Join the Socialist Party Join us today!

Printable version Printable version

Facebook   Twitter

Link to this page:

From The Socialist newspaper, 7 June 2007

Drowning in an ocean of debt

IT IS a telling sign of the scale of debt-related stress, when some people who have 'opted' for bankruptcy say they are relieved. An insurance salesman who declared himself bankrupt was quoted in last Sunday's Observer (3.6.07), saying: "Although it still carries a stigma, overall it's been a ray of light, a salvation of sorts. It's an opportunity to start afresh".

Bankruptcy, though, is not a relief for everyone. Another testimony in the same Observer feature was from a working woman whose bankruptcy deal included being forced to pay 579 a month for the following three years and she was still threatened with court action for having borrowed 'beyond her means'.

The number of bankruptcies has reached its highest level since 1960 and personal debt in Britain has reached 1.3 trillion, the highest level in Europe.

A record 30,075 people declared themselves bankrupt or insolvent between January and March this year. County court judgments regarding unpaid debts on credit cards, personal loans, mortgages, car loans etc has nearly doubled in three years. Nearly 250,000 were issued in the first quarter of this year.

Banks and other profiteering lenders are turning to the courts more and more, backed up by bailiffs who will try to seize goods. They are increasingly keen to go to court at an earlier stage, in order to act before people reach a point where they declare themselves bankrupt or resort to an 'individual voluntary agreement' (IVA), as these outcomes make it more difficult for banks to recover all the loans and interest.

IVAs involve a negotiation to write off a portion of the debt. But incredibly, the company setting up the IVA can super-exploit the debtor's crisis by taking the first chunk of re-negotiated loan repayments for itself - a kickback that can amount to thousands of pounds!

In any event, banks make sure that they themselves do not suffer too much from the spiralling number of debt defaults. Having enticed people into massive debt in the first place, when a layer of people cannot manage the repayments they simply increase bank charges for everyone else, or threaten to do so again soon. When rejected by the main institutions, some people turn in desperation to door-to-door loan sharks at interest rates of up to 500%, with no legal limit.

Culture of debt

AN INCREASING number of young people are getting into difficulty. They face much greater financial burdens than their parents' generation on expenditure like house rents, mortgages and university costs. At the same time they are sucked into a dangerous present-day capitalist culture of seeing debt as normal or even healthily speculative and superior to not having it.

Contributing to this is widespread sentiment that the borrowing can go on and on with the total debt never being repaid. This is not the first time that there has been such a "bubble of delusion", as it was described by one commentator. For instance, there was one before the early 1990s housing price crash.

The poorest working-class people are particularly hard hit, often having high debt levels in relation to their income, but more affluent workers and middle-class people are badly affected too.

People are paying up to 50% of their income in servicing debt and find it increasingly difficult to manage, especially those who feel compelled to borrow more and more and end up facing astronomical interest payments. A recent survey showed that the average two-child household has more than 100,000 worth of mortgage, loan and credit card debt.

Four interest rate rises since last August have brought interest rates to 5.75%, with a further rise to 6% already predicted. More interest rate increases or higher unemployment, or both together, will send many more people into a downward spiral.

The high levels of personal debt have become a familiar refrain in newspapers. With this background, it is important not to become immune to noticing the increasing extent and speed of the escalation. Housing debt for instance has increased by 20% in the last year alone. Nationwide building society reported a huge 92% increase in housing borrowing in 2006 compared with 2005. And as the charity Citizens Advice warned: "It takes only a small change in people's circumstances to tip them from manageable commitments into serious debt".

Of course there are limits to how much debt people can be burdened with. As a general rise towards those limits is reached, it is inevitable that people will have to stop borrowing more and will then have to cut back on their spending.

At some point this will tip the credit-fuelled economy into recession and interest rates might be temporarily lowered, but that will be small comfort to workers who lose their jobs in the recession and the millions who will face further attempts by the bosses to keep pay rises low or non-existent. Recession would also bring further attacks by the government on public services, already being destroyed in a period of economic growth.

We must fight for:

Why not click here to join the Socialist Party, or click here to donate to the Socialist Party.

In The Socialist 7 June 2007:

Labour cheats NHS

PFI - a licence to print money

Petition on NHS: Stop cuts and privatisations (word)

War and terrorism

Fight Brown's agenda of war, cuts & privatisation

Socialist Party workplace news

Postal workers fight closure

Coventry says 'keep our Post Office open'

CWU delegates attack link with Labour

Come to the Shop Stewards' Network conference

National Shop Stewards Network Founding conference

Ritzy - low-paid workers strike again

G8 Summit protests

80,000 demonstrate against the G8 summit

Activists with ideas

What we think

Drowning in an ocean of debt

Socialist Party feature

Young people: a bright future... or different shades of grey

International socialist news and analysis

Bolivia: Release Adam Ziemkowski

South Africa: Public sector workers in mass fightback

The Arab-Israel 1967 war: repression and bloodshed continues

Socialist Party news and analysis

Don't trust the Trust schools - organise!

Tony Blair "brings church into school"

Weekly bin collections AND recycling schemes

Black and Asian group: Socialist ideas to unite all workers

Take part in the 22-28 June Fighting Fund week of action

The fat cat and the 'cleaning lady'

Workplace news and analysis

Remploy management squander opportunities

Tesco strikes show new mood


Home   |   The Socialist 7 June 2007   |   Join the Socialist Party

Subscribe   |   Donate  

Related links:


triangleTunisia: explosion of protests against government austerity

triangleA world in crisis, ripe for revolution

triangleRetail sector crunch: nationalise to save jobs

triangleAmber warning lights flash on British economy

triangleMarch for free education! We demand a future!

Interest rates:

triangleHousing crisis: Corbyn's positive measures blanked by Labour's right

triangleDefuse the consumer debt time bomb: nationalise the banks!

triangleGlobal finance: Are those storm clouds ahead?


triangleThem & Us

triangleWidening wealth gap, increase in poverty...make the fat cats pay

triangleRBS to sack 1,000: nationalise the banks


triangleHeating scandal on east London estate


triangleYoung people being strangled by debts

Reports and campaigns

Reports and campaigns


Socialist Party

Southern Socialist Party conference: discussing the way forward in 2018



Socialist Party women's meeting brings together members to share experiences



Packed Newham meeting against academies



Lobby pushes Liverpool council to oppose privatisation



Heating scandal on east London estate



Undercover policing legal challenge



No to the Woolwich monster block



We must fight all council cuts!



Workplace news in brief



PCS union 2018 elections - nominate the left slate for a continued fighting leadership



Hackney school cleaners strike



RMT strikes against driver-only operation continue



Ferrybridge: Workers down tools over unpaid wages



Home care workers to strike


Waltham Forest

Outrage against 'monster block' plan

triangleMore Reports and campaigns articles...

Join the Socialist Party
Subscribe to Socialist Party publications
Donate to the Socialist Party

triangle16 Jan Home care workers to strike

triangle15 Jan Carillion crisis: Demand action to save jobs and services

triangle12 Jan Outrage against 'monster block' plan

triangle12 Jan Mini-strike wave continues and intensifies

triangle10 Jan Strike wins biggest pay rise in ten years

triangle10 Jan Movement of workers and youth challenges Iranian regime

triangle10 Jan Cabinet chaos as shambolic reshuffle underlines Theresa May's...

More ...

triangle18 Jan Waltham Forest Socialist Party: How do we get Corbyn's policies into Waltham Forest council?

triangle18 Jan Southampton Socialist Party: Is there a global nuclear threat?

triangle18 Jan Swansea Socialist Party: Is there a threat of nuclear war?

triangle18 Jan Cardiff East Socialist Party: Building Socialism in Cardiff East

More ...

Socialist Party Facebook page
Socialist Party on Twitter
Visit us on Youtube



January 2018






















Platform setting: = No platform choice