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‘We can’t cut Wonga links’ says South Tyneside Council boss

Wonga advert pensioners

Wonga advert pensioners

A SOUTH Tyneside Council leader has denied double standards after the authority launched a crusade against payday lenders.

At a meeting of the full council last week, a motion was passed to introduce a series of measures against high interest lenders.

Action includes blocking access to lenders’ websites from council computers, working with partners to stop the promotion of such firms and to lobby for an extension to planning and licensing powers to prevent them locating in South Tyneside.

But one of the motion’s signataries, Coun Allan West, has now been forced to defend the move after it emerged the authority, along with the four other Tyne and Wear councils, pays into a pension fund which has £233,000 invested in Wonga shares.

Today Coun West, the council’s lead member for adult social care and support services, said legal regulations prevent the authority, which administers the fund, from cutting its “indirect” ties with the payday lender.

He said: “We are raising the issue of payday lending because it is the right thing to do.

“At times of financial pressure, it can feel like payday lenders are the only option, but their extortionate rates can trap people in a vicious circle of increasing debt and interest payments.

“The council administers the Tyne and Wear Pension Fund on behalf of 140 different organisations and we are bound by some very clear legal restrictions as to how the fund is allowed to operate.

“Case law and local government pension scheme regulations specifically require the fund to seek the best possible return on its investments and only allow us to consider social and ethical issues when they have a financial impact.

“The Pension Fund has no direct investments in payday lenders, but does have a very small indirect holding via Pooled Investment Vehicles as part of its global private equity programme.

“This is similar to a private individual investing in a unit trust and having very limited influence on how those investments are made.

“These indirect holdings represent a tiny proportion of the fund’s investments – about 0.005 per cent of its total value, which currently stands at £5.6bn.

“We are very keen to invest as ethically as possible, but the pension fund issue is extremely complex, and something that all local government pension funds are grappling with on a national level.

“There is a lot we can do on a local level to make a difference and ensure that people have an alternative. We have recently reorganised our welfare rights service to ensure it can help more people with financial problems, and The Bridges Community Bank in South Shields is a non-profit service that offers far lower rates.

“There are also encouraging signs that the new Financial Conduct Authority is ready to cap the cost of loans and provide increased protection for vulnerable borrowers.

“In the long term these things will either encourage payday lenders to improve their practices or it will impact on their profits, which in turn would make it easier for pension funds to invest elsewhere while staying within the law.”

n Anyone who has financial problems or concerns about the Government’s changes to the welfare system should contact the council’s welfare rights service on 424 6040.

Twitter: @shieldsgazpaul

 

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