Coming out of recession is often the most dangerous time for your personal finances.
In the early 1990s, the biggest year for repossessions wasn't when the economy was contracting but when it was starting to grow again. Now accountancy giant Deloitte has warned that bankruptcies and individual voluntary arrangements (IVAs) are set to jump over the rest of the year as individuals who have been battling to survive finally give up, a little like exhausted survivors from a shipwreck clinging to a piece of wood for hours on end, just letting go and slipping beneath the waves.
And this is all before the extra pressure of unavoidable tax and interest rate rises over the next year or so. As far as bankruptcies, IVAs and even repossessions are concerned, the recession may be seen as a bit of a "phoney war" because, for most of us who have kept our jobs, the effects of the 6 per cent shrinkage of the economy has been barely noticeable. Apart from wage freezes, the news has actually been quite good, with interest rates at a once-in-a-lifetime low, and inflation, until lately, well below the norm. The pain, though, is now on the way. And the big question is – will it stop us spending or not? If it does, then the double-dip recession will happen.
If you're one of those people who has struggled, or who feels that they will be vulnerable, then a quick piece of advice. Please ignore the siren calls of firms offering to solve your debt problems. They will have names and websites which make it seem they are both free and impartial, but nothing could be further from the truth.
These IVA providers will negotiate with your creditors to reduce your overall debt burden, but in the process will load you down with exorbitant fees and all too often leave you with nothing to live on – just as long as they get their pound of flesh. And by entering into an IVA, you will be tagged for future credit. My experience in dealing with these firms is that they are nothing but exploiters, ripping people off for the same service that debtors can get – free – through a debt charity such as the Consumer Credit Counselling Service. In the amoral ocean of financial services, IVA providers are bottom feeders.
On this point, I recently received a cold call – which is against a code of practice agreed with the lenders – from one of these IVA providers asking whether I had debts and if I wanted to reduce them by up to 75 per cent and "one easily managed monthly payment". They were careful not to give the firm's name and when I quizzed them further they got spooked and actually put the phone down on me – a first, I'm sure. A few days later, a friend of mine told me they had received a similar call. It seems to me that the IVA industry, reading the runes of the economy, is gearing up for another assault on the consumers of this country.
Good-bye to all that
Were you up for Lembit Opik? Doesn't have quite the same ring to it as Portillo does it? Nevertheless, Thursday's election night was pure drama with shock results aplenty. Sad to see Mike O'Brien (Labour) and Nigel Waterson (Conservative), both of whom have done good work on pensions, get the chop, bewildered by why anyone would re-elect Glenda Jackson and stunned at the gracelessness of the speech made by the losing Tory in Westminster North, Joanne Cash, who blamed "press lies" for her defeat. If you want to see toys thrown out of the pram check it out on YouTube.
But one thing is certain, amid all the human drama, the electorate has said to the politicians that you have to get away from the old tribalism and actually work together. In recent years they have failed us at almost every turn, so let's see if they are now up to the task.