When Ed Miliband called for a freeze on energy prices, the Tories denounced it as “unworkable” interference in the market, says The Daily Telegraph.
Yet now, after weeks of controversy over the high charges imposed by payday loan companies – and opposition from the Treasury for caps on credit – Chancellor George Osborne has ordered the new consumer regulator, the Financial Conduct Authority (FCA), to restrict the cost of loans.
This looks “remarkably like an attempt to replicate the sort of political stunt for which Mr Miliband was criticised”.
It is hard not to conclude that this is a “political” move, agrees The Times, to show that the government understands people are struggling. But is it the right solution? Much depends on where the cap is set, but it could drive “even responsible businesses to the wall”.
Citing large annual rates of interest doesn’t make sense for short-term loans. High rates are in any case inevitable with loans that have a large risk of default. And there is a genuine market for payday loans: people need money to tide them over in emergencies.
If capping costs “makes a business model unviable”, this demand won’t vanish – it may drive people into the arms of more unscrupulous loan sharks.
“Every problem has a good and a bad solution” and “statist, top-down or downright socialist answers should not be acceptable to this government”, says Allister Heath in City AM.
“It would make far more sense to focus on pro-market solutions” based on competition and tax cuts. Sometimes I wonder who is running Britain: whenever the opposition starts to campaign on any issue with cost of living undertones, “the Coalition eventually caves in.”
Osborne’s intervention is “politically opportunistic”, says the FT. The Treasury has not specified a limit on borrowing costs and says it expects an evidence-based approach to designing the cap. The FCA’s instructions are “so vague as to leave open the possibility of a cap so low that payday lenders disappear entirely, or so high that they carry on exactly as before”.
Osborne can “claim credit for taking on pariah lenders while sidestepping dissent over the specifics”. This isn’t good enough. “Many people think the government should take a large role in running the economy to eliminate perceived injustices. Much depends on the outcome of this debate. The Conservatives should make clear where they stand.”