Three new reports on partnership working between faith and local government.

Debt charities sceptical about Labour plans to tax payday lenders

Debt charities have condemned a plan by Labour to impose new taxes on payday lenders, suggesting that these additional costs will only be passed on to consumers.

Last week, Labour leader Ed Miliband pledged to introduce a new levy on payday lenders in order to double the existing £13m that the current government has allocated to boost credit unions.

The Money Advice Trust, which operates National Debtline, said: “Extra taxes on lenders get passed on to consumers. More research needs to be done on how payday lenders will respond to that.”

The Trust also expressed scepticism about the benefits that credit unions provide to those in debt.

It believes that additional credit does not solve the problems faced by those who get involved with payday lenders and credit unions.

A spokesman said: “If the government is to fund credit unions through payday lenders, then the idea is to have more people using credit unions instead of payday lenders.

“But a lot of people going to payday lenders to fund financial problems should not be going into more credit. We do not believe in solving credit problems with more credit.”

Citizens Advice: banks should offer micro-loans

Citizens Advice believes the answer lies instead with banks offering personal micro-loans.

Chief executive Gillian Guy said: “The proliferation of payday loans is a symptom of the squeeze on living standards. There is a clear demand for short-term credit, and while boosting credit union services could offer some help in the long term, consumers need more choice now.  

“High-street banks have been let off the hook by the lack of pressure on them to enter the short-term credit market. Banks need to offer a responsible alternative to payday loans like an affordable personal micro-loan.”

Payday lenders' body hails credit unions

However Russell Hamblin-Boone, chief executive of the Consumer Finance Association, which represents payday lenders operating in the UK, defended credit unions as a valid option for those in longer-term financial difficulty.

He said: “We fully support the important role that credit unions play in ensuring that people have a choice of financial products to meet their needs, but they provide very different services to our members. Payday loans are small-sum, short-term loans and should not be used to manage long-term debt.”

Back in July, the Church of England vowed to take on payday lenders when the Archbishop of Canterbury promised to allow credit unions to set up on church property. This was followed by the embarrassing announcement that the Church had indirectly invested in payday leader Wonga.

This article was taken from Civil Society – http://www.civilsociety.co.uk/finance/news/content/16261/