In my work on combating child poverty in the UK I have been looking at what we can do to help people avoid serious personal debt.
Around 9 million people in the UK are in serious debt and British consumers are twice as indebted as people in Europe.
Inadequate incomes clearly lead to debt but debt is both the cause and effect of other social problems, such as unemployment, addiction and family breakdown.
Greater numeracy and financial literacy skills would prevent people from getting into serious debt. I would like to explore how budgeting and interest calculations could be incorporated into the examples used to teach maths in school. The party has committed to launching a free National Financial Advice Service, paid for by a levy on the financial services industry. believe that part of its role needs to be to challenge public attitudes towards debt and saving, both of which have shifted considerably for the worse over the last sixty years.
We will also create a Consumer Protection Agency to provide tougher consumer protection for financial services customers. We would also penalise retailers whose store cards charge over 25% interest, as many store cards charge double the average credit card rate.
A further urgent task is to expand the provision of affordable borrowing to those who need it most. We would like to see the expansion of community based credit unions and other social lenders such as community development finance institutions. We will also look at how the Social Fund could work more effectively, including with those who are currently excluded from its loans and grants.
I also believe that the quality of debt counselling is much too variable around the UK with some debt counsellors achieving less good outcomes than the best in the field. One organisation that I visited which has particularly impressed me is Christians Against Poverty (CAP), based in Bradford, but with local centres around the UK. Their service is free to users and many choose to keep their CAP account even after they have become debt free.
This is the experience of one of their customers. Soon after Janet left work to have her fifth child her husband lost his job. The couple got behind with their bills and were almost evicted. They took out another loan to make ends meet. Janet used to go for days without food and her marriage hit rock bottom. She went to see her doctor because she was crying all the time. He prescribed anti-depressants and gave her a CAP leaflet.
An adviser visited Janet at home the next day. They went over the paperwork together and the adviser called all the creditors to get them to freeze all interest and charges. A week later Janet had a CAP account and a budget of what to pay off and when. Janet said “It had realistic amounts to pay off our debts and still put food on the table and a small amount for savings – it was unreal.”
( 6 comments ) Tags: Christians Against Poverty, Consumer Protection Agency, Debt, National Financial Advice Service, personal debt, Social Fund, unemployment
Comment by Steve Willis on December 27, 2009 at 1:19 pm
I like the bit; “We would also penalise retailers whose store cards charge over 25%…”
Over the past years, Egg have increased my credit card interest rate from just under 10% to 26% interest. This has caused me to wonder why none of the political parties have acted in respect of:
1. Challenging the illegal cartel operated by British Banks when they set the LIBOR rate. Taking submissions from their own members and then fixing a street price puts them in the same league as drug barons. It doesn’t require a change of government to deal with this – it can be done now by any Member of Parliament.
2. There appears to be no immediacy of action to restrict the piratical interest rates being charged by providers such as Egg, Halifax or MBNA. I believe legislation should limit interest rates on credit cards & loans to no more than 3% above Bank of England base rates.
3. Contracts relating to credit card are very one-sided to the point of being unfair. Providers can change interest rates and the customer is faced with paying the increased rate or losing the facility. This is pure co-ersion and yet, politicians do nothing to stamp this out.
PLEASE CAN WE HAVE URGENT ACTION NOW, RATHER THAN WORDS?
Comment by jigs on February 2, 2010 at 2:19 am
I think that is right. We all saw what the earthquake had done to Haiti. I think it is an enough reason to can all the debt of Haiti. And not just that, the people of Haiti needs our help.
Comment by Darren on March 15, 2010 at 11:17 am
Why are only store cards targeted and not all Credit cards?? Seems a way of avoiding doing anything meaningful. Cap of 18% on all card borrowing
Comment by Philip Curnow on March 20, 2010 at 1:12 am
It is not just the interest rates which should be looked at, it is the way some Banks (not all) and other lenders are irresponsible with their lendeing and encourage people to get into debt that they probably can’t afford to repay. A simple answer would be to prevent irresponsible lenders being able to enforce unfair contracts and therefore unable to collect high interest on money that they should not have lent in the first place.
Comment by Ted on June 19, 2010 at 9:49 am
No wonder we are in debt. We spent money on War, recruiting manager, building Children’s center. Children’s centers costing a lot of money.This money should have been allocated to schools to provide play group sessions and play activities for under 3 children, running strengthening communities classes, employment and training service for parents and to early years health service to recruit more health visitors and HV assistants, Early years service should do compulsory parenting classes to expectant parents.
Comment by Consolidation Debt on October 21, 2010 at 1:31 pm
I would like to explore how budgeting and interest calculations could be the examples used to teach maths in school.
************
Kevin