CHANGING TRACK
WHAT THE NEW GOVERNMENT MEANS FOR THE INDUSTRY

CCTA

Following Boris Johnson’s somewhat forced resignation in July, a new leadership contest for the Conservative party took place over the summer. Due to the current political system and the ways in which leaders are elected, this inevitably meant a change of Prime Minster and a new Government.

Liz Truss MP, winner of the leadership contest became Prime Minister shortly after. Truss, viewed as the favourite for most of the campaign, was elected as an MP in 2010 and has served as part of the Cabinet since 2014. Most recently holding the role of Foreign Secretary.

Truss, recognised as being on the right of the Conservative Party, campaigned on a platform of the need to deliver economic growth and tax cuts. We have already started to see this action being taken as part of the mini budget at the end of September, with the planned rise in National Insurance being reversed, and a series of tax cuts.

A change in policy direction has also been coupled with changes to other major roles in government. Very few remain from the Johnson administration. This has been seen at HM Treasury with the appointment of Kwasi Kwarteng as Chancellor and a new ministerial team. The structure of the team has also been amended. Previously it was the Economic Secretary that held responsibility for financial services regulation, the FCA and access to affordable credit. These have now become the responsibility of the Financial Secretary. Andrew Griffith MP was appointed to this position on the 8th of September.

Griffith is a relatively new MP, elected in 2019. Prior to this he worked in private business for most of his career but not much is known yet about his stance on consumer credit. We have written to the new Minster to introduce the CCTA and the issues currently facing the alternative lending market. Aside from this we continue to have regular meetings with policy officials at HM Treasury as these remain in post despite changes in government.

Other government departments have also seen changes. At the time of writing, we are waiting for some responsibilities to filter through on issues we are concerned about such as small businesses and financial inclusion. These should become clear in the coming weeks.
Access to credit remains central to our messaging, particularly the role for commercial credit within the market. In recent times we have tried to draw political attention to the sharp reduction in the supply of regulated credit for consumers who are unable to access the ‘prime’ credit market.

A report from the Centre for Social Justice (CSJ) in March found that over 1.1 million people are now having to use illegal lenders in England (up from the previous estimate of 300K). We believe there are now more people using loan sharks than regulated high-cost credit, something the Government should be concerned about.

In the last three years the FCA has presided over the departure of more than 100 non-bank lenders serving these consumers; and in the same period has not approved the entry into the marketplace of a single short-term, home-collected or guarantor lender. This is another area we will be looking to raise with the new Government as we believe the regulator has a duty to ensure a competitive market, as well as delivering the appropriate levels of customer protection.

We have long had concerns that too much emphasis is being put on the ‘alternatives’ to commercial credit, such as Credit Unions and Community Development Finance Institutions (CDFIs). Previous ministers clearly saw this as a solution to meet demand. But this cannot be achieved by these institutions alone, despite significant investment of public money in recent times. It remains to be seen whether a more business-minded government will look to businesses to help fill the gap rather than relying on public money.

It is our view that a mixed economy of not-for-profit and commercial lenders is needed to help families access credit to manage their finances. Otherwise, illegal lending will flourish with dire consequences for millions of non-prime borrowers. These are the core messages that will form part of our advocacy work with the new Government in the coming months. We will keep members informed on any developments.