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Back in mid-2007, borrowing money seemed so secure, so easy, and so cheap. The Northern Rock Together deal, a 95% mortgage topped up with a loan of up to 30%, is now considered to be the defining image of the easy credit generation.

But plenty of other loans were easy to come by. We eventually had our hands on 56 million credit cards in the UK. In the meantime, our savings habit was waning. In 2008, we saved less than 2% of household income, compared with 10% in 1995.

First-time buyers and self-certified borrowers joined the party, and those starting a business were given easy access to credit. But eventually, as more risky borrowers started to default, and banks realised these bad loans had been packaged up with good ones, this easy access was over. The credit crunch became the household crisis we all know so well.

As financial institutions wavered, and occasionally collapsed, savers decided to value security over opportunity.

The official level of protection for deposits rose to £50,000 per saver per institution, but the government made it pretty clear it would actually cover all depositors’ losses if a bank went bust.

Yet a flight to safety was underway. National Savings and Investments (NS&I), which sees its profits go to the Treasury, received 340,000 calls in October 2008 compared with 85,000 in a typical month. The nationalised Northern Rock also saw a sharp inflow of funds.

There are an estimated 35 million people with savings of some type in the country, nearly double the estimated 18 million people who have mortgages. Yet the size of the borrowings and savings actually reveals that UK consumers borrow more than they save.

Total household savings in July 2009 stood at £1.1 trillion, with banks holding a 70.2% share, building societies 21.1% and NS&I 8.7%. In the same month, total outstanding lending to individuals, according to the Bank of England, stood at £1.46 trillion. Of this, £1.23 trillion was mortgage debt and £231m was other forms of consumer credit.

Personal debt was about £1 trillion lower in 1993 than it was in July 2009.

But in a notable development in July, UK households paid back more debt than they took out for the first time since the Bank of England started collecting data 16 years earlier.

There are several explanations for this. During the crisis, the Bank of England dropped the Bank rate and so variable rate mortgage holders saw their repayments drop significantly.

At the same time the returns on savings fell sharply. The Bank rate has remained at its record low of 0.5% since March, and the Bank’s governor Mervyn King recently implied that it could remain so until into 2011.

Consequently, those who have some funds to save or invest are looking to pay off debts, such as reducing the balance on their mortgage or paying off credit card debts. In July, the average individual paid back £10 more debt than he or she took out, but the average debt still stood at £24,000 each.

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The government has recently announced that it is launching a ‘consultation’ about the future of debt management companies, which operate in a troubled market but are, at the moment, mostly unregulated.

The companies step in and negotiate on behalf of people who are having debt problems. They talk to their clients’ various creditors and persuade them to agree to reduce the payments, but this usually greatly extends the period of the loan.

However, fees are added to the repayment amount and vulnerable customers are not always properly informed or advised.

Apparently, government officials are keen that this is not seen as a ‘crackdown’ on debt management companies, but they say there is a need to examine the system more closely and find out whether customers are getting appropriate help tackling their debt problems.

The figures demonstrate why there is a case for the examination of this industry. The average household in Britain owes £9,000 excluding mortgages and roughly 100,000 debt management agreements are reached every year.

The Citizens Advice Bureau has pointed out that the self regulation of debt management companies is not good enough. Indeed, with self-regulation having spectacularly failed in many industries over the years this is hardly a surprise.

The evidence shows that there is a need for statutory regulation of debt management schemes. Unfortunately this isn’t always the case at the moment and while there is some good practice, there are also cases where people doing all they can are still being harassed by creditors and threatened with enforcement action, extra costs and added stress.

The ‘consultation’ by the Ministry of Justice is hoped to be completed by December and the government will make an announcement at some point next year.

There are three main options under consideration put forward by various stakeholders in the industry.

The first of these is to leave the situation as it is and allow debt management companies to continue unregulated. Unsurprisingly, this is the favourite choice of the companies themselves.

The ‘light touch’ option is to introduce a new code of practice for companies operating in this area. If there is a compromise struck this is likely to be the option used.

Finally, the option favoured by agencies working in the field and consumer organisations is to bring debt management under a formal system of regulation. Unfortunately, this is also the option that will take the longest time and be the most expensive to implement.

By the time this zombie government has decided what to do the recovery will be under way and a different government looks likely to be in power.