Insovency will grow, warns financial education charity

A financial education charity has warned that the number of insolvencies in England and Wales is likely to continue to grow. The prediction from the ifs School of Finance follows the release of insolvency figures by the Insolvency Service. The figures from the Insolvency Service show that in the last quarter of 2006, the number of individual insolvencies in England and Wales increased by 44.1 per cent over the previous year, to 29.804. This led to an increase in the total number of insolvences from 67,584 in 2005 to 107,288 in 2006.

Anne Kiem, Director of External Affairs at the ifs School of Finance has commented that the number of people taking out individual voluntary arrangements (IVAs) or being subject to bankruptcy orders is increasing. In the period from 1998 to 2006, the British economy has been buoyant. However, during that same period the number of bankruptcies has increased from 28,000 to more than 107,000.

Ms Kiem predicts: ‘These increases are likely to continue, and worse, if there is even a slight downturn in the economy, even greater increases will occur.’

She suggests that the British population suffers a ‘general lack of financial capability’ which is why the insolvency picture is so worrying. She adds: ‘By giving everyone the crucial life skill of being able to manage their own finances the numbers of insolvencies would doubtless decrease. If policymakers have a real desire to address this problem, bold action is needed in the form of proper financial education for all.’

The ifs School of Finance believes that this could be achieved if the government ensured that all schools and colleges offered their students the chance to study a standalone financial education qualification. Additionally, government should include financial capability teaching as part of teacher training and should ring fence funding for financial education in schools.