Consumer borrowing could hit £1,000bn by the summer, the Liberal Democrats warned yesterday, as they urged the Government to rein in irresponsible lending.
Vincent Cable, the Liberal Democrat shadow chancellor, said British households now owed banks and other creditors as much as the external debt of Africa, Asia and Latin America combined.
"British consumers have been on the biggest borrowing binge in history. It has been keeping the British economy going but this isn't sustainable," Mr Cable said, pointing to recent Bank of England figures that show consumer lending at £934bn. This is rising at 1 per cent a month, meaning borrowings are set to hit £1,000bn by the summer.
He wants the Government to act to protect consumers from being crippled by their borrowings, and shelter the financial services sector from a boom and bust economy.
Mr Cable called for curbs on the "tidal waves" of unsolicited approaches by credit companies that encouraged borrowing, saying they should come with a prominent "credit health warning".
Loan sharks should also face a crackdown by tightening up rules on consumer credit licences. Mr Cable also demanded that rules on advertising be enforced more vigorously to prevent consumers being misled and that excessive interest rates on store and credit cards should be policed.
"Although interest rates are currently low they are rising - a £100,000 mortgage could well involve increased payments of £40 a month were interest rates to rise by 0.5 per cent," he said.