Bank governor speech on debt ‘misleading’

Britons are in much more and worse debt than was acknowledged in a speech this week by Bank of England governor Mervyn King it has been argued.

Save Our Savers (SOS) has criticised comments made by the governor in which he said:  "The increase in households' borrowing came to an abrupt halt in the 2008/9 recession."

SOS said this was "misleading" because it suggested that consumers have ceased borrowing, adding "nothing could be further from the truth".

The pressure group said that the reality is one of debt that is continuing to cause widespread difficulty for households, with the overall drop in indebtedness being due to some of it being written off by banks.

It stated that the fall from the figure of £1.461 billion of debt in November 2008 to £1.461 billion was mainly due to £26.7 billion being written off, meaning that once these are excluded there has been a net rise of £18.4 billion.

The body also quoted the Bank's own statement that: "There is little sign that, at the aggregate level, households are making an active effort to pay down debt more quickly than in the past."

Credit card debt is one area in which the problems faced by consumers appear to be ongoing, according to a survey by Gocompare.com.

It found 26 per cent of Britons will be carrying a card debt throughout 2012, while nine per cent owned up to being reliant on plastic to make ends meet.

The study also found 35 per cent of people want to reduce or eliminate their debts.

By James Francis