History > 2006 > UK > Economy (II)

20 years ago

the dole queue hit 3 million

- today it is the workforce

that's a record

Wednesday August 16, 2006
Guardian
Ashley Seager

Today's unemployment figures for July come on the 20th anniversary of the postwar peak in the unemployed claimant count. In July 1986 the number of people on the dole hit almost 3.1 million, 10.6% of the workforce. Today, on comparable figures, it is less than a million, with a rate of 3%.

Many Labour politicians, brought up during the mass unemployment of the 1980s and early 1990s, regard the fall in the unemployment rate to a 30-year low as their proudest achievement. The deep recession of the early 1980s and the job losses that followed the miners' strike of 1984 pushed unemployment up from the 1 million Margaret Thatcher had inherited as prime minister in 1979 to more than 3 million in seven years.

"When social historians look back at the 1980s in detail, they will ask how it was allowed to happen and how it was tolerated ... Britain also had the highest child poverty of any developed European economy," employment minister Jim Murphy told the Guardian. "The reduction in unemployment that we have achieved as a government, although somewhat unheralded, is at the centre of everything Labour has achieved."

The Tories let unemployment rise a second time to just under 3 million after the Lawson boom of the late 1980s, which had halved unemployment, turned into a spectacular bust. To be fair, it then started to fall again after the pound crashed out of the European exchange rate mechanism in 1992. The Tories also adopted the system of inflation targeting that laid the foundations for the current economic stability and low unemployment.

Legacy

Labour inherited a claimant count of 1.35 million in 1997. There is little doubt, say economists, that Labour's handing of responsibility for interest rates to the Bank of England, combined with labour market policies such as the New Deal and Jobcentre Plus, which put benefit payments and job searching under one roof, helped push unemployment far lower than most economists thought possible while keeping inflation low and stable. Employment stands at a record of just under 29 million, or 74.6% of the workforce, the highest in the G7 leading economies. Four million jobs have been created since 1986, half of them on Labour's watch.

Critics, particularly in Conservative ranks, say the jobs have been created by expansion of the public sector, particularly in its second term. In fact official data shows that while public sector employment has grown by 700,000 since 1997, employment in the private sector, particularly in services such as retailing, has expanded nearly twice as fast.

Labour has also reduced long-term youth unemployment to virtually nil through its New Deal. "We have a zero-tolerance policy towards youth long-term unemployment. We will not allow 18-24-year-olds to park themselves on the dole with no help or support in finding a job," said Mr Murphy.

This is all part of the "rights and responsibilities" approach the government has taken to employment whereby individuals have a right to benefits and help to find a job but a responsibility to actively look for work and take one of the jobs on offer. Mr Murphy points to the 600,000-odd vacancies in the economy and says the government is actively trying to match unemployed people with those jobs. "More people want to work than ever before and that's fantastic."

However, the labour market has turned in the past 18 months, with unemployment starting to rise again. The claimant count has risen by 93,000 over the past year, though the rate remains low at 3%, up from a three-decade low of 2.7% last summer. According to the wider Labour Force Survey measure, which picks up those who are out of work but not claiming jobseeker's allowance, joblessness has risen by 224,000 over the past year to 1.65 million, a rate of 5.4%.

The picture is confused by the continued rise in employment - by 223,000 to 28.9 million. This turns on its head the usual equation in which rising unemployment also means fewer jobs.

Sluggish

There are various reasons for this. One is that the economy was sluggish last year and unemployment has ticked up after a time lag. But probably the main reason, says John Philpott, labour market economist with the Chartered Institute of Personnel and Development (CIPD) is that the working age population has been expanding. It has grown by 447,000 in the past year. Demand for labour is still expanding, but the supply of labour is expanding faster. This is partly because of a fall in the nearly 8 million adults of working age classified as "inactive", such as students, those looking after a home or the long-term sick.

Policies to get the long-term sick back to work have brought a drop of 72,000 to 2.1 million over the past year, while there has been an increase in those coming back to work from looking after a home. There has also been strong growth in numbers of women at work and in the over-65s coming back into the workforce, especially in retail. Economic inactivity dropped in June to its lowest since 1992. Another possible reason for the expansion of the workforce is migration, particularly from eastern Europe, though a study for the Department of Work and Pensions (DWP) could not find any evidence of an effect on the labour market.

Mr Philpott is unconvinced. "The rise in the supply of labour is due partly to population growth, driven mainly by increased immigration, and partly to entry to the labour market of more people who were previously economically inactive."

The Bank of England governor, Mervyn King, said recently that of the 1.7 million expansion in the workforce over the past decade, 1.3 million was due to migration. He said the labour force had recently been expanding twice as fast as in the rest of the postwar period.

In the short term, there is a danger of government policy swelling the ranks of the unemployed. Mr Philpott and the DWP's officials say the government's drive to get 1 million of the 2.7 million people on incapacity benefit back into work may push up the jobless numbers as people report themselves unemployed while looking for a job. Mr Murphy says there is evidence that this is already happening.

In the long term, whether Britain can find jobs for its growing workforce now depends firmly on growth in the private sector, as the government attempts to trim the civil service. Economic growth has picked up strongly this year, and the CIPD's latest labour market survey, released today, says there has been a continued recovery in the numbers of private sector firms expecting to recruit since a trough last autumn, particularly in the service sector.

20 years ago the dole queue hit 3 million - today it is the workforce that's a record,
G, 16.9.2006,
https://www.theguardian.com/business/2006/aug/16/
socialexclusion.politics 

Problem of personal debt

spiralling out of control,

say insolvency experts

· Record number of people throw in repayment towel
· Official figures said to be tip of the iceberg

Saturday August 5, 2006
Guardian
Larry Elliott, economics editor

Insolvency experts warned last night that the problem of personal indebtedness was "spiralling out of control" after official figures showed record numbers of borrowers are losing the battle to keep up their payments on loans, overdrafts and credit cards.

Amid concern that Thursday's increase in interest rates from the Bank of England will be the final straw for many struggling to keep up their payments, the government said a record 26,021 people gave up the fight and became insolvent in the second quarter of this year.

The 66% rise over the past year left insolvencies on course to break through the 100,000 barrier for the first time this year. But there are concerns that the official data only scratches the surface of a nation with debts in excess of £1 trillion.

James Falla, managing director of the consultancy firm Thomas Charles, said: "Official figures for individual insolvencies are just the tip of the iceberg. Our own research indicates 1.1 million adults in Great Britain are in some danger of becoming insolvent. The situation is here to stay and is set to grow."

Separate figures from the Council for Mortgage Lenders also saw a sharp rise in the number of homes repossessed in the first half of the year, which at 8,140 was up from 4,620 in the same period of 2005 and was the highest for five years.

Personal insolvencies in the second quarter were made up of 14,915 bankruptcies and 11,105 individual voluntary arrangements (IVAs), which allow people to repay a set amount of their debts each month in exchange for having interest payments capped. KPMG said at least 800 of those signing up for IVAs in the three months to June had unsecured debts of £100,000 or more.

Mark Sands, director of personal insolvency at KPMG, said: "Pressure could mount further as consumers face higher energy bills and rising interest rates and we predict a record number of personal insolvencies of 100,000 in 2006, and we think the figures mean someone is entering formal insolvency every minute of the working day."

The financial advisers Grant Thornton said the problem was "spiralling out of control". Mike Gerrard, its head of personal insolvency, said almost 9,000 people a month were losing the fight to remain solvent against 2,500 a month five years ago. He said: "What is of greater concern is that such rises have developed within a relatively benign economic context. Without wanting to be overly gloomy, it is undeniable that recent economic factors such as the rise in unemployment levels, ever increasing utility bills and, since yesterday, higher interest rates will all play a part in tipping yet more people over the edge and adding to the problem." Mr Gerrard said the growth in insolvencies had been fuelled by excessive consumer spending, exacerbated by people "often ignoring its effects and letting interest rates turn a pile of debt into a debt mountain".

Pat Boyden, a PricewaterhouseCoopers partner, said the rise in the number of IVAs was "staggering" and followed a borrowing binge in the last six years. People in the 30 to 40 age group took out the most IVAs while the number was growing fastest among 20 to 30-year-olds. The majority of young people entering IVAs were manual and unskilled workers rather than students.

Opposition parties blamed the government for the insolvency figures. The Conservative director of policy, Oliver Letwin, said: "An economy built on borrowed money is built on borrowed time. As the economy fails to live up to Gordon Brown's expectations, the number of bankruptcies is rising faster and faster."

Vince Cable, Treasury spokesman for the Liberal Democrats, blamed the financial services industry for aggressive selling of credit and called on ministers to work with lenders to establish independent advice centres. "High levels of personal debt are leading many people into financial difficulty and, in extreme cases, bankruptcy," he said.

"There is currently a considerable degree of irresponsible lending and aggressive marketing to individuals of personal loans and credit. Lenders have an obligation to stop these practices and to provide greater levels of debt advice."

Problem of personal debt spiralling out of control, say insolvency experts,
FT, 5.8.2006,
http://money.guardian.co.uk/creditanddebt/story/0,,1837871,00.html

Insolvencies hit record high

Friday August 4, 2006
Guardian Unlimited
Hilary Osborne

The number of people unable to meet debt repayments reached record levels in the second three months of this year, as more than 26,000 people were declared insolvent, official figures showed today.

The figure marked a 10% increase on the previous three months and a 66% increase on the same period last year. Analysts suggest the UK's £1 trillion combined debt could mean the problem will continue to grow.

At the end of a week that has seen all the major banks report an increase in bad debts, the government's Insolvency Service said 14,915 people were declared bankrupt in the second quarter of 2006. This was a 3.3% decrease on the figure for January-March this year, but a 32.5% increase on the number in April-June last year.

Meanwhile 11,105 people entered into individual voluntary arrangements (IVAs) with their creditors in the same period, 35% more than in the first quarter of 2006 and up 153.2% on the same period last year.

IVAs are an alternative to bankruptcy and allow a borrower to repay part of a loan to their creditor while the remainder is written off. They have grown in popularity as awareness of them has increased.

Separate figures from the Council of Mortgage Lenders (CML) showed the number of borrowers unable to meet their mortgage repayments was also increasing, with a rise in the number of homes repossessed in the first half of this year.

The CML said 8,140 properties had been possessed by lenders, a marked increase on the 5,690 possessed in the second half of last year and the highest figure since the first half of 2001.

The number of borrowers who were more than 12 months in arrears on their mortgage also rose, to 15,070 from 14,380 in the second half of 2005 and 12,580 in the same period last year.

However, there was a fall in the number of mortgages that were three to six months in arrears, and the number that were six to 12 month behind in payments levelled off.

The CML said payment difficulties had been driven by interest-rate rises between autumn 2003 and summer 2004.

Yesterday's base-rate rise would add to payment difficulties for some borrowers, it said. However, the effect should be limited as more people now have fixed-rate mortgages which shield them from any change.

The CML's director general, Michael Coogan, said the organisation was working with the government to see how more borrowers could reduce their risks by taking out long-term fixed-rate deals.

He added: "Repossessions are up, but remain historically low. Arrears have been stabilising, though the latest interest-rate rise may have a modest effect over time. But we continue to expect repossessions to run at levels of around 15,000 a year between 2006 and 2008, well below their long-run trend."

The Conservative's director of Policy, Oliver Letwin, said the rising number of insolvencies was evidence that the economy was "built on borrowed time".

Mr Letwin said: "As the economy fails to live up to Gordon Brown's expectations, the number of bankruptcies is rising faster and faster.

"There is a personal tragedy behind each of these insolvencies and this shows that many families are feeling the pressure of rising interest rates and rising fuel bills. Gordon Brown is doing nothing to help these families with more and more stealth taxes and ever increasing council tax."

Howard Archer, chief UK economist at consultancy Global Insight, agreed that it was likely figures for insolvencies and repossessions would continue to rise.

"With unemployment continuing to rise, utility bills soaring, many home owners stretched to the maximum and debt bills at record high levels, it seems highly likely that individual insolvencies and mortgage repossessions will climb markedly further over the coming months," he said.

"This danger has been magnified by the Bank of England raising interest rates this week."

KPMG's director of personal insolvency, Mark Sands, predicted the number of personal insolvencies in 2006 could reach 100,000.

"The increase in the number of people entering IVAs is causing concern," he said. "With these record levels courts have never been busier - we calculate that someone is entering insolvency every minute of the court's working day."

Changes to the law introduced in April 2004 mean that bankrupts are discharged after one year instead of three, which may be behind some of the increase.

Wider marketing of IVAs and bankruptcy by debt advice services, as well as increased publicity for agencies such as the Consumer Credit Counselling Service, have also made people who are struggling with debt more aware of their options.

Insolvencies hit record high, G, 4.8.2006, http://money.guardian.co.uk/creditanddebt/debt/story/0,,1837338,00.html

12.45pm update

Bank raises interest rates to 4.75%

Thursday August 3, 2006
Guardian Unlimited
Mark Tran

The Bank of England today delivered a blow to homeowners as it raised interest rates for the first time in two years in a pre-emptive strike against inflation.

In a precautionary move after inflation went up sharply in June, the Bank's monetary policy committee (MPC) lifted borrowing costs by a quarter of a percentage point to 4.75%.

"With inflation likely to remain above the target for some while, the committee judged that an increase of 0.25 percentage points ... was necessary to bring CPI [consumer price index] inflation back to the target in the medium term" an MPC statement said.

Before the committee's move, many analysts had predicted it would be a close call amidst conflicting economic data.

The MPC's task was not made easier by today's mixed bag of data.

According to a Chartered Institute of Purchasing and Supply/RBS survey, services - the dominant sector in the UK economy - grew less than expected in July and at the weakest pace in four months.

Analysts thought - mistakenly, as it turned out - that the evidence of softer services expansion last month and more moderate increases in prices charged would have bolstered the case for unchanged interest rates.

Howard Archer, of the consultancy Global Insight, said he now expected the Bank to keep rates at their current level for some time.

"We expect growth to be generally softer over the coming months compared to the second quarter and the labour market to slacken further, thereby helping underlying inflationary pressures to remain largely contained," he said.

"As a result, we expect the Bank of England to now return to the sidelines for another extended period."

Elsewhere, Halifax - Britain's largest mortgage lender - said house prices had risen 0.2% in July after two consecutive months of decline.

It raised its forecast for house price inflation in 2006 to 5% from 3%, but detected signs that upward trends in prices and activity levels were easing.

At last month's MPC meeting, all seven members voted to hold rates and minutes showed them to be in no hurry to raise borrowing costs.

Since then, however, it has emerged that the annual inflation rate unexpectedly rose to 2.5% in June - well above the MPC's 2% target - reflecting the impact of soaring energy costs on petrol prices and utility bills.

Economic growth in the second quarter was also brisk, with preliminary estimates of GDP growth up by 0.8%, above the long-run trend and following upward revisions to past years.

Today's rise could mean trouble for households at a time when debt has reached record levels, with Britain's big banks this week reporting a large increase in bad debts.

Barclays today said the amount of money set aside to cover bad loans had surged to more than £1bn over the first half of the year - an increase of 50% - with Barclaycard customers struggling to repay their mounting credit card bills.

The Centre for Economics and Business Research had earlier urged the Bank to be careful about lifting interest rates given this background.

"With debt levels so high, if rising UK interest rates were to hit housing values and the worth of shareholdings and pension fund plans, then the gearing [level of debt] on household balance sheets would rise to levels not seen for more than a decade," it said in a statement.

Bank raises interest rates to 4.75%, G, 3.8.2006, http://business.guardian.co.uk/story/0,,1836465,00.html

Key workers now priced out

of housing market in most UK towns

· Average house in 339 out of 519 areas unaffordable
· Problem has spread beyond London and south-east

Saturday July 29, 2006
Guardian
Larry Elliott, economics editor


Key public sector workers are being frozen out of the housing market in two-thirds of the towns and cities of Britain after prices have doubled in five years, the Halifax said today.

The bank found the asking price for a house in 339 of 519 towns surveyed was unaffordable for police officers, ambulance staff, firefighters, nurses and teachers. In 2001, the figure was 124.

In the most expensive town surveyed, Gerrards Cross in Buckinghamshire, the Halifax said it would take 30 times the average annual salary of ambulance staff to buy the average house. It said the problem of affordability for public sector workers was spreading beyond the south-east.

"Key workers have been hit by the strength of the property market over the past five years. Now it is difficult for key workers to buy the average house, not only in the south of England but also in significant parts of the Midlands, northern England, Wales and Scotland," said Martin Ellis, the bank's chief economist.

The study found the lack of affordable houses was most acute in the south-west. The average house price was unaffordable for the five groups of public sector workers in all of the 34 towns it surveyed. In 2001, that was the case in only five towns.

Public sector workers were having to make do with flats and maisonettes, the Halifax said. But even in this section of the property market there were signs it was getting tougher to find a property they could afford. "While flats are affordable for key workers in many towns outside southern England, it is becoming increasingly difficult for key workers to purchase a flat in many major cities, including Edinburgh, Oxford and Cambridge and two-thirds of London boroughs," Mr Ellis said.

The government has recognised the problem of key workers being priced out of the market. The Key Worker Living scheme and, since April, the Homebuy scheme are intended to help an additional 20,000 households to buy their own home by 2010. Mr Ellis said: "It is important that the government continues to develop schemes to help key workers on to the property ladder and to ensure that these schemes are not confined to southern England. The presence of sufficient key workers is critical to the smooth functioning of life in our cities and towns."

House prices to earnings ratios are highest in London and the south-east. In London, the average house costs more than 11 times the annual salary of ambulance staff and 9.5 times that of a nurse. Ambulance staff were found to be the key worker group with the most acute affordability problems. Houses were within their reach in only four towns in Britain - three of them in Scotland.

The Halifax's benchmark for affordability was the ratio of house prices to earnings for first-time buyers. In 2005, this was 4.46. It considered a town unaffordable if the multiple of salary needed to buy a house exceeded 4.46. It used government figures for average earnings - £31,626 for full-time teachers in primary and secondary schools; £24,759 for full-time nurses; £34,913 for full-time police officers; £26,511 for full-time firefighters at the rank of leading fire officer or below; and £21,384 for full-time ambulance staff excluding paramedics.

According to the bank, the group which had experienced the biggest deterioration in affordability was nurses. They were priced out of houses in 97% of the towns surveyed, up from 43% in 2001. Beverly Malone, general secretary of the Royal College of Nursing, said: "I have been deeply concerned to hear of some cases of nurses considering quitting the profession for better-paid jobs so they can afford to buy their own homes."

Matt Wrack, general secretary of the Fire Brigades Union, said: "In recent years firefighters have suffered from the dramatic rise in house prices in certain parts of the country. This has particularly been the case in large urban areas and firefighters have seen their commuting distances increase as they have been forced to live further and further away from work."

A spokesperson from the Department for Communities and Local Government said 21,000 key workers had been helped by the government's schemes since 2001. She added: "Ultimately though, we have not been building enough homes for a generation. Over the last 30 years the number of households has gone up by 30%, but the level of new house building has dropped by 40%.

    Key workers now priced out of housing market in most UK towns, G, 29.7.2006, http://money.guardian.co.uk/houseprices/story/0,,1832962,00.html

Don't even think about Islington, angel

In London a nurse can work 12½-hour shifts for 10 years
and still not afford a home in the area - as Tanya Ferrai
has discovered

Saturday July 29, 2006
Guardian
Katie Allen

Tanya Ferrai has been a nurse for 10 years but still can't get on the housing ladder. The 29-year-old Australian, who works in a south-west London accident and emergency department, was baffled at living and property costs when she came to London four years ago.
"I bought my first house when I was 21," she said. "If you are a first-time buyer in Australia the government wants to get you on the housing ladder.

"Here I have friends who are nearly 40 and they are still renting. My housemate who is a teacher, she's a key worker and she's 32 and she can't buy a house. It's just so expensive in London."

Ms Ferrai and her partner are determined to move into their own home and have been househunting round the area for a year. But her annual salary of £18,300 is nowhere near enough to secure the mortgage for the typical one-bedroom flat at £250,000 where they live in Kennington. Even combined with her partner's pay it falls short. "I can't buy where I want to because nothing is in our price range," she said. "It's got to the stage where we will have to borrow money from friends and relatives."

Another option is to look further away from central London and from her hospital but a long commute is barely feasible after her 12½-hour work day. In the meantime she and her partner are cutting back on spending. "We've missed out on holidays. We won't go out this weekend. Between us we could spend £200 if we went out, so it's easier just to stay home."

Although as an Australian citizen Ms Ferrai is not eligible for government help here, some of her colleagues have benefited from a government scheme that provides loans of up to £50,000 towards buying a home for nurses, teachers, police officers and firefighters.

But without such help, many cannot buy. Ms Ferrai said: "In Australia, renting is deemed a waste of money, whereas here it is a way of living."

    Don't even think about Islington, angel, G, 29.7.2006, http://money.guardian.co.uk/houseprices/story/0,,1832958,00.html

10.30am

Bank plans free cashpoints

for deprived areas

Friday July 28, 2006
Guardian Unlimited
Mark Tran

The Royal Bank of Scotland plans to install 300 new cash machines, with no usage fees, in Britain's poorest neighbourhoods, the company said today.

Europe's third largest bank is to seek the advice and support from relevant MPs, credit unions and community leaders, to ensure that the most appropriate locations will benefit.

RBS is also inviting anyone who believes that their area qualifies for a free to use cash machine, to make a request at a dedicated web link.

"The initiative is designed to ensure that the most vulnerable in our society, the elderly, disabled, those of limited financial means or whose benefits constitute all or the bulk of their income, have free access to their cash close to their point of need," said Gordon Pell, the chief executive of retail markets at RBS.

RBS launched its initiative ahead of expected record bank profits next week. Last year, profits totalled £30bn and new records are expected to be set this year.

The newly-elected chief executive of the British Bankers' Association today defended the industry as it prepares for accusations of "excess profits".

Angela Knight said it was "a pity" banks come in for criticism for profiteering.

"They do such an excellent job, they are competitive, they are efficient... if you've got money in the bank it's free banking," she told BBC Radio 4's Today programme.

"I think it is a pity that they are criticised in the way they are."

The RBS initiative follows a report from the charity Citzens Advice earlier this month decrying "free ATM (automated teller machines) deserts", often in poor neighbourhoods.

In 1999, virtually all cash machines in the UK were free, Citizens Advice said, but of the 58,000 cash machines now operating, 40% charge a fee regardless of the size of withdrawal.

Increasing numbers of fee-charging machines are to be found in newsagents and convenience stores.

The average cost per withdrawal is £1.50, but some fee-charging cash machines charge as much as £3.

Citizens Advice singled out Chapeltown in Leeds as an example. It is one of the most deprived areas in Britain and the area has ten fee-charging machines, but not a single free cash machine.

Sue Edwards, of Citizens Advice, described the RBS programme as a good start but added that it should be part of a long term commitment.

"We are pleased that RBS have responded to our report by looking into putting more free cash machines in poorer communities," she said.

"However, we would like a committment to keeping machines in place for at least three years and ensuring the same access to cash machines as the rest of the country. Having access to free cash machines will make a real difference to thousands of people who can ill-afford the high costs they currently face."

RBS, already the largest provider of free-to-use ATMs in the UK with more than 6,300, said cash machine use has risen over the last three years with a 28% increase in withdrawals and a 37% increase in balance enquiries.

RBS has already installed three new free cash machines under the scheme, two in Scotland and one in England. The machine in England is at the London borough of Harrow's council offices, alongside social housing payments.

The other two machines are in Scotland, one in Partick, Glasgow, in the local Woolworth's store, while a second machine has been installed in the Yoker credit union.

"By working in conjunction with local MPs, local authorities, credit unions and the communities they represent, to identify potential sites," RBS said, "the poorest areas in the UK will soon have free access to their cash, via machines located in their local area."

· Alliance & Leicester today reported a 1.5% fall in half-year profits as a decline in margins and higher bad debts outweighed increased mortgage lending.

Britain's seventh-biggest listed bank, said core operating profit in the six months to the end of June was £268m, down from £272m a year earlier.

    Bank plans free cashpoints for deprived areas, G, 28.7.2006, http://business.guardian.co.uk/story/0,,1832309,00.html

Government turns charities

into multimillion-pound businesses

· Voluntary sector 'becomes arm of big business'
· Contracting out leaves training groups booming

Monday July 3, 2006
Guardian
David Hencke, Westminster correspondent

The government is creating a new generation of multimillionaires and turning charities into multimillion-pound businesses by contracting out services provided by the state, a report commissioned by the Whitehall trade union the Public and Commercial Services union, reveals today.

The report, by Steve Davies, senior research fellow at Cardiff University school of social sciences, shows a swath of companies set up to provide training for disabled people, the unemployed on New Deal programmes, and young offenders are now multimillion-pound enterprises.

The top example is A4e, founded in 1991 by 42-year-old Emma Harrison, which now employs more than 1,500 people and has a turnover of £75m a year, providing training services for the government, private companies and welfare reform programmes in Israel and Poland. The company is now the largest training provider for the government's New Deal programme for the unemployed. Ms Harrison is reputed to be worth £55m and received £1.1m in dividends alone last year.

Another multimillionaire is Deborah Fern, who ran Fern Training and Development, set up in 1986 to provide training programmes for unemployed and disabled people. She sold her company to another expanding group, Carter and Carter plc, five months ago for £13.6m, taking £2.9m in shares.

Among the charities highlighted are the Shaw Trust, which provides training programmes for disabled people and has seen its income jump by £18.36m to £63.98m in the last year - with £37.5m coming from Jobcentre Plus and just £1.9m from private fundraising.

Other charities funded from government sources include Tomorrow's People, which has strong links through its trustees to the Diageo drink and food conglomerate. Another is a public-private company, Working Links, which is a third owned by Mission Australia, a charity campaigning for Britain to adopt the Australian model of service provision, in which the government contracts out all its services to the private and charitable sectors. The other owners are the management consultants Cap Gemini and the employment firm Manpower.

Mr Davies said: "Far from the third sector being portrayed as a cuddly voluntary sector with people working for modest salaries, it is rapidly becoming another arm of big business, either directly through new private companies or though connections with big businesses."

Mark Serwotka, PCS general secretary, said: "There is a real danger that government plans to increase the role of the private and voluntary sector in the provision of public services will mean a step back to a model of prewar welfare provision. The fear is that this is 'soft' privatisation, with the voluntary sector opening up services for contests which can subsequently be won by the private sector."

The companies and the Department for Work and Pensions disagree. A4e says that the company and its founders are leaders in innovation and "championing the disadvantaged and underprivileged in society by our stated mission and Emma's driving passion to improve people's lives".

Carter and Carter plc did not want to comment, but said that Deborah Fern had "made a huge difference to thousands of people's lives" in running her company.

A DWP spokesman said: "By taking a partnership approach between the public, private and voluntary sectors, we have made enormous progress in helping people in some of the poorest parts of the country to get off benefits and to get into work. People have seen real change in their communities and it is right that we continue with it to help a million people off benefit and into a job ... This is all about modernising the welfare state to ensure the world of work is accessible to all."

    Government turns charities into multimillion-pound businesses, G, 3.7.2006, http://society.guardian.co.uk/voluntary/story/0,,1811200,00.html

Prosecute bad lenders over debt suicides,

says whistleblower

· Executive calls for curbs on profit-hungry banks
· String of deaths linked to mounting loans

Monday June 5, 2006
Guardian
Rupert Jones

Some of Britain's high street banks are almost "putting profits before human life", a senior banking executive claims in a BBC1 programme to be broadcast today.

The unnamed executive said that following a string of cases in which people have killed themselves after running up big debts, the law should be changed so that banks shown to have loaned money irresponsibly can face criminal charges. In the past two years, at least eight cases have been reported of people taking their lives after debts spiralled out of control.

Many other suicides are never picked up by the media "because they are handled internally to ensure that does not happen", says the female executive who, the programme-makers say, was a key decision-maker in lending policy and strategy for one of the top five banks.

Speaking on Britain's Streets of Debt - The Whistleblower, she said: "These tragic cases where people have taken their own lives are the cost that is paid for irresponsible lending practice. This is exactly why the banks need to be curbed."

The programme comes amid continuing concern about soaring consumer debt. Last month, Citizens' Advice said the number of people seeking help with credit card and loan debts had doubled during the past eight years, and accounted for three-quarters of the 1.25m new debt cases that its bureaux dealt with last year.

A recent study suggested that almost nine out of 10 credit card borrowers were issued cards without the lender checking they could afford to repay debts.

MPs have stated that better sharing of information relating to potential borrowers' creditworthiness would probably prevent some of the tragedies as it could reduce the risk of those already overburdened with debt borrowing more. Some banks have now begun to share data. Between them, Britain's big banks reported record profits of £33bn for last year.

The BBC programme features the case of a married father-of-two, Mark McDonald, 43, who threw himself under a train in January 2005. His bank, Royal Bank of Scotland, had allowed him to build up a £6,000 overdraft, loaned him more than £20,000 on two credit cards, and let him remortgage his home. At the time he died, he owed his bank almost £120,000.

His widow, Marion, said: "I think the Royal Bank of Scotland were totally uncaring, totally reckless - they just wanted to make money as far as I can see."

However, in a statement, RBS said it had dealt with Mr McDonald "in a responsive and professional manner". It added: "The lending decisions on his account were consistently based on strict lending criteria... At no point did Mr McDonald express to the bank that he was struggling with his finances. He managed his current account and maintained regular payments to both of his credit card accounts."

The whistleblowing executive said some banks increased credit limits without customers' consent. "Unsolicited increases in your credit limit can take place up to twice a year," she said. "In some cases, your credit limit could literally double in the space of two years."

Another way of enticing people into borrowing more was through a "financial health check", when a customer is invited into the bank to review his or her finances. "In many cases, a financial health check is probably the last thing you need, because it is a sales pitch."

The executive told the programme: "The banks are basically neglecting their duty of care. They are putting profits before human life almost."

Prosecute bad lenders over debt suicides, says whistleblower, G, 5.6.2006, http://money.guardian.co.uk/creditanddebt/loans/story/0,,1790469,00.html