DON’T FORGET THE PRIVATE SECTOR
Figures published today by the Insolvency Service show that, despite emerging from recession, the nation’s people are still well and truly in debt.
According to Credit Action, total UK personal debt had risen to £1.46 trillion by the end of March meaning that individuals now owe more than the whole country produces in a year. In addition to this, the Government’s own figures point to a record level of public borrowing at just over £163 billion, the highest annual level of borrowing by any peacetime government. It’s clear that the whole country is broke!
On the day of the most important general election for a generation, whoever is elected will face some difficult decisions about where cuts should be made to reduce unprecedented levels of public borrowing. According to the Institute for Fiscal Studies (IFS), deep cuts will have to be made over the next three to five years if any of the parties are to make their budget commitments, cuts not seen since the 1970s.
Bev Budsworth, managing director of multi award-winning, The Debt Advisor, commented: “Personal insolvencies reached nearly 134,000 in 2009 – another record high! The level of UK personal debt is just short of £1.5 trillion with the average adult owing just over £30K, inclusive of mortgage, or approximately 131% of their average earnings. It’s clear then that this is still a huge issue and figures are set to continue to break new records.
“Problem debt carries a number of serious impacts for households, especially those on low incomes. Indebtedness also has a serious impact on the country’s finances so we need to get these debtors recycled and back on their financial feet, making a positive contribution to the economy by paying off their debts.
“However, the biggest impact on the public’s coffers is from the actual funding of ‘free’ debt advice. The taxpayer currently foots the bill for a plethora of schemes set-up by third sector organisations to help those with serious levels of debt. The total amount of taxpayer funding swallowed up by these schemes is unclear but is likely to be in the range of £70 million – £100 million spent on the provision of face to face advice. The recession has obviously seen the demand for these services grow and even the Department for Business, Innovation and Skills (BIS) has now admitted that many of their funded schemes do not have the capacity to cope and are now refusing some new clients or adding them to a growing waiting list.
“The issue comes because the Financial Services Authority (FSA) automatically signposts people to ‘free’ (third sector) advice services which are usually funded by the taxpayer. We are asking the next government of this country not to forget the private sector which can also help to provide the right advice to help people struggling with debt.
“We have an excellent private debt advice sector and I am encouraging the next government to use it! The private sector typically realises four to six times the level of debt repaid for every £1 spent. I would like to see these schemes opened up and more and more people in need of professional debt advice signposted to DEMSA-accredited, private sector companies.”
DEMSA (Debt Managers Standards Association) was established in 2000 in order to promote good practice in the debt management industry and to protect the interests of the public and the lenders to whom they owe money.
Bev continues: “DEMSA has already obtained approval from the Office of Fair Trading (OFT) and is somewhat of a kite mark for the industry. In fact, DEMSA’s standards are significantly higher than those which are required from third sector, taxpayer-funded organisations.”
Bev concludes: “I would urge the next government to partner with DEMSA-accredited debt advice companies to assist with the provision of genuinely free advice and self-help packs to people in financial difficulty. This could be done simply and quickly by initially signposting people in their literature.
“By utilising the properly-accredited private sector, politicians can help reduce the financial burden on the taxpayer and, at the same time, provide much-needed invigoration and support to the economy. After all, it will be the private sector that will grow the country’s economy, not the public sector.”
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