Sunday, 21 December 2008

'Interesting times' - Labour's crisis loan conundrem

. It was reported earlier in the day that government would seek to start charging interest on emergency loans of upto 27%. This wouldn't make such loans very competitive and to be fair seems to have been moved to the back-burner after a glut of criticism. Kitty Ussher, the work and pensions minister, told The Independent that the Government was "absolutely not" proposing charging interest on loans from the social fund:

"She said that ministers were considering involving credit unions in the distribution of the loans. But while credit unions are permitted to charge interest of up to 2% a month on their own loans, they would not be allowed to do the same with Government products."

While these organisations are obviously worthy and do provide a great service I am a bit weary of these proposals; good old-fashioned Labour outsourcing does not have a distinguished past. Think the SAT's debacle and the general chaos that such methods have caused in the examinations system. Furthermore, charging interest on these loans is clearly unacceptable and as Vince Cable said totally self-defeating.

However, it does show that one of the key problems that is going to be vexing this government in the months to come is how to recoup it's borrowing. Since we already know the new 45p tax-band are going recoup close to zero the real question is how; maybe the hike in NIC's was an early indicator that 'fairness' isn't going to be top of this governments list of priorities when considering such things. This does give us something of a opportunity to eat into Labour's 'core vote' with our agenda for reforming the tax system to generate more revenue.

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