Consumer Debt Time-Bomb Ticks In The Countdown To The Election

As we count down to the UK’s general election, it is important to look at how the political parties intend to tackle the consumer debt crisis and what impact new leadership could have.

With one-in-ten British residents struggling to manage their credit commitments and personal debt now standing at around £1,500 billion, addressing the problem is essential in the recovery of the economy.

So what do the front runners in the political race propose as a solution? Here are the main consumer debt related issues covered by the respective election manifestos:

Labour focuses on the provision of affordable credit, as well as tighter regulation of doorstop loans, which can be subject to extortionate interest rates.

The Conservative party has suggested tackling excessive interest rates and charging orders, as well as establishing a national financial advice service.

The Liberal Democrats have focused their attention on interest rate ceilings for credit and store cards, to help protect consumers against overinflated interest repayments.

But is any of this enough? Protecting consumers from exploitative lending is of course important, but it is essential that people have access to quality debt advice services that are appropriate to their circumstances; without facing long waiting lists or having to resort to paid-for debt solutions.

The Government’s current strategy has been criticised for its lack of management and a report from the National Audit Office has found that many support services are unable to cope with the increasing demand for debt advice.

At Debt Advice Foundation we are committed to working with the Government to bring about legislative change to benefit UK consumers, and believe that an ethical debt advice framework should be put in place across the financial industry.

As a self-funded charity, we have also identified that there is a genuine and workable way for impartial debt advice to be provided by the not-for-profit sector, which does not rely on taxpayers’ money and is instead funded through the credit industry (see our response to House of Commons’ Public Accounts Committee report on helping over-indebted consumers).

Over the coming years we are expecting demand for debt advice to continue to soar. Many will still experience ‘income shock’ due to redundancy or pay cut, and the predicted interest rate rises of 2 per cent by the end of 2011 mean that the average mortgage could cost an extra £200 per month – putting extra strain on UK households.

The Government will also need to address the issue of the first generation of UK consumers reaching retirement age with significant levels of credit debt.

As yet the polls are too tight to speculate which party will win the election, but it is safe to say that whichever leader claims victory will need to take a new approach to the country’s spiraling consumer debt.