Insolvencies will soar as cuts bite, says debt charity

The Debt Advice Foundation has warned that the number of people facing insolvency could rocket by 20% following the outcome of the government’s spending review.

With speculation that 500,000 public sector jobs could be lost by 2014, the charity believes that al-though personal insolvency figures have fallen for the second consecutive quarter, the country is sitting on a financial time bomb.

David Rodger, managing director of the DAF, says: “Although 2010 has seen a reduction in those becoming insolvent, the prospect of 500,000 public sector jobs being cut with little hope of the private sector picking up the slack means the worst could be yet to come.”

He says although insolvency volumes are the result of a several factors, such as unemployment, the spending cuts could lead to insolvencies rising to over 40,000 per quarter, 20% higher than at present.