Kezia Dugdale: Payday loan deal won’t balance books

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More and more Scots are turning to payday lenders to cover the costs for the basics: food, the gas bill, the rent.

Payday lenders make their millions of profit out of the financial misery of Scots every year, whilst also sucking money from our economy, reducing tax receipts and harming local services.

Sadly, by subsidising the rent of one of the major market leaders, Edinburgh City Council has given payday lenders its tacit support to cause such hardship.

I’ve campaigned hard against payday loan companies for years now, building a campaign called Debtbusters which has involved thousands of people across the country.

To see my own council administration – full of hard-working people devoted to tackling poverty and inequality – make such a short-sighted decision is truly disappointing.

For many people, it’s the hypocrisy which will anger the most. Why councillors would speak out against payday lenders one day and then cut them a bargain basement deal on rent the next is hard to stomach.

But, for me, the most infuriating aspect of this story is how the council will end up out of pocket in the long run by propping up companies such as the Cheque Centre.

You don’t have to look too far to see how it could have been handled differently. The Labour council in Glasgow has some of the most progressive anti-payday loan policy in the whole of the United Kingdom.

It recognised the damage these companies were doing to their communities early on, commissioned a group of experts to come up with some ideas on how to take the companies on and implemented every single recommendation.

Whilst Edinburgh slashes rents for payday loan companies Glasgow is slashing the business costs of credit unions so they can set up on the high street and drive payday loan shops out of business.

There’s an endless list of money advice and welfare organisations willing to tell us how bad payday loan debt is getting.

I’ve spent some time in the call centres of national debt charities, listening to folk call in wondering how they are going to make all their payments and put food on the table.

The vast majority of which were people in full-time, low-paid work. Most people’s pay packets have been frozen for a few years now whilst the cost of living has been rising.

Around 38 per cent of people taking out payday loans last year used them to pay a household bill – gas, electricity or rent.

For too many families there’s just too much month left as their money runs out and people increasingly have to borrow to make ends meet.

Debts pile up and spiral out of control. Bills that were once late to be paid stop being paid at all – and council tax and rent are at the top of the list.

The more debt the citizens of Edinburgh get into, the harder it is going to be for the council to get their own books to balance.

A bit like a payday loan itself, cutting the Cheque Centre a deal in the short term might have provided some short-term gain, but the pain will be felt long in to the future.

• Kezia Dugdale is Labour MSP for Lothian