Sam Dunn: At last, British borrowers don't want to get burnt

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The Independent Online

Borrowing money didn't cause any long-term trouble for Tony Curtis in the comedy classic Some Like It Hot. While his character, Joe, failed miserably to manage his money and was always having to turn to the ladies for loans, he got to play the sax, dine on a yacht and seduce Marilyn Monroe.

Borrowing money didn't cause any long-term trouble for Tony Curtis in the comedy classic Some Like It Hot. While his character, Joe, failed miserably to manage his money and was always having to turn to the ladies for loans, he got to play the sax, dine on a yacht and seduce Marilyn Monroe.

But the reality of being in hock and paying creditors back is starkly different. For the true face of debt, simply swap glamour for graft.

The nature of the hard slog to repair our damaged finances is, it seems, finally hitting home in the UK. For in the past 10 days, signs have begun to emerge that we are dealing with our debts.

We actually tightened our belts last month, according to figures from trade body the British Bankers' Association. For the first time since May 1994, when Britain was struggling to claw its way back from recession, we repaid some of our outstanding credit card balance - £40m - instead of adding to it.

Usually, by the end of each month, consumers have racked up more new debt on their plastic than is repaid.

David Dooks, the director of statistics for the BBA, said this "change in sentiment" might also be reflected in rising cash deposits in banks during the past couple of months.

Elsewhere, a report from the Association for Payment Clearing Services pointed to our developing a greater appetite for paying down our debts. Although Apacs found that the number clearing their credit card debt at the end of the month was fairly static (55 per cent), more borrowers were making inroads into their outstanding balances.

And, in another suggestion that debt is being taken seriously, more first-time buyers are taking out mortgage loans with insurance protection in case disaster strikes and they're not able to meet their repayments, according to the Council of Mortgage Lenders.

These rare flashes indicate that more of us are getting a grip on our debts, although the implications of a slowdown in our borrowing could have a wider, rather less welcome, impact on the health of the economy.

Indeed, the high street has already begun to feel the pinch. Retailers including Boots, Marks & Spencer and WH Smith have all struggled as a result of shoppers' fading desire to spend, spend, spend. Economists warn that a shock such as a rise in interest rates or unemployment could have a big impact as consumers have become super sensitive to such changes.

But the signs are at least evidence that the one-way debt traffic is no more. And this has come not a moment too soon.

Warnings of debt overload have been sounding for nearly two years now, and as a nation, we owe more than £1,000bn (including mortgages). Home repossessions and personal bankruptcies are rising - although not to levels anywhere near those of the early 1990s - and there are now over 73 million credit and store cards in the UK - almost two for each adult.

Meanwhile, Barclaycard said last week that it had been forced to write off more in bad lending debts than expected.

There has also been a particularly dark side to the credit spending boom, with stories of suicide because of over-indebtedness.

It would be heartening to see more signs in the next few months of consumers reining in their spending.

You could argue that a greater consciousness of being in the red has already begun to catch on, but don't hold your breath. April may have marked a turning in the credit card tide, but the BBA report also underlined a big rise in debt on personal loans and overdrafts.

Clearly, our debt mountain isn't going to diminish anytime soon.

A recent survey by the credit-reference agency Callcredit suggested that more than half of us have no idea of what we owe. If we all calculated this sum and got a better idea of exactly where we stand with our finances, maybe more of us would be better prepared to do something about it.

Tax turn

"Nothing is certain but death and taxes," said Benjamin Franklin. But the American statesman, didn't count on "Tax Freedom Day", which falls on Tuesday.

The Adam Smith Institute calculates that, for the first five months of the year, everything the average UK employee earns goes to Treasury coffers. This includes income and indirect (on goods) tax, as well as national insurance contributions.

But from Tuesday, every working penny you earn is your own.

Rejoice by pushing your individual "freedom day" back still further, using tax breaks such as the £7,000 individual savings account allowance and putting savings in a lower-earning partner's account.

s.dunn@independent.co.uk

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