Money works

In his 2014 local government manifesto Sir Robin Wales promised to address the problem residents face from the high cost of credit and rip-off pay-day loans by setting up a council-run alternative: 

Labour will set up a one stop shop – Money Works – which will provide a range of support to responsible residents including:

• Pay day loans – at fair rates
• Access to loans for white goods – at fair rates
• A life changing fund which provides loans when people have a realistic and sensible idea which could change their lives – at fair rates
• Access to low cost home furnishings
• Crisis loans
• Access to credit to clear loans in certain instances
• Support, guidance and loans to help you with your energy bills.

The basis of this one-stop shop will be that residents will only be able to access loans if they are responsible. Any failure to repay the money owed will mean they can never get any support again for Money Works.

On the face of it, that sounds like a good idea – though, given that Sir Robin thinks 80% of London market rents are ‘affordable’, quite what his idea of ‘fair rates’ might be is anyone’s guess.

But it’s actually completely redundant – an alternative source of low cost affordable finance for residents already exists – Newham Credit Union:

NewCred is a community based credit union. It is a not-for-profit organisation owned and run by its members. As part of a worldwide credit union movement it provides financial services to the people of Newham. NewCred strengthens social networks and contributes to the local economy.


NewCred aims to be the primary provider of low cost affordable financial services in Newham. [emphasis added]

Why would the mayor want to go to the trouble and expense of setting up and then managing an in-house operation rather than simply point residents to NewCred? Given that credit unions are cooperatives, owned and run by their members, this would be a good way for Sir Robin to help build the more self-reliant, resilient community he talks about.

And supporting NewCred would fit in with Labour policy nationally. Ed Miliband has promised his government will impose a levy on the profits of payday lenders that would be used directly to fund the expansion of credit unions.

So why not do it? I asked some of the candidates – now councillors – before the election and the answer that came back was a “concern about scale.”

But the council could help NewCred overcome that and make it a genuine local alternative to the likes of Wonga. It would take a bit of investment. NewCred’s office’s on Romford Road are not exactly prominent, so retail store fronts in, say, Stratford shopping centre and East Ham high street would be a huge boost. Newham has ready access to exactly that kind of commercial property, which it could lease at favourable rates.

And the council could become a depositor – if Newham can put £7 million into risky Icelandic banks, why not the rock-solid local credit union?

Then there’s advertising and promotion. Perhaps Sir Robin could be persuaded to have his photo taken at NewCred’s offices opening his own savings account and published in the Newham Mag. Stories could be placed in the Recorder. I know he’s normally a bit reticent about that sort of thing, but he could be persuaded for a good cause!

I suspect though that the real objection to building up NewCred is one of control. For all his talk of fostering independence and building resilience, Sir Robin wants everything to come from Building 1000. Even your white goods and home furnishings.