The Labour Party has pledged to cap credit card fees for three million people in dire financial straits to ensure no-one pays back more than twice what they borrowed.
In his keynote speech at the Labour Party conference, Shadow Chancellor John McDonnell will urge the Government to introduce a cap on interest payments on credit cards similar to the ceiling placed on payday loans.
Lambasting “Tory economic failure” that has created a “perfect storm” of falling wages and rising debt, McDonnell will point to people in persistent debt having on average £3,464 to pay off, meaning the total amount outstanding on these accounts is around £14 billion.
Labour says struggling credit card customers pay around £2.50 in interest and charges for every £1 borrowed. If the Government does not adopt the recommendation of the Financial Conduct Authority, Labour would introduce the “McDonnell amendment” to ensure it happens if the party sweeps to power.
McDonnell will say:
“The last seven years of Tory economic failure has created the perfect storm, as wages have fallen behind, more and more families are being pushed deeper into debt.
“Household debt in this country stands at the record level of over £1.8 trillion.
“We have seen with pay day loans; some companies were making massive profits from people’s financial difficulties.
“Under pressure, the government has been forced to cap interest payments on payday loans.
“But more than 3 million credit card holders are trapped by their debt. They’ve paid more in interest charges and fees than their original borrowing.
“The Financial Conduct Authority has argued for action to be taken on credit card debt as on pay day loans.
“I am calling upon the Government to act now apply the same rules on payday loans to credit card debt.
“It means that no-one will ever pay more in interest than their original loan.
“If the Tories refuse to act, I can announce today that the next Labour government will amend the law. Call it the McDonnell amendment.”
McDonnell will also warn of the need to prepare for a “fourth industrial revolution”, and take a jab at Tory grassroots favourite, Jacob Rees-Mogg.
He will say: “Huge changes are underway in our society and economy.
“Technological change is accelerating: This year Chinese scientists used quantum mechanics to teleport data to a satellite.
“But we can match that: we’ve got a government full of people teleported from the 18th century.
“While the Tories remain stuck in the language and values of the Victorian era we are determined that Britain embraces the possibilities of technological change – scary though they may be.
“By the middle of this century it is possible that up to half of all the jobs we do now could be automated away.”
Mogg, who over the summer was touted as a future Conservative Party leader, has been dubbed “the Member of Parliament for the 18th century”.
To address the change, McDonnell will propose a New Institutional Framework: a new board where the Chancellor, Business Secretary, Governor of the Bank of England and the new National Investment Bank “drive funding into the technologies of the fourth industrial revolution” and “out of the hands of the speculators”.
In response, Chief Secretary to the Treasury Liz Truss MP said: “We set up the Financial Conduct Authority which is ensuring credit card firms do more to help their customers clear debt and, from January, rip-off credit card charges will be outlawed.
“The best way to help people with their personal finances is with our balanced approach to the economy, which is creating more well paid jobs and cutting taxes for working people.
“Labour take it too far and would damage our economy, meaning fewer jobs, higher taxes and more debt. Working people would pay the price, just like they did last time.”