HC Deb 29 January 1987 vol 109 cc470-1
1. Mr. Kirkwood

asked the Chancellor of the Exchequer if he will make a statement regarding the rise in the accumulated level of personal debt.

The Chief Secretary to the Treasury (Mr. John MacGregor)

Over the last five years personal sector financial liabilities, including borrowing by unincorporated businesses, have been rising at a steady rate, matched by similar growth in personal sector financial assets.

Mr. Kirkwood

Will the Chief Secretary acknowledge that the official figures do not tell the full story, because they do not include things such as building societies, families, friends and employers who lend money? Has he seen last year's estimates by the market research analysts Mintel? They show that consumer debt was increasing at £8 billion to £10 billion per annum. Does he think that that level of increase is sustainable? Does he agree that the consumer debt increase is simply contributing to the worsening trade figures?

Mr. MacGregor

The hon. Gentleman ought to be aware that building society lending and things like that are included in the figures that I have quoted. Although lending has been going up, as I have said, assets have been going up as well. An important point in this context is that net financial wealth, which is assets minus liabilities, has increased by nearly 150 per cent. since 1980. Obviously. it is important that people should borrow prudently so that they can service and repay their debt. It is clear that, on balance, consumption is rising at a moderate level, and investment is rising at about the same level.

Mr. Latham

Is my right hon. Friend aware that the biggest item of personal debt for most people is the mortgage repayment? Is he doing his best to try to get interest rates down in the interest, apart from anything else, of the counter-inflation policy?

Mr. MacGregor

A mortgage is certainly a major item in a person's financial affairs and it is healthy that more and more people have the opportunity to obtain mortgages. There is a question about interest rates later on the Order Paper, and I will deal with that point when we come to it.

Mr. Ashley

Is the Chief Secretary aware that irresponsible pressure is brought to bear on some people by credit organisations which make no effort to ensure that loans can be repaid? Is there not some way in which he can protect consumers against these ruthless people who are behaving in an irresponsible manner, damaging individuals and the economy?

Mr. MacGregor

As the right hon. Gentleman knows, consumer protection is a matter for my right hon. Friend the Secretary of State for Trade and Industry. The right hon. Gentleman will have noticed that the Bank of England recently issued a letter to all lending institutions urging them to observe prudent lending measures in their lending. My hon. Friend the Minister for Housing, Urban Affairs and Construction has echoed that point to the building societies in respect of lending for housing. It is important that these institutions observe prudent lending policies. I believe that, coupled with prudence by those who borrow, that is the best way to deal with the matter.

Mr. Powley

If it is right that we should be concerned at the accumulated level of personal debt, does my right hon. Friend agree that it is absolutely right to be extremely concerned at the level of accumulated debt by local authorities in London and the level of debt incurred by this country in public spending?

Mr. Speaker

The question concerns personal debt.

Mr. MacGregor

Of course, the growth on both sides of the balance sheet—and I have said that this has occurred not only in borrowing but in the level of financial assets that people have acquired—is seen in most industrial countries. My hon. Friend's point about local authorities in London is a separate matter. Those authorities identified by the Audit Commission have been showing grave imprudence in the way in which they have managed their financial affairs.

Mr. Blair

Now that the Chancellor has arrived at a position, 15 years on, that is considerably worse than that provided for by Lord Barber, will the right hon. Gentleman explain why he is so much in favour of individuals borrowing to consume, but so against the Government borrowing to invest?

Mr. MacGregor

I have said that I am in favour of individuals borrowing to build up financial assets and to consume, provided they do that prudently. The Government have been borrowing prudently, and we have also been investing. Capital investment has been maintained in real terms under this Government, whereas under the Labour Government it substantially dropped in real terms.