Opinion & Features

Debtors need our help

The Bank of England has cut interest rates (PA)

Our society is fuelled by debt. Whether it’s your credit card, student loan or the latest mobile phone that you have to have, the average pile of household debt in Britain has risen to £13,250 – an increase of £4,000 on last summer. And that’s before we consider your mortgage.

This is an international problem that is only going to get worse. The Governor of the Bank of England believes that if something isn’t done to change the personal debt crisis it has the potential to plunge the world into economic catastrophe.

Our political leaders seem content to allow the British economy to fuel itself on personal debt. What has the Catholic Church to say about the issue?

Apart from advocating a general sense of unease about materialism, the Church’s response to the problem has been inadequate, according to Professor Philip Booth, research director at the Institute of Economic Affairs.

“Only once in my life have I heard a Catholic priest say anything about the importance of earning money,” he recalls, “and then deciding how much you give to charity, and then prudently putting some more aside either to save or to pay down debts. And funnily enough, it was my Catholic parish priest reporting a televangelist from the US.”

The Church could have a major influence by advocating financial prudence and responsibility, as practised in the Old Testament, he says. “It’s only by people changing behaviour that culture will change.”

In contrast to our own, the economy in biblical times was structured in a way to avoid long-term debt and destitution. Loans were a way to help one’s fellow man out of poverty, not to push him deeper into it. And while it was not a sin to be in debt, God encouraged the Israelites to avoid it: “The borrower is slave to the lender” (Proverbs 22:7). The Bible also condemns usury, which referred to any interest charged on a loan at the time, as it encouraged poverty and inequality. This is why all debts were cancelled at the end of every seven years (and to remember the mercy they had received from the Lord).

Fast-forward 2,000 years: more than a million people in Britain are living below the poverty line, many as result of being burdened with unsustainable debt. Payday lenders are charging extortionate interest rates to exploit the vulnerable, and reckless lending by banks has caused recessions across the world.

The Bank of England has cut its interest rate to a quarter of a percentage point. Though this will suit those in debt in the short-term, in the long term it is likely to result only in more borrowing and less saving, and therefore an economy more vulnerable to a sudden rise in interest rates.

The question is whether the Church can have any influence or offer any guidance to help those who are most in need.

Mgr John Armitage, rector of the Shrine of Our Lady of Walsingham, says: “The main issue in poor areas is where do you go when you need money immediately, when something has broken down, children need shoes, the rent is behind, your mother has died.” “Many have no credit rating, so the only option is the loan shark or crime.”

Booth suggests the Church should nurture an institutional framework that can provide a better means for people to borrow if they have to.

This can offer opportunities for people to save, in the form of credit unions or something similar to the now defunct Catholic Building Society, which secured mortgages for low-income earners between 1960 and 2007. This is not a new concept and the Church can take the lead from other more active institutions.

“Evangelical churches can be pretty good at this,” explains Booth. “If you’re a non-Christian who starts attending an Evangelical church, and then you become baptised and you’ve got debts, the church members will often clear them off, and replace them with interest-free loans, which you then pay back.”

Mgr Armitage agrees that credit unions are the answer but notes that running them is not without challenges. “I attempted to start two credit unions, both of which failed, and I have been involved with another one that failed,” he says, blaming a lack of parishioners with experience and confidence to handle other people’s money problems.

“If Church dioceses or Catholic charities want to help address the debt problem, then they need to create a body of competent ‘money people’, who can train and give direct support to people in the parishes to run a credit union,” he says. “People will step up to the mark in the parishes if they feel they are trained and supported in this area.”

At present it remains rare for the Catholic Church to engage in such issues. As part of this year’s Extraordinary Jubilee Year of Mercy, Pope Francis has called for a merciful Church. Perhaps the Church’s works of mercy could involve doing more to engage with these issues in order to free those who are enslaved by debt.