William Kay: Volcano bubbles as our debt mountain grows

This week's new Bank of England figures showing that as a nation we are wallowing in all-time record levels of personal debt, is worrying both personally and collectively. Combined with the government's rising tide of spending, the debt mountain is storing problems for the future.

This week's new Bank of England figures showing that as a nation we are wallowing in all-time record levels of personal debt, is worrying both personally and collectively. Combined with the government's rising tide of spending, the debt mountain is storing problems for the future.

The debt will eventually have to be repaid, and as a first step millions of people will have to start spending less so they do not take on even more debt. That has potentially serious implications for the economy and therefore the stock market.

Shares have been encouragingly resilient, even through the dog days of summer. Confidence is slowly returning, but it will be fragile for some time and I do not yet rule out another plunge deep into the 3000 levels of the FTSE 100 index. In that context, the debt mountain must be treated with care. It could turn into a volcano.

At the personal level, debt is double-edged. It is fairly easy for most people to cope with, as interest rates are so low. But because pay rises are also low, debt does not melt away as painlessly as it did when inflation used to roar away.

This is the best time to sort out your finances, when things are relatively calm. Tedious though it may be, it is worth regularly reviewing debt and savings or investments.

Certainly, you should ditch that store-card bill you ran up when you bought something extravagant with the lure of a 10 per cent discount. Try to concentrate your owings on your mortgage, because that is likely to be costing the lowest rate of interest.

If your debt is getting out of control, do not run away from it. Think what to do, and if the answers are too grim to contemplate do not be afraid to seek advice. Tell lenders: this may take bravery, but it will repay you.

The good news is that you can tap plenty of free help, from the likes of National Debtline (0808 808 4000), your nearest Citizens Advice and the Consumer Credit Counselling Service (0800 138 111).

* If debt is bewildering for some people, phone deals seem to be deliberately designed to befuddle. BT was the latest this week with Mobile Home, a plan that was apparently made to fit like a glove on to its target audience of families with teenage children.

But closer inspection made it seem less alluring. The rental and call charges are high, the free time is not as generous as it sounds at first, and basing a package even partly on the fickle whims of teenagers is highly risky.

While parents are sitting at home eagerly waiting for their children to call, an image with a slightly sepia-tinted feel in the 21st century, a lot of kids don't want to phone just because mum and dad expect it. The mobile phones selected for the scheme are hardly cutting-edge, and BT is not exactly the coolest network provider.

Mobile Home will undoubtedly work for some families, and BT's stated sales target are suitably modest. But this looks destined to become yet another idea that looked better on the drawing board than in customers' hands.

Now that eight in 10 of us have mobile phones, it is logical for providers to seek unexplored niches and try to persuade us to use phones in new ways. But, as with the internet and other hi-tech devices, people have been level-headed about what it will get sucked into. Simplicity and value for money are the only gimmicks that last.

* Congratulations to Nationwide building society for winning its campaign to give Link cash-machine users warning of charges. It was iniquitous, and all too characteristic, of banks to hide the charge, and Matt Barrett at Barclays was quick to back down when he saw what a loser this was.

Nationwide is now fighting to have the warnings in the form of stickers on the machines. This sounds messy, and I wouldn't put it past some banks to print their stickers in the most unobtrusive possible colours.

Surprisingly, Nationwide is not fighting Link's decision to put off the implementation of a warning system until next April. Surely it would not have been too difficult to make the change by Christmas, when people might not be looking closely at charges?

w.kay@independent.co.uk