Brown and Blair must tackle debt

9.20.00am BST (GMT +0100) Sun 19th Sep 2004

Today Norman Lamb, Liberal Democrat MP for North Norfolk, will call on the Government to take immediate action over the ever growing levels of personal debt in the UK at the opening day of the Liberal Democrat national conference.

Conference will urge banks and building societies to stop recklessly fuelling this surge in consumer spending by ensuring greater transparency within the system and removing incentives to borrow.

Liberal Democrats will call on financial institutions to give a small percentage of their profits to support the Citizens Advice Bureau so that they can increase capacity to deliver financial advice to all who may be in debt, before it spirals out of control.

The true extent of household debt across the country is revealed in DWP figures. These show the percentage of families with children in credit arrears and behind with household bills. In some regions nearly a quarter of households are in credit arrears.

The figures show that 20% of families with children in the Eastern region are in credit arrears, and 12% are behind with household bills.

Norman Lamb, Liberal Democrat Treasury Spokesman said:

"Personal debt has reached over £1 trillion pounds, which is equivalent to £16,500 for every man, woman and child in the country. The ratio of debt to income is also at unprecedented heights.

"The Chancellor has tried to ignore this fundamental imbalance in the economy and it is only recently that the DTI have put together a strategy to deal with indebtedness.

There has been a lot of debt talk recently but we have seen very little action.

"Banks must also take responsibility and stop recklessly fuelling the consumer boom. The banks have been heavily pushing borrowing over saving by giving incentives to employees to sell loans, hiding information in the small print, and generally failing to provide information in an open and transparent way.

"Maximum interest charges are not the way to regulate the banking sector. Maximum rates will not only succeed in pricing sections of the population out of the market but may also force them to turn to loan sharks who may end up charging much higher rates of interest."

Liberal Democrat Shadow Chancellor, Vince Cable MP, added:

"It is essential that good independent financial advice is available easily and locally so that people who are in debt can access advice as soon as they find themselves in financial difficulty.

"Being able to access financial advice before things spiral out of control can help people avoid the many traps that may lead to further debt.

"I recently visited the Citizens Advice Bureau (CAB) in Twickenham with Charles Kennedy. The CABs across the country currently receive 1.1 million new debt enquiries a year. That is a staggering growth of 74% since 1997.

"Today I am asking banks and other lenders to contribute a small percentage of their profits to increase the capacity of financial and debt counselling services. By donating just 0.1% of profits banks could provide an additional £27 million towards debt advice.

"This is not a call for more Government regulation. It is a call for Chief Executives, shareholders and senior managers of those organisations to put a proportion of their profits back into the community to help those who might be affected by financial hardship."

Notes:

1. Total profits of the major banking groups in 2003 as defined by the BBA amounted to £27.2bn. A contribution of 0.1% would generate a £27 million annual donation.

2. The Money Advice Trust estimates that there are currently at least 250,000 people in need of debt advice for which there is no capacity.

3. Current expenditure on free money advice services of all kind is estimated at £55million and this meets current demand of 500,000 people. There is currently an estimated shortfall of 250,000 and so increasing the supply of free face to face advice services to meet this need is estimated at £27.5 million. Precise figures regarding total need are difficult to estimate but £27 million would help to increase capacity substantially.

4. DWP figures on indebted households sourced from:

http://www.dwp.gov.uk/asd/asd5/rports2003-2004/rrep211.asp

Region % of families with children in credit arrears ; % behind with household bills

Scotland 17 ; 23

Wales 22 ; 20

London 21 ; 18

East Midlands 20 ; 8

Yorkshire 17 ; 17

North East 13 ; 15

South East 23 ; 15

South West 16 ; 14

North West 21 ; 14

EASTERN 20 ; 12

West Midlands 17 ; 11