25 November 2013updated 26 Sep 2015 10:31am

Osborne echoes Miliband as he calls for government to set “the rules” of the market

The Chancellor's announcement of a cap on payday loan charges undermines the coalition's attack on the Labour leader's "Marxist universe".

By George Eaton

It was as recently as last year that George Osborne was arguing against a cap on payday loan charges. He told MPs on 6 March 2012:

I completely understand the concern about excessive and very high interest charges, which have been a problem for many years. I think it is better to tackle the specific abuses. The Government are conducting a review of the cost of credit to consumers, but by tackling very specific abuses such as the roll-over of loans and the use of continuous authority, we think we are getting to the really hard cases and abuses that we want to see ended. I have to say—this was certainly the view of the previous Government, too—that although it could be worth looking at, simply introducing a cap might have the effect of pushing a lot of people into a completely unregulated black economy. I am not sure that any of us would want to see that.

But a cap is precisely what the coalition has announced today, declaring that there is “growing evidence” in support of the move. Interviewed on the Today programme, George Osborne confirmed that the cap would apply not just to the usurious interest rates charged by Wonga and co but also to arrangement fees, penalty fees and rollovers. He also rather euphemistically acknowledged the role “individual MPs” had played in the decision, before (after some prompting from Evan Davis) eventually referencing Stella Creasy by name.

The Walthamstow MP, who has campaigned relentlessly on this issue for three years, is rightly declaring victory today. She said this morning: “Just two months ago this Government criticised Ed Miliband for wanting to reform broken markets, and now today we see them following Labour’s lead on the need to act against legal loan-sharking…That the Government is today admitting it got it wrong in opposing these measures and is still playing catch up on how to combat these problems shows it is Labour who have the ideas and determination to tackle Britain’s cost of living crisis.”

On Today, Osborne sounded remarkably Miliband-esque as he spoke of how government “needs to step in to create the rules of the market” and to ensure that capitalism “works for hardworking people”. The Chancellor’s rhetoric was all the more surprising given his private warnings to Conservative MPs not to play on Labour’s turf by mimicking Miliband’s focus on living standards.

Osborne might be right when he argues that those who support a free market system have never believed in “complete laissez-faire” but the problem for him is that the government has often given the impression that they should. After Miliband called for a freeze on energy prices, David Cameron accused him of living in a “Marxist universe where you control these things” and declared that he needed a “basic lesson in economics”.

The Treasury’s response to those noting this irony is to argue that the government will intervene in markets (as in the case of Help to Buy) when it can do so to the genuine benefit of people; a cap on energy prices remains a “gimmick” that will help no one. But after taking action in this area and conceding that the state has a duty to set “the rules” of the market, it will become harder for the Tories to dismiss Miliband’s calls for it to do so elsewhere too.