Dear Justin Welby – here’s how you can really take on Wonga

I’ve been in the pulpit again, this time to salute the centenary of the death of Charles Norris Gray, a formidable Victorian vicar of my Yorkshire town of Helmsley. Gray was a social activist with strong opinions on everything from sanitation to election candidates, and he did a great deal of good for his parish — so I’m not averse to the idea of churchmen intervening in worldly affairs, and I think Archbishop Justin Welby was right to highlight the parasitical nature of ‘payday lenders’ such as Wonga, even if he was subsequently embarrassed to discover that the Church of England was an indirect investor in it. But by his own sophisticated standards I think he is a bit unworldly in his enthusiasm for credit unions as the morally acceptable solution to the cashflow problems of the poor.

The volume of borrowing (just under £1 billion) and number of borrowers (just over a million) from credit unions or financial co-operatives in the UK has roughly doubled since 2004, while the number of unions has shrunk by a third. Those are not surprising trends, but an archbishop-driven further expansion of the sector would almost certainly lead to higher levels of bad debt and the swallowing up of weak unions by stronger ones — diluting the localism that is the movement’s strength, and forcing it towards more commercial lending criteria.

So Welby would do better to turn his firepower on the commercial banking system itself, urging a return to genuine localism and human contact both in the management cultures of very big banks and in the nurturing of smaller ones, either de novo or (as in the case of TSB, which is due to re-emerge from Lloyds in September) carved out from those currently under state -control. The announcement of Barclays’ plan to meet tougher regulatory demands by raising £5.8