How to tackle Britain's personal debt problem

Britain has one of the worst personal debt problems in Europe. Before the economic downturn, we as a nation have been on a spending spree, unparalleled in modern times. Those were the concerns expressed in my report, Breakthrough Britain, over a year ago. It is getting worse.

Despite the economic downturn, we are still borrowing more. Total UK personal debt currently stands at £1.44 trillion - an increase of about £160 billion since two years ago. The present government hasn't helped by getting rid of incentives to save and by raiding the pension funds ten years ago.

This is not just an economic issue: debt can wreck lives. A poll conducted by YouGov for the Centre for Social Justice found that over 40 per cent of British adults think that "serious personal debt" was the biggest social issue facing the UK. The human cost of debt is its effect on people's self-esteem, their health, their relationships.

Relationship counsellors tell us that it is almost impossible for couples to discuss debt rationally, which creates huge tensions in relationships. In one survey, two out of five couples whose relationships broke down cited debt as a contributing factor. All this is made worse by the accelerating number of house repossessions around the country, estimated now at 123 every day.

Though serious personal debt affects middle and high income families, low income families suffer disproportionately. The same YouGov poll found that just under 40 per cent of respondents living in local authority or housing association accommodation experience serious personal debt, compared with about 20 per cent of the broader population.

Sub-prime lending is an established feature of our deprived communities. It is characterised by high interest rates, often well over 100 per cent on what are essentially short term loans and little or no competition between lenders. In the UK the only bona fide unsecured loans that people on low income can obtain, come from such doorstep lenders.