‘Wonga’ economy

A small but conspicuous element of London society consists of a wealthy, thriving domestic and international elite.

Meanwhile, the vast majority of London’s population struggles to afford to live in the city where their families have lived for generations.

National and local government economic and social policy overwhelmingly supports the interests of the growing wealthy elite at the expense of the rest of London’s population.

Policy only benefits Londoners on average and lower incomes when it coincides with the interests of London’s highest earners.

For instance, central bankers at the Bank of England have artificially held down interest rates at a record low of 0.5% for five years – helping to bail out post-meltdown ‘zombie’ banks with cheap and easy money.

House price bubble

True, low interest rates benefit people with mortgages.

On the other hand, low interest rates offer savers low returns – including savers with mortgages.

Low interest rates also don’t stimulate investment in new products, services, jobs and research and development.

And these insolvent yet supposedly ‘too big to fail’ banks themselves fail to lend their bailout and QE money to small and medium-sized enterprises that could re-boot the ‘real economy’.

A promised flotilla of smaller, lender-friendly ‘challenger’ banks fails to materialise.

Rate rise

Meanwhile, top staff at the ‘too big to fail’ bailed out banks enjoy huge salaries and bonuses that helps fuel house price inflation in London.

Public disquiet about a house price bubble deepens. The Bank of England makes noises in the summer of 2014 that it might raise interest rates gradually ‘sooner than later’.

If rates do rise, many people could find themselves struggling even more to make their monthly mortgage repayments.

Little is done to help build more houses – the best way to bring down prices.

Interest rate apartheid

Conversely, politicians perpetuate ‘interest rate apartheid’ by allowing short-term loan interest rates to skyrocket to up to 5,000%.

Londoners on low incomes are charged these rates by a plethora of online and High Street short-term loan or ‘pay day lenders’ – often derided as ‘legal loan sharks’.

For instance, a typical loan might be £270 for 30 days. But with added interest, borrowers repay £367.

Many Londoners are amongst seven million people in the UK in 2014 using such high-cost credit providers in this ‘Wonga economy’ – and many people, often faced with capped benefits, fall quickly into life-cramping debt.

Food banks

Online short-term lender Wonga leads a market that mushroomed rapidly in the aftermath of the financial meltdown – a market that remains largely unchallenged by low-cost community-based credit unions.

One such high-cost lender, The Money Shop, boasts 111 shops in virtually every London postcode area.

An estimated 2.5 million children in London and across Britain live in ‘problem debt’ families that struggle to pay household bills and to repay such short-term, high-interest loans.

No wonder that London has also become a ‘food bank society’.