Lib Dems: Consumer debt must be tackled
The Liberal Democrats today launched a 10-point debt action plan to head off what they say is the “ever-growing problem” of consumer debt.
Treasury spokesman Vince Cable admitted that debt was currently affordable for all but a small group of people, but warned that a combination of higher interest rates, lower employment and poor savings records could see debt levels “spiral out of control”.
His ten action points included better protection for people with mortgages, a crackdown on hidden charges in credit and store cards, and making it harder for people to borrow irresponsibly.
British household debt passed the one trillion mark for the first time last year, and is now larger than the country’s total earning power.
As yet, there have not been reports of widespread debt problems, but personal bankruptcies in the last quarter of 2004 hit record levels, and requests for help with debt fielded by citizens advice bureaux have nearly doubled in the past seven years.
Dr Cable said: “So far the problems of personal debt have seemed manageable because interest rates have been low, house prices high and unemployment low. But this could change rapidly.
“It is deeply worrying that the relationship between debt and income is at an all time high, and problems of debt servicing and extreme debt are growing.”
Accusing the Government of being complacent over debt problems, he outlined ten measures to tackle “ever-growing” consumer debt and the associated housing market bubble.
The number of ‘protected’ mortgages should be increased, he said, and a tighter rein was needed on banks that lent money without adequate checks on borrowers’ incomes. Student debt should be fully disclosed as part of moves to increase the transparency of lending.
Dr Cable also said hidden charges in store and credit cards must be eliminated by making standardised examples of products compulsory, and the Financial Services Authority should put ‘health warnings’ on credit card advertisements.
Other action points included more financial education for schoolchildren, and a national ‘financial health check’ service.
