We shouldn't just accept soaring household debt, we should do something

Today an expert has warned that the pursuit of debt by local authorities in Scotland is pushing families into poverty. Since the 1990s a policy of 'cheap money' was promoted in the UK to encourage a debt-fuelled consumer spree. The outcome has been unsustainably high levels of personal and household debt.

This is a problem for all sorts of reason. It means people don't have savings which reduces their financial resilience, particularly in a recession or financial crisis. It creates a policy incentive to run a low interests rates policy even though that discourages long-term investment into the economy. And it requires large public subsidy to support families in deb, particularly with high housing costs.

We treat the 'national debt' as a priority but we ignore personal and household debt. The national debt is apparently in crisis because it is now at 95.3 per cent of GDP (UK's annual wealth). Yet personal and household debt is at 120 per cent of disposable income and stands at £1.85 trillion.

Politicians intentionally created the conditions to get the public indebted to encourage a consumer boom but behave as if the result of this policy is all our fault and therefore our problem to solve. It isn't, it's a national problem with shared national implications.

Common Weal believes we need a national Household Debt Reduction Programme. We believe that some of the commercial organisations who have made vast profits from debt should be required to take a 'haircut' and write off a proportion of people's debt. Public sector debts should be written off or reduced where they are unlikely to be repaid anyway.

We believe we need an explicit strategy of house price reduction because housing as become too expensive, and that might mean redirecting mortgage tax perks into price reduction moves. Those who want to should have access to aMortgage to Rent scheme. We believe there should be a National Mutual Bank set up on a purely public-good basis and that it should produce a protected National Mortgage Scheme designed to constrain house prices and make housing more affordable.

Finally, we would create a National Credit Rating Agency so that precarious household finances could be managed on a public good basis and not a commercial basis. We would set a National Debt Ratio that indicated how much debt was affordable in relation to the household income. That would mean that people who were deemed to be under financial duress could be offered a Debt Management Programme to help them restore their finances.

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