Wealth gap ‘a source of debt problems’

A growing gap between the wealth of those on middle incomes and the rich has been a major cause of the increase in consumer borrowing and consequent debt problems, it has been claimed.

Such a view was expressed by Ed Miliband, the leader of the Labour Party, speaking yesterday at the launch of a review into the squeeze on middle incomes and its causes by the Resolution Foundation.

Mr Miliband acknowledged that this trend has been occurring for many years and is not a result of the recent recession, with less of the wealth Britain produces going into wage packets and the increase in wealth of the richest outpacing the rest, something he said the Labour government of 1997-2010 bore some responsibility for because it did not fully tackle the problem when it had the chance.

He said the desire for cheap credit was strong in recent years “because wages weren’t keeping up with the pressures on families too many were forced to borrow to finance their living standards”.

But while noting credit card debt and other financial problems could be blamed on the policies of past governments, Mr Miliband said he believed the coalition’s cuts were making matters worse and pledged to ensure Labour could reinstate the “British promise” of making each generation better off than the previous one.

In the meantime, those who have run up large debts may wish to seek a debt management plan to get these under control.

The Resolution Foundation Commission on Living Standards will spend the next 18 months examining the causes and issues underlying the relative decline of middle income wealth levels.

By James Francis