Rising bills add to pressure on those in debt

Rising household bills are set to put greater pressure on consumers who have financial difficulties, says the government's annual report on tackling over-indebtedness.

The study, which outlined government initiatives to tackle the problem, noted that calls to debt advice agencies rose significantly last year. It said National Debtline, a telephone helpline that provides free advice, took 65,535 calls during 2005 - an increase of 43 per cent on 2004.

In 2005, the Consumer Credit Counselling Service saw a 48 per cent rise in the number of Debt Management Plans, where consumers agree a scheme to repay their debts.

The annual report concludes most consumers use credit prudently although "a small and growing minority continue to show signs of financial distress". It notes that "even in the current benign economic conditions, the existence of trends . . . such as growth in levels of consumer debt make it likely that levels of over-indebtedness may continue to increase in the future".

The report comes just weeks after figures from the Insolvency Service showed individual insolvencies in England and Wales soared 66 per cent year-on-year reaching 26,021 in the second quarter of 2006.

In the annual report, the government pointed to some of its programmes that improve the financial education of consumers and help to minimise the number of people who became over-indebted. These included the launch of an online debt test, which consumers could use to assess the state of their finances.

The report pointed to the introduction of the 2006 Consumer Credit Act, which gained royal assent in March, which would introduce laws to improve responsible lending by banks.

It also highlighted the £120m which had been earmarked to increase access to affordable consumer credit for people on low incomes. This included £45m to launch more face-to-face debt advice around the UK.

It sets out a number of priorities including rolling out the Money Doctors scheme which provides financial advice to students in higher education as well as a £36m fund that supports lenders willing to help those who live in poor areas.

The government is also piloting a new debt helpline and pointed to the work of its loan shark investigation teams in removing illegal money lenders from the streets.