As many as eight million adults in Britain may be in serious debt - many more than the official figure of one million, according to a study carried out by the Conservative Party.
A group reviewing the party's policies on social justice, chaired by the former Tory leader Iain Duncan Smith, called for curbs on lending money to low income families. It warned that the easy access to money was compounding Britain's social problems.
Its report, Breakdown Britain, which was published yesterday, painted a bleak picture of a society "breaking down on the margins" where the "social fabric of many communities is being stripped away".
It warned that Britain faced a "debt time bomb", with consumer debt at record levels and personal debt estimated at £1.25 trillion, the equivalent of £50,000 per household.
Polling for the group found that people regarded personal debt as Britain's most serious social problem. The report said three million people were excluded by mainstream lenders such as banks and had to resort to doorstep lenders, pawnbrokers, sale-and-buy-back shops and mail order catalogues and paid interest charges of between 100 per cent and 400 per cent. Loan sharks charged even higher rates.
The report said that they faced escalating penalty charges and their "juggling act" was compounded when they took out new loans to pay off old ones.
People with a history of drug or alcohol problems or a criminal record were more than twice as likely to get into serious debt than the average person.
Mr Duncan Smith said the financial institutions were failing to show "a duty of care" to poor families. He said family breakdown, educational failure, economic dependence, indebtedness and addictions were all inter-related.
"Children from a broken home are twice as likely to have behavioural problems, perform worse at school, become sexually active at a younger age, suffer depression and turn to drugs, smoking and heavy drinking. The increasingly dysfunctional society described in this report is one that breeds criminality," he said.
The group's final report next summer is likely to form the basis of David Cameron's anti-poverty programme, including tax rewards for married couples. Yesterday's report called for a "radical appraisal" of marriage policy to reduce social tensions and family breakdown, which costs Britain more than £20bn a year.
Last night Mr Cameron insisted that the Tories were not "trying to point the finger" at people such as single mothers by stressing the importance of marriage. "We won't tackle poverty unless we get to grips with this issue, so politicians shouldn't shy away from it," he told the BBC.
Pat McFadden, the Social Exclusion minister, said the Tories had opposed measures to tackle poverty such as the minimum wage, maternity leave and flexible working. "The truth is that, despite all of today's rhetoric, the Tories are not offering one concrete policy proposal to help and support Britain's hard-working families and to eradicate poverty," he said.Reuse content