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Volume 689: debated on Tuesday 6 February 2007

My Lords, is the Minister aware that the figures he has just given to the House show that since 2002, when the Government eased bankruptcy regulations, the number of bankruptcies and IVAs has gone up by four times? During that period there has been no increase in the rate at which new businesses are formed. The Government have encouraged the feckless and improvident at the expense of the prudent and hardworking. Can the Minister recognise that the three great achievements of his Government have been to make it easier for people to get drunk, buy drugs and go bankrupt? Will that feature in the Blair legacy?

My Lords, there are a number of reasons why the level of individual insolvencies has increased, including the availability of credit, unemployment, other economic factors and specific reasons relating to the individuals concerned. I do not accept the noble Lord’s point that legislation has led to that increase in insolvency; after all, the number of those in insolvency has risen in Northern Ireland and Scotland, where people have not been affected by the same legislation.

My Lords, will the Minister accept that there is another reason why there are such high levels of bankruptcy; that is, the very low levels of financial literacy in the UK? Will he further accept that the Government’s action in appointing Mr Thoresen to undertake a review in this area is, frankly, too little, too late? Does he agree with the IFS School of Finance that financial education should now be included in the national curriculum?

My Lords, the noble Lord has a valid point that far more needs to be done to educate people about indebtedness and how to deal with it. The Government are already doing a lot in that area; for example, we are giving grants totalling £47.5 million for advice agencies to hire and train more than 500 new debt advisers. We are giving an additional £21 million-plus to Citizens Advice this year to help it to provide support services and an extra £1 million to the National Debtline. In addition, we are working to ensure that we provide information and advice to young people—so we are doing a lot in this area, which will benefit hundreds of thousands of people.

My Lords, in the 1960s and 1970s one could borrow only one and a half times one’s income and up to 85 per cent of the value of a property. Today one can borrow up to 125 per cent of the value of the property and about five times one’s annual income. To what extent has that affected the rate of bankruptcies?

My Lords, I am not sure that it has. The fact is that we have record low historic levels of interest rates, record levels of employment and GDP growth in the UK has now seen an unbroken 58 consecutive quarters of positive growth, so the economic background and environment is generally improving. However, it is true that indebtedness in certain sectors of society is increasing. The issue is how a minority of people deal with those debts. The level of insolvency in the UK is something like a quarter or a fifth of the levels in the United States, so I do not see the picture in the same terms as the noble Lord.

My Lords, if things are so good, how come people are struggling to hold on to their homes? There have been 91,000 court orders for repossession this year alone. Are the Government in the least concerned that the level of debt that they have encouraged is now throwing thousands of people into the misery of bankruptcy and repossession? What is the Minister going to do about it?

My Lords, of course the Government are always concerned about repossessions—but I recall the late 1980s and the early 1990s, when the levels of repossession went through the roof and when interest rates, under the previous Conservative Government, went up to 15 per cent. That created real difficulties for home owners.

My Lords, there is great concern about the potential mis-selling of IVAs, individual voluntary arrangements, and the distress that that will cause many in the future. How do the Government view IVAs?

My Lords, the noble Lord is correct; there are concerns about the advertising of IVAs. An IVA is a matter between a debtor and his or her creditors and it must be licensed by an insolvency practitioner. Insolvency practitioners are already subject to stringent regulatory regimes which apply both ethical codes and professional standards. The Government are keeping a close eye on that and monitoring it.

My Lords, does the noble Lord recall the wise words of a former general secretary of the Labour Party, Morgan Phillips, that the Labour Party owed more to Methodism than to Marxism? The Methodist regime believed in thrift, decency and community rather than in capitalism and market forces.

My Lords, it is an interesting philosophical point, but I did not know Morgan Phillips personally so I should not like to comment further.