Concern about rise in personal bankruptcies
The Liberal Democrat treasury spokesman has expressed grave concerns about a rise in the number of personal bankruptcies.
Dr Vince Cable says personal debt is increasing and has been “recklessly” fuelled by banks over-eager to lend money.
New quarterly figures from the Insolvency Service, part of the Department of Trade and Industry, reveal that individual bankruptcies have risen by 29 per cent since the same period last year and Individual Voluntary Arrangements (IVAs), which can be used as an alternative to bankruptcy, have risen by 8.9 per cent.
However, the figures also show a “significant” drop in the number of company insolvencies, down by 18.2 per cent and voluntary liquidations by 17 per cent.
Desmond Flynn, the chief executive of the Insolvency Service, said: “Although the figures for individual insolvencies have increased, it is clear people are seeking to deal with their debt problems outside bankruptcy, as the number of IVAs has also risen.
“This is an indication that many over-indebted individuals are making responsible choices when dealing with their financial difficulties.”
Dr Cable, however, argued that the figures show the problem of personal debt is increasing.
He has been campaigning heavily in the media in the past few months on personal debt, calling for new regulations to prevent excessive lending. Speaking today, he said: “The ratio of debt to income is at unprecedented heights, and this can no longer be sustained if interest rates continue to increase.
“The banks have been recklessly fuelling the borrowing boom.
“There is a fundamental imbalance in the economy which encourages us to borrow more. Supposed interest free loans, mortgages with flexible repayment schedules and credit card companies offering lower interest payments are all ways of encouraging us to keep borrowing.”
Dr Cable added: “Rising interest rates, falling house prices, and mounting personal debt are all danger signs for the British economy – and a downturn will lead many more into serious financial difficulty.”
Yesterday, the Bank of England raised its base rate to 4.75 per cent, the highest level since September 2001.
