Labour is unveiling a pledge at its conference to help families trapped by massive credit card debts by introducing a cap on interest payments.
The shadow chancellor, John McDonnell, will announce plans to guarantee that no-one pays more in interest payments than their original loan.
Announcing his interest rate cap, Mr McDonnell will say: “Household debt in this country stands at the record level of over £1.8trn.
“We have seen with pay day loans; some companies were making massive profits from people’s financial difficulties.
“Under pressure, the government has been forced to cap interest payments on payday loans.
“But more than three million credit card holders are trapped by their debt. They’ve paid more in interest charges and fees than their original borrowing.”
Mr McDonnell said he owned a credit card himself, but had stopped using it years ago.
He told Sky News: “I use a debit card, I gave up using the credit card side of that some years ago, because a lot of people get into problems when they borrow on credit cards.”
Some credit card repayment rates are now so high that customers pay around £2.50 in interest and charges for every £1 they borrow.
:: The average amount of credit card debt outstanding for accounts in persistent debt is £3,464
:: The total amount outstanding on these accounts is about £14bn
:: Consumer credit debt, which includes credit cards, personal loans and overdrafts, has passed £200bn for the first time since 2008
Chief Secretary to the Treasury Liz Truss said: “The best way to help people with their personal finances is with our balanced approach to the economy, which is creating more well paid jobs and cutting taxes for working people.
“Labour take it too far and would damage our economy, meaning fewer jobs, higher taxes and more debt.
“Working people would pay the price, just like they did last time.”
UK Finance chief executive Stephen Jones said: “The FCA’s extensive credit card market study looked very closely at the issue of persistent debt.
“It considered whether a cap on interest charges should be introduced, but concluded that there were preferable alternatives which the industry is supportive of and will implement when the current consultation is concluded later this year.”
But Mr McDonnell’s speech to delegates on the economy is not the only big issue on the Labour agenda for day two of its conference in Brighton.
Party leader Jeremy Corbyn is facing protests from pro-Remain Labour MPs who are furious that he has dodged a meaningful vote on Brexit policy, after it was blocked by conference delegates.
The decision came after the left-wing campaign group Momentum emailed supporters urging them not to back Brexit in a ballot of motions, calling it a “potentially time-consuming cul-de-sac”.
The Conservatives also attacked Labour’s decision not to hold a decisive vote on party policy on Brexit.
Eurosceptic MP Suella Fernandes said: “Labour are ducking away from debating Brexit, the biggest issue facing our country, because they are too divided on the issue and have no plan.
And Mr Corbyn’s critics in his own party are accusing the Labour leader and his supporters of a stitch-up and saying: “So much for his claim to make the conference more democratic.”
