Government complacent on debt

Anti-poverty campaigners today accused the government of complacency in the face of rising rates of personal insolvency after ministers said Whitehall departments were "making progress" in efforts to combat growing indebtedness.

In a report "Tackling over-indebtedness", the government said initiatives to increase the number of debt advisers and put illegal loan sharks out of business were under way, coupled with education programmes for adults and children.

Consumer affairs minister Ian McCartney said efforts by the government would reduce people's vulnerability and increase the support they could expect. Campaigning groups and opposition parties said the government was failing to address many of the causes of rising bad debts.

The Liberal Democrats said ministers were belatedly recognising the seriousness of the situation, while shadow chancellor George Osborne said the situation was muddled with some government agencies still taking a harder line on bad debts.

Citizens Advice said: "Personal indebtedness is a growing problem and while there are quite a few initiatives coming from the government many of them won't get under way for some time while others are pilot projects affecting only small areas of the country." The charity said new analysis of figures from last year revealed that almost 360,000 of the 1.4m debt problems dealt with by citizens' advice bureau advisers resulted from store cards or credit cards. Difficulties paying interest payments on unsecured loans accounted for a further 250,000 cases.

Personal insolvencies are expected to hit 100,000 this year for the first time, after a 66% rise in the number of applications in the first half of this year. The Bank of England's decision to raise interest rates, coupled with rising energy bills is likely to make the situation worse.

A Citizens Advice report showed clients owed an average of £13,153 - almost a third more than three years ago. Debt Free Direct, personal debt negotiators, says its typical client earned £20,000 a year but had £46,000 in credit card and loan debt on top of their mortgage.

Liberal Democrat spokeswoman Julia Goldsworthy MP said: "Releasing annual reports with vague targets is simply not sufficient ... Unfair bank charges and lenders who raise credit limits and extend overdrafts without prior instruction from the consumer must be stopped."