Manifesto > Enterprise: Creating a future for all (Introduction) | A Strategy for Growth and Prosperity | Low, Simple and Fair Taxation | Cutting the cost of the state | Deregulation: Industry, Employment and Incomes | Finance and Credit | Agriculture, Forestry, Fisheries and Foods

Enterprise: Creating a future for all

The financial sector is at last starting to notice the consequences of its own actions.  The Northern Rock fiasco is but a small part of a much bigger picture.    If governments endlessly underwrite bad debts, the banks will can lend without risk.  We need to reform the financial services industry in order to make it behave responsibly and ensure that there is proper accounting for risk.

Irresponsible borrowing goes hand in hand with irresponsible lending. Although a loan can often play a key role in helping families to become homeowners or to grow a business, certain sectors of the finance industry have abused their unique position by allowing virtually unfettered access to credit. There is often a lack of honest competition and many are confused by a bewildering array of complex lending options. Household debt is fast becoming a major issue and stricter lending controls are inevitable. However, we must also help people who have over-borrowed to recover their situation.

The New Party will establish a debt remedial bureau to consolidate and professionally manage the debts of borrowers who get into trouble with loans and credit cards. The financial sector will operate the scheme by levying its members according to their share of defaults and all credit card providers and licensed money lenders will be required to subscribe to the bureau. Those on the scheme will be placed on a central register to prevent them obtaining further credit until such time as their situation is stabilised but they will pay only normal rates of interest. We will also introduce a cap on lending rates, similar to that employed in Germany, to deal with fringe lenders.

We will place stricter controls on lending especially on the under-25s and a deposit will normally be required. We will also make lenders responsible for establishing a client’s total indebtedness in determining whether a loan can be granted. Lenders who do not practise responsible lending will become liable for at least part of the debt in the event of a default.

The business sector has also suffered from banks withdrawing credit facilities with little notice. Banks will therefore be required to carry out a statutory process of consultation, before withdrawing borrowing facilities or calling in securities.

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