Published:

Joe Shalam is Policy Director at the Centre for Social Justice.

Politics has always been a game of nicknames. One need only look at the number of ‘Captain Hindsight’ references in Hansard to see that – ten already this year.

At PMQs last month, Sir Keir Starmer trieds a new one, branding Rishi Sunak ‘the loan shark Chancellor’ after his £9.1bn cost-of-living announcement. Watching on a year into the first major study of illegal moneylending in England in a decade, I couldn’t help but wince.

At the Centre for Social Justice (CSJ) we have known for a while, informed through the whispers of our regional network of local poverty-fighting charities, about the debts owed by their clients to suspicious ‘friends’ or shadowy local figures.

Shrouded in taboo – and the complex emotions felt by borrowers in discovering that the person they had turned to was, in fact, not a friend at all – hidden debt of this kind can cause untold misery to individuals, families, and sometimes entire communities.

But the scale of the problem of illegal money lending today is far worse than we had previously imagined. In a new report published this week, Swimming with Sharks, the CSJ reveals that there could be up to 1.08 million people currently borrowing from an illegal lender (commonly known as loan sharks) in England. While by its very nature it is difficult to produce high confidence estimates of the scale of hidden debt, this is over 700,000 more people than those identified in the last official study.

Digging through the largest sample of known victims of illegal lending compiled to date, it becomes clear that the stereotypical image of muscle-bound brutes patrolling estates with baseball bates rarely matches the reality.

There is, in fact, a vast gradient of perpetrator – from ostensibly benign members of the community who lend ‘on the side’ while pestering their ‘customers’ into shouldering more debt, to loan sharks embedded in organised crime groups and drug gangs.

Yet listening to the stories of victims we have been struck by the sinister psychological methods of coercion brought upon them by lenders of all types, 55 per cent of whom borrowers tragically considered friends. Children given selection boxes at Christmas as a display of the lender’s control. Explicit photos held as ‘securities’. Threats to destroy marriages by informing unsuspecting spouses of their ‘nasty secret’.

All the while, lenders are employing new methods to reach vulnerable people 24 hours a day via social media, one convicted loan shark even paying an ‘influencer’ to entice victims.

It also becomes clear looking at the data of known victims that, while no one is safe from exploitation, it is overwhelmingly the most disadvantaged among us who are affected. Two thirds of victims were already indebted and earning below £20,000. Savings were absent for all but one in ten.

With 45 per cent of victims using the cash for everyday expenses and household bills, the combination of mounting pressures on household budgets, low financial resilience, and increasingly limited credit options is liable to produce a perfect storm in which people are driven towards exploitation.

This week the Chancellor will announce further measures to buffer the squeeze on living standards. Using the additional income tax revenue collected last year to lift the threshold for National Insurance would benefit many lower earners, although Universal Credit (UC) should also be employed to funnel additional financial support directly to those most in need.

The dynamism built into UC should be used to uprate benefits by inflation more responsively in-year (and in line with future energy bill spikes). Cutting the maximum UC debt deduction claimants can receive and remitting old tax credit debts (caused by errors made during the Brown era) would also help those on the lowest incomes through the turbulence.

Fiscal measures, however, will only take us so far. We must urgently renew the fight against illegal money lending, appreciating its complexity as a social and cultural, as well as an economic, phenomenon. The Government has already made welcome commitments to address economic crime, but we propose a three-pronged attack to ensure that tackling illegal lending is at the forefront of this agenda.

First, we need to clamp down hard on lenders. Achieving this will be largely determined by the scope of the key statutory authority, the Illegal Money Lending Team England, to identify victims and prosecute suspects. The team has shown it can deliver on a limited budget, but it must be equipped now to scale up operations given the context we are in. Simultaneously, the Government should also use the newly inked Online Safety Bill to address the new frontier for illegal lending: social media.

Second, we must better protect the most vulnerable through a generational national awareness campaign of both the dangers and support available, stretching every sinew of debt advisers, councils, police, housing providers and work coaches to bring hidden debt to the surface.

Finally, we must provide the alternative. The Government should strip away the red tape stuck in place from the 1970s and liberate credit unions to become bigger and bolder, reaching thousands more of those at risk. We must also raise underlying levels of financial resilience in Britain by increasing the uptake of the excellent but under-utilised Help to Save scheme introduced by the Economic Secretary to the Treasury, John Glen.

While banter in the House of Commons should always remain fair game, illegal lending cannot. We must see it for the very real threat and danger it represents to our communities.

And with illegal lenders licking their lips at the desperation set to accompany the emerging cost of living crisis, we must act now to help the thousands in England who are swimming with sharks.