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Decrease consumer debt says CBI chief

Confederation of British Industry director general John Cridland says that although the current economic upturn looks set to continue, UK recovery strategy must focus on reducing reliance on debt.

In his new year address Cridland says: “The major lesson from the financial crisis is that as a country we need to move away from an economy that was far too reliant on consumer and Government debt. As growth picks up we must make sure that it is well-balanced.”

He adds that signs of a balanced recovery are positive. He says the CBI’s growth indicator, a measure of growth covering retail, manufacturing and service sectors to be introduced in January, will show a cross-sector recovery: “A sneak preview of our new CBI growth indicator suggests the recovery is broad-based and continues to gather pace.”

Cridland also warns of the possible negative effect of Scottish independence and UK exit from the EU.

He says: “While the economic outlook is improving, business is moving into a period of political uncertainty with European elections, a referendum on Scottish independence, a general election, and a potential EU referendum all looming.

“Our view is clear, we are better off inside the EU reforming it from within, and the UK is more than the sum of its parts and we must stick together.”

In November, the Scottish parliament set out its plans for the creation of a new financial services regulator and compensation scheme in the event of a ‘yes’ vote on independence. Experts told money marketing the plans looked like ‘a nightmare’

The latest figures from the Office For National Statistics show that UK GDP increased by 0.8 per cent in Q3 2013. Year on year GDP increased 1.9 per cent to end of Q3 2013 but overall GDP is still 2 per cent below the peak in Q1 2008.

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  1. The only way to reduce consumer debt is to regulate unsecured consumer borrowing. Start by

    1. limiting it to a maximum of 3 months nett income (from all sources ~ anything more is surely dangerous),

    2. clamp down hard on pay day lenders (by outlawing obscenely high rates of interest) and

    3. restrict consumer purchases on credit to 80% of the purchase price (if you can’t afford to put down even 20%, then is it a wise purchase?)

    These are simple, straightforward measures. Why isn’t the FCA pressing for powers to enact and enforce them?

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