Live Now Pay Later attitude Blamed for Increased Debt

FRIDAY, NOVEMBER 10, 2006

There has been a lot of buzz recently surrounding the 55% increase in the number of insolvencies over last year and the fact that the number of insolvencies will most likely cross the 100,000 barrier for the first time in the history of the UK.

The Conservatives and Liberal Democrats received data from the Department of Trade and Industry that showed that due to raised bills, taxes, and unemployed rate, many borrowers, who are already in deep debt, many with debts over £50,000, have no other choice than filing for bankruptcy or trying to get an IVA

The number of insolvencies has increased almost 6% in the 3rd quarter over the 2nd quarter of this year and almost 55.4% over the same time period in 2005.

Data from the Department of Constitutional Affairs said that mortgages were a major problem this year as more and more families were finding that they did not have enough money to pay for their house. As a result, over the past 3 months lenders have started almost 35,000 home acquisitions. This is the highest it has been since 1992.

"An economy built on borrowed money is built on borrowed time," said George Osborne, the shadow chancellor. "There is a personal tragedy behind each of these insolvencies and this shows that many families are feeling the pressure of rising interest rates and rising fuel bills. Gordon Brown is doing nothing to help these families, with more and more stealth taxes and increasing council tax."

Vincent Cable, the Liberal Democrats Treasury spokesman, said that both the government, and individual banks are to blame for this increasing debt. "There is currently a considerable degree of irresponsible lending and aggressive marketing to individuals," he said. ìThe government should be working with the financial services industry to provide a national network of independent advice centers so people could have financial health checks before they got into a crisis situation".

Although personal bankruptcy in debt is in dire need for help, corporations seem to be doing good as in the third quarter, the number of corporate bankruptcies fell 4.9% to just over 3,200.

Still many believe that there are hard times ahead as rising interest rates will only further increase the problem. Mike Gerrard, head of personal insolvency at Grant Thornton, said: "The seemingly never-ending rise in the number of UK personal insolvencies continues apace, sustained by the side-effects of the buy-now-pay-later generation. Individuals with credit card debts in excess of £50,000-£60,000 are not all uncommon, while the overall age of those affected appears to be on the decrease, with a larger proportion of women also noticeable."