It brings the number of self-declared bankruptcies for this fiscal year to 100,000 for the first time. The number is up from 22,000 in 1997 when Labour first came to power. The figure represents 75% of the total, the rest being made up of creditor-forced insolvency.

High street banks seem to be viewing this as a long-term problem, as they have recently increased the amount of money in their protection fund for bad debts. Barclays bank, who made a record-breaking £4bn profit in the last half of the year, said: "Credit provisions rose 20%, driven principally by an increase in delinquencies and a reduction in recoveries in UK credit cards." New rules regarding bankruptcy, which clears a person's credit status after one year rather than three, have played a part in the increased number, according to insolvency specialists, but is mainly down to wider economic influences.

Howard Archer, chief UK economist at Global Insight, said: "The sharp jump in the number of individual insolvency highlights the fact that many people have borrowed to their limits, making them vulnerable to even the relatively modest rise in interest rates that occurred through to August 2004."

The high number of people living on the edge of bankruptcy through borrowing may have its roots in the sales techniques of the banks. Two people who posted to Libcom.org, a libertarian website, described their experiences:

"They hand out credit left, right and centre," said The Button. "I hadn't had a bank account for six years, I walked

into HSBC with the missus, walked out with a joint bank account, an overdraft facility and a mortgage.

"A couple of months later, they sent me a pre-approved offer for a gold credit card, which I applied for because it's handy for buying online, and they give me a f6,000 overdraft limit. The missus applies for one, and they gave her a £6,000 limit too - and she's a full-time student (albeit a funded one). So that's £12,000 credit between us."

Chris said: "The lending institutions have dished out credit irresponsibly. To individuals to fund lifestyles beyond their means and to companies who are desperate for investment capital for businesses that rely on faulty predictions of demand.

"Debt is the newest form of slavery. It's a consequence of a policy of strategic de-industrialisation carried out not for the sake of economic efficiency, but for the purposes of social control."

A continuing slump in retail and manufacturing trade has led to largescale layoffs and increasing unemployment across the UK.

Manufacturing output and sales fell for the fourth month in a row in July. The overall economy is at its weakest for twelve years, according to the government.

Business analysts hope a 0.25% cut in interest rates, imposed by the bank of England earlier in August, will boost the economy. The cut will be equivalent to a £25 annual saving on a £10,000 debt, or just over £2 a month.

IVAs are long term agreements where a debtor will agree to a partial write-off of their debts with their creditors in order to avoid going into bankruptcy, where the creditor is likely to lose all their unsecured loan money and the debtor loses house/furniture, etc., and continues to pay back at a reduced rate. Generally only suitable for people with £15,000 or more of debt.

- from Freedom, 20 August 2005