The OFT’s public consultation on irresponsible lending is a welcome move. Grant Thornton’s annual survey at the start of the year reported that in 2007, for the second year running, UK personal debt stood at a higher level than UK GDP.
Stephen Gifford, Grant Thornton’s chief economist, says, “Although there is no cause for panic as personal debt is well covered by the UK housing stock, the figures clearly illustrate the continuing problem of growing personal debt levels in the UK. If the property market and economy continue to weaken, the current levels of personal debt will become unsustainable and there will be a marked increase in personal insolvencies”.
In September that prediction became real with the OECD reporting that the UK is due to head into recession, brought about in part by the downturn in the hugely inflated housing market, while the Chancellor walked into a political storm with his admission of the UK’s gloomiest economic prospects for 60 years and house prices down 12% year on year. UK house repossessions jumped by 48% in the first half of the year to the highest level for 12 years and the Consumer Credit Counselling service estimated that more than 3.3 million people in the UK are facing serious debt problems.
The changes in the Consumer Credit Act and the subsequent OFT consultation to control irresponsible lending have been welcomed by Citizens Advice who reported situations where poorer pensioners, people on very low incomes, disability benefits and people with mental health problems were offered credit cards and loans completely inappropriately.
But this issue goes wider – the UK economic boom of the last ten years has in part been funded by access to cheap credit secured on rising property prices, encouraged by the lending institutions, celebrated by the government, and warmly welcomed by consumers. Any boom based on a housing bubble was always likely to bust. This consultation is a great idea – but way too late.
Alison Braybrooks heads up the LBG and is a senior member of the consulting team at Corporate Citizenship. Among her responsibilities are working with major blue chip companies to help them better manage their community programs. Current clients include HSBC advising on the management of their international $100 million Climate Partnership, Vodafone, advising on the management of their £5 million Reach partnership, and BT, assessing the effectiveness of their community strategy. Previously, Alison was Community Investment Strategy Manager at EDF Energy, one of the largest energy companies in the UK, and managed their award winning community and employee volunteering program. Prior to EDF Energy, she was the Sponsorship Manager at Macmillan Cancer Support, a leading UK cancer charity, and headed up the corporate partnerships teams at NCH (formerly National Children’s Homes) and Shelter, both the leading charities in their respective sectors of support for children and homelessness. She is a regular speaker at industry conferences with broad experience of corporate responsibility issues and particular expertise in community investment strategy and managing NGO partnerships.
COMMENTS