cuts and the dramatic changes expected from the Welfare Reform Act means that anti-poverty campaigners need to remain determined and committed to service as well as political engagement to try to ensure the best deal for those who need help most.

Scotland’s Constitutional Future

Last week I was involved in the submission of a response to the UK Government’s consultation on Scotland’s Constitutional future.

The debate around the whole issue of constitutional change is an important and interesting one. However any change must bring about it social justice benefits through reducing poverty and improving health and education for the people of Scotland.

This issue is not about how many questions there are but about self-determination and the right of the electorate of Scotland to vote for or against any constitutional change.

Neither independence for Scotland, not increased devolution, nor the status quo are prizes in themselves. The real victory lies in the alleviation of poverty, the reduction of ill-health and forgiveness in the criminal justice system and society. It should also be about a cultural change that leads to building better neighbourhoods, the removal of prejudice that feeds things like sectarianism and building a society that welcomes strangers without qualification.

Whatever the process it must be handled by an independent body with experience of handling referenda and there must be sufficient time for key issues to be fully debated.

Whatever your political views it is important that we all take the time to carefully consider and discuss with each other what kind of Scotland we would like to live in and make our decisions based on that and not be influenced by political pressure. If we get this wrong we cannot go back to the ballot box in four years time and try to fix it. We must get this right first time - therefore any timetable must allow sufficient time for appropriate debate by all.

Pay Day Loans

A Common Select Committee yesterday discussed the issue of “pay day loans” and the high interest rate charges that are applied.

The use of Pay day loans is indeed a time-bomb that needs to be addressed. There are also many internet loans now available which offer short-term loans of sums up to £1,000 per month. These companies are charging extortionate interest rates. Octopus Loans quotes one of the lowest APRs which is 1737%, Quick Quid quotes an average APR as being 2222.46% on a loan of only £50 and Wonga’s homepage declares a “representative APR as being 4214%. Although many of these companies say that the only lend to those with existing credit histories, the trap is that regular payers can increase what they can borrow, which can lead to serious problems. Of course, payday loans are supposed to be for emergencies. The problem is that for many people, topping up their incomes at the end of the month is not an occasional occurrence, but a way of life.

Surely what we need is a legal solution. The law has to be changed to address organisations that charge these extortionate credit rates and ensure that there is a ceiling on the amount that can be loaned to individuals. In an economic downturn, there will always be a market for loans and easy forms of quick cash. Payday loan websites and shops are just part of that phenomenon, but they are able to exploit a gap in Britain’s consumer protection laws: we have no usury laws.

Many other countries have a cap on interest rates. In Germany, lenders cannot charge more than 20% interest a year. Italy brought in a legal definition of usury in 1996. The US states all set their own caps on interest rates, some higher than others, and a Consumer Financial Protection Agency was created last year to supervise this at the national level. Payday loan interest rates are capped at 60% in Canada.

There has been political pressure for a similar cap in Britain, led by the End Legal Loan Sharking campaign and others. We as a church have recently been interested in the work that Dr Stella Creasy MP has been doing around these issues. A cap isn’t a straightforward solution however. An investigation by the Office of Fair Trading concluded that it could encourage lenders to hide the charges in fees and fines instead, and make things less transparent for borrowers. It could also drive desperate borrowers to illegal lenders.

I think there’s a place for a cap if it’s set at the right level, but it needs to be complemented by other measures. Perhaps payday loan companies should be taxed in proportion to their average rate of interest, and there should be controls on the ways they can advertise.

In some ways it is too easy to look to regulating the loan companies, when the bigger issue is the culture of debt that creates the market for their services in the first place. There’s a need for debt counselling, free financial advice, and education on budgeting.

And that brings us up against an even bigger problem – personal debt is great for the economy and is an easy way to prop up GDP. The government will hesitate to do anything to discourage it, no matter how predatory it becomes.

This is an issue we have to address and action should be taken to reduce the increasing debt the country faces. A good starting point would be to have every company and organisation that can afford it working towards paying all employees at least the Living Wage.

We can all make a difference

This is Fairtrade Fortnight - a good opportunity to focus our thoughts on what we can all do to help people trying to scrape a living as farmers in poor parts of the world.

Take a Step’ for Fairtrade is this year’s campaign and they are calling on all of us to engage with the Fairtrade vision of an even bigger movement for positive change on unfair trade. If you already buy some Fairtrade products you might want to think about adding more to your shopping list. Despite global warming you cannot buy Scottish bananas! So why not ‘take a step’ and choose bananas with the Fairtrade mark?

Some are cynical, questioning whether it really makes any difference. Yes it does – buyers must pay at least the Fairtrade minimum price to the producer. This covers the costs of sustainable production and is a safety net for farmers when market prices fall. So the poorest farmers and workers throughout the world benefit from us choosing Fairtrade when we shop.

Fairtrade encompasses almost all of Africa, Latin America, the Caribbean, Oceania and the poorest countries in Asia. But, did you know that Fairtrade applies to Scottish producers and farmers too? So support them and reduce carbon emissions from transport by buying local Fairtrade products whenever you can.

‘Take a step’ and make a difference. Look for the Fairtrade logo on products. It couldn’t be easier.

There is a wide selection of products available these days and it is your guarantee that disadvantaged farmers and workers around the world are getting a better deal.