Local MP calls for debate on personal debt in House of Commons

2.03.36pm UTC (GMT +0000) Fri 12th Oct 2007

Personal Debt is a serious problem and needs to be tackled

Mark Hunter MP for the Cheadle constituency today intervened during Business Questions in the House of Commons to ask the Leader of the House, Harriet Harman MP for an urgent debate on high levels of personal debt in the UK, particularly amongst students and graduates. His demand came in response to widely differing predictions about the UK's future economic growth made by independent assessors in the Government's Pre-Budget Review and Comprehensive Spending Report published earlier this week.

Britain now has £1.3 trillion of personal debt and spends 20% of its household income on servicing this debt. This comes after a decade of policies by Gordon Brown that have relied on high level of spending fuelled by even higher levels of borrowing. High house prices, and low interests rates have encouraged people to take out large mortgages, while tuition fees have forced many young people to begin their lives with at least £9,000 pounds debt each.

High levels of personal debt threaten the long term security of the economy and undermine future economic growth. The treasury has had to reduce its growth forecasts sharply downwards, while independent economic assessors are similarly urging caution. The uncertainty about the future of the British economy is set to continue according to the experts.

In response to Mark Hunter's question the Leader of the House, Harriet Harman, said that she shared the concerns about the high level of personal debt and that the Government were particularly concerned about the people who were 'at risk of being unable to repay' such loans.

Speaking after the debate, Mr Hunter said: "This is an extremely important issue which needs to be urgently debated in the House of Commons. We need to find a solution to the growing and critical problem of personal debt that blights the lives of so many people. Credit is just too easy to obtain in many cases, and often tempts people who are unlikely to be able to repay it.

The effect of personal debt on the economy is already noticeable. With £1.3 trillion of debt, and 20% of Britain's household incomes being spent on paying off this debt and the interest it accrues, there is obviously less money for ordinary households to spend in other ways. In fact disposable income is at it lowest in real terms than it has been in the last ten years, a fact which is bound to effect economic growth. The impact can in fact be seen already in the uncertain nature of growth and expected volatility of the UK economy shown in by the Government's announcements this week.

Personal debt needs to be tackled and tackled now. The Government agrees that this is a problem but has no real solution as to how it can be reduced. Surely a good start would be cutting student tuition fees. Graduates are good for our economy and students from all economic backgrounds should be able to university without facing a mountain of debt once they graduate.

For too long irresponsible lending has been ignored, leaving households now facing 160% income to debt ratios. The Government needs to take action now and stop ignoring this problem."