Unite calls on government to abandon economic programme as research shows people are borrowing money to get through to the end of the month
The third week of every month is rapidly turning into ‘Wonga Week’ as massive strains on household incomes push working people into the arms of payday lenders, according to a Unite survey.
More than 350,000 people took part in the survey, which reveals a debt disease spreading across the UK with more than eight out of ten (82%) of working people reporting that their wages cannot last the month, with 12% of that group turning to payday loan companies to tide them over.
The union also found that with workers reporting themselves to be £150 per month worse off in the year up to April’s budget, a staggering £2.7 billion spending hole could be opening up across the economy every year caused by the missing income of Unite’s members alone.
Unite is accusing the government of ‘gross irresponsibility’ as it presides over endemic private debt and the mass transfer of the earnings of working people away from their pockets to payday lenders. The union estimates that if a worker borrowed £200 per month from a pay day lender charging an interest rate of 4,200% APR, it will take them three working days in a month to pay it back.
Unite has been tracking working people’s journeys through the economic crisis. Its survey reveals troubling levels of debt as members report housing and food costs the chief strains on their shrinking incomes. Rising numbers are turning to ‘sub prime’ lenders, including Wonga, The Money Shop and Quick Quid, as the option to use savings or turn to family, friends or the banks for short-term loans run out. There are also worrying signs that those under 25 are struggling most with the numbers saying that they cannot manage on their wages doubling.
It also shows changing shopping patterns as working people cut back on ‘healthy’ food, eating out and eschew major retailers such as Tesco because they are considered too expensive.
Unite calculates that on interest rates of up to 4,200% annually, the average borrower is handing £66 per month in interest alone back to the company every month. If just one in twenty of the 20 million adults in the UK borrowed £200 every salary month, then an astonishing £66 million each month would be paid back in interest alone.
Unite general secretary Len McCluskey said: “This is the true cost of the banking crisis and this government’s mindless austerity addiction.
“Working men and women are under horrific strain, lumped with wage cuts and rising costs. Their falling wages simply do not last the month and in trying desperately to get by they are being driven into the arms of vulture lenders.
“The government may crow that it is paying off the deficit, but all it is doing is pushing ordinary men and women deeper and deeper into debt.
“Right now, in this week, thousands will be borrowing to get by, and they will be paying horrific levels of interest on these loans. Instead of spending their wages in local shops and businesses, they are handing three days’ worth over to companies like Wonga. This is a crazy way to run an economy, and it is grossly irresponsible of this government to preside over this spreading debt disease.”
Unite has repeatedly called for the government to abandon its senseless economic programme of severe and constant cuts alone and to go for growth across the economy.
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