Peter Jackson column

Oct 5 2006 By Peter Jackson, The Journal

British borrowers are responsible for a third of all the unsecured debt in Western Europe.

While the average European owes a measly £1,558, excluding mortgage borrowings, John Bull, according to independent market analyst Datamonitor, is likely to be in hock to the tune of £3,175.

And this might explain the eagerness of our clearing banks to offer their customers free account reviews, so that they might better organise their financial affairs and gain some sort of handle on their borrowings.

Of course, the banks aren't being entirely altruistic. They hope to use these reviews to sell products to their customers, that is to say, to persuade them to consolidate their debts by borrowing money from them and then insuring the loan.

To be fair, these reviews are probably still in most customers' best interests, particularly given the dangerous UK debt situation.

But they are not necessarily welcomed by other sectors of the economy.

Take gyms and health clubs, for example. Have you ever wondered how so many of these can afford to offer life-time memberships at a guaranteed fixed cost every month? The reason is, they can't afford not to.

A large proportion of gym and health club members seldom, or even never, use the facilities - if they did, the clubs and gyms couldn't cope. But they still go on paying for those facilities because they have forgotten they ever signed the direct debit.

If the clubs and gyms didn't offer a lifetime fixed price, but put their prices up every year, they would have to write to the members pointing this out and those members who don't get value out of their subscriptions would cancel the direct debits.

So it's in the clubs' best interests to let sleeping dogs - or couch potatoes - lie and settle for the fixed cost subscription.

But now the banks are spoiling this by offering account reviews, with lists of all outgoings and direct debits, including the subscription you took out to the gym two years ago, and to which you've been twice in the past eight months.

The fact that it takes the bank manager to point this out to us might also explain how we British so easily run up such massive debts.