Conclusion

The long-term perspective taken by The Politics of Consumer Credit in the UK affords fresh evidence on a number of significant historical debates. It indicates that Britain’s departure from pathways followed in other European consumer credit markets was not simply a by-product of neo-liberalism’s influence on late-twentieth-century governments. It has also allowed us to offer important contributions on questions such as the impact of political ideologies over policymaking, the validity of a right–left framework for analysing politics, the extent to which a post-war consensus existed (and was broken after 1979), and the question of how adept British political parties were in exploiting the emergence of a more affluent electorate....

A Sisyphean Task

Chapter 3 examines debates about controls on consumer credit from late 1957 to 1964. As in Chapter 2, this chapter provides a fresh appraisal of Labour’s response to the affluent society. The party attempted to outflank the Conservatives on the issue of consumer protection. It embarrassed the Conservatives over their sluggish response to the Molony Committee’s recommendations on hire purchase legislation. The chapter also supports previous analyses that have identified the strong impact of new consumerist groups, particularly the Consumers’ Association and the weakening role of the Cooperative Movement. The issue of credit controls became more contentious. The Radcliffe Committee on monetary policy (1958) highlighted the weaknesses of the system. Of particular concern was the impact of controls on consumer durable industries. They were removed in 1958, but reintroduced, in 1960, following a dangerous rise in consumer indebtedness.

Consumer Credit on the Eve of Affluence

The chapter begins with an examination of debates around consumer protection and hire purchase in the 1930s. It explains the emergence and significance of the Hire Purchase Act, 1938. It explores radical (but thwarted) Labour plans to reshape important sectors of the consumer credit market during the 1940s. The chapter then explains the influence of Keynesian theory and its role in generating new policy on economic demand management. The Conservative election victory of 1951 owed much to the party’s courtship of voters with free market rhetoric, but this government instigated hire purchase controls to improve the balance of payments and combat inflation. Labour dubbed the measures ‘a very vicious piece of class legislation’. This policy created long-standing disagreement between the Treasury and the Board of Trade (and consumer durables manufacturers) about the damage to UK manufacturing. The chapter outlines developments up until the Radcliffe Committee was tasked to examine the issue.

‘Too Much of a Good Thing’

By the 1980s, the Labour and Conservative parties were more receptive to radical ideas that had great implications for the consumer credit market. Labour’s left pursued plans to nationalize financial institutions. The Conservatives embraced monetarism as a solution to Britain’s high levels of inflation. While ideology played a role, it does not provide sufficient explanation for the liberalization that followed. Hire purchase terms controls were eventually abolished in 1982, alongside the more generalized attempts to restrict personal lending, but the persistent search for a more effective means to the same end continued for longer than might have been supposed. Liberalization, in turn, led to a boom in the use of consumer credit in the 1980s, producing renewed Labour demands for its restraint. The debate that followed is revealing of how new technological and international influences made devising a workable system of credit control ever more difficult.

Truth in Lending? Consumer Credit and Social Policy after Crowther

Chapter 7 addresses consumer protection issues from the 1970s onwards. It discusses the increasingly complex connections between mortgage and consumer credit, particularly in terms of second mortgages. It discusses the consumer credit protection put in place by the Consumer Credit Act. It explains how important decisions taken at that point increased further the UK’s diverse and liberalized consumer credit markets and enabled the survival (and growth) of forms of sub-prime credit that died elsewhere in Europe. The chapter also addresses issues around credit discrimination on the grounds of race and gender. It probes the reaction of consumer groups to the backlash to consumerism and the liberalization of personal finance markets under the Thatcher regime. The chapter also breaks new ground in exploring the impact of Europe, with an exploration of the hostile response that emerged when the European Parliament’s Consumer Directive threatened to curtail the UK’s consumer credit markets.

A Nation of Mortgagors, 1970–1989

Between 1970 and 1989 the two main parties began to diverge on the sale of council homes, particularly after the election of Margaret Thatcher in 1979. The chapter explains the widening ideological fissures on social housing and home ownership. The spread of home ownership during this period continued the ‘tenurial revolution’, which began in the interwar period. In the same period, a co-relationship had developed between mass markets in consumer durables and owner occupation. The relationship was amplified further in the 1980s amidst a credit boom and rising levels of home ownership. This chapter focuses on the role of the Conservatives’ renewed focus on the right-to-buy policy that turned many council tenants into members of the expanded property-owning democracy.

Introduction

A decade on from the ‘credit crunch’, with repeated warnings of the potential for a repeat of that financial trauma, this is an appropriate moment to offer a historical investigation of the politics of consumer credit in modern Britain. By the 1980s, Britain had the most diverse and liberalized consumer credit sector in Europe. From one perspective, the element of risk in the British credit market was a strength, but it made the nation more vulnerable to severe economic jolts caused by events such as the housing market correction of the early 1990s and the credit crunch of 2008. ...

‘A Supreme Example of Whitehall “Tinkering” ’

Competition and Credit Control contributed to the abandonment of hire purchase terms control, but officials continued to search for another mechanism that could target consumer expenditure. Their quest became more pressing after 1973, as tremendous economic difficulties strengthened the desire to control the growth of the money supply. Competition and Credit Control failed to restrict credit expansion and was modified by the introduction of the ‘credit corset’. Hire purchase terms controls returned, alongside the voluntary system for other forms of consumer credit. The failure was dramatic enough for Labour’s front bench to advocate a return to ceilings on bank advances and the withdrawal of credit cards. In office, however, Labour accepted the status quo and relaxed some controls following pressure from the consumer durables sector. The general thrust of the experience in the 1970s led officials and ministers to lose faith in the capacity of the state to effect change.

Crisis and Credit Control, 1964–1971

Between 1964 and 1971 the UK suffered great economic difficulties, including repeated balance of payments crises, leading to a prolonged credit squeeze, the seeking of loans from the International Monetary Fund (IMF), and the devaluation of sterling in 1967. These issues dominated control over consumer credit. Hire purchase terms control continued to feature in government economic management, producing stronger objections from the consumer durables sector. While the Treasury saw them as a useful demand management tool, the Board of Trade complained of their damage to British industry and the Crowther Committee established to examine consumer credit called for their abandonment. There was also growing pressure, particularly from the Bank of England, to move away from the use of ceilings on bank lending. In 1971, a new system of credit control was introduced, reliant on changes in the cost of credit rather than restrictions on its overall availability.

Building a Property-Owning Democracy, 1945–1970

The chapter explains the emerging concept of a property-owning democracy. Encouraging home ownership, Conservatives argued, increased ‘independence of character, self-reliance, initiative, and the habit of saving and the acceptance of responsibility’. The Conservative government of 1951 granted local authorities powers to sell council houses to their tenants. Conservatives portrayed the Labour Party as hostile to home ownership. However, Labour revisionists encouraged colleagues to take the concept of a property-owning democracy seriously as part of a strategy to refresh their egalitarian agenda. In similar vein, Anthony Crosland argued that the concept was a ‘socialist rather than a conservative ideal’ as long as property was ‘well distributed’. Thus, as Britain became more affluent, the central debate on housing shifted from one centred on which government built the most houses to which party would offer homeowners the best deal, with a focus on the terms of mortgage lending.