Britain's debt problems 'epidemic', warns think tank

One in four British households has a negative cash position

Britain's debt problems turning 'epidemic', warns government think tank (GETTY IMAGES)

The nation's debt problems have become an epidemic that needs solving with a national campaign to bring the issue into the open, similar to that undertaken by the government in the 1980s with AIDS awareness.

That's the conclusion of a major report from government think tank The Smith Institute published today in conjunction with debt charity Step Change.

It shows that one in four households has a negative cash position and one in 10 has net debts of more than £5,000. The report - "Tomorrow's Borrowers" - also highlights the growing menace of payday lenders by revealing that the worse off households owe half their debts to high-interest creditors.

Lord Wilf Stevenson, chair of the StepChange debt charity, pointed out that "six million people in the UK have problem debt."

But things are set to get much worse, according to the report. It warns that the traditional view that having high levels of debt is associated with youth is changing. "Many of tomorrow's borrowers have made no plans for their retirement," it says, concluding that people will accumulate greater debts in early life and take longer to pay them off.

It means that by 2025 more older people than ever will be trapped in personal debt. "This presents a serious problem which has negative consequences for individuals and for society as a whole".

"Britain is sleepwalking to a more serious debt crisis," warned Paul Hackett of the Smith institute.

The Institute called for a "concerted national campaign on a par with the AIDS awareness campaign of the 1980s or the five-a-day fruit and vegetable campaign that began in the 1990s".

The campaign should include a generic message that stops debt problems escalating by encouraging people to seek help early and have a plan to repay debt. The report calls for determined action by government and regulators.

But it warns that there also needs to be changes in policies affecting where we live and the world of work, as well as a much bigger effort at improving financial literacy, especially among the young