Sometimes it takes a casual phrase to really reveal the gap between a slice of our ruling class and the rest of us.

The Tory frontbencher Alan Duncan says that living on £64,000 a year – which puts him in the richest 4 per cent of the population – means a life on "rations", and "no one who's done anything" will want to live on it. Boris Johnson says wages for a second job of £250,000 are "chicken feed", even though they are more than what 99.99 per cent of us earn. (He must have an army of gargantuan chickens). David Cameron doesn't even know how many houses he owns, and his heiress wife says a windfall of up to £250,000 from selling a property is "nothing life-changing".

Yet out in the real Britain, the median wage is £23,000 a year. Half earn more; half earn less. Underneath this figure, there's another: the average personal debt is £29,500. As individuals, we owe more than we earn in a year. This is a relatively recent development, and it happened for an underlying structural reason.

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Since the early 1980s, average incomes have stagnated, even as the economy – and people's expectations – have continued to grow. How is this possible? Under Thatcher and (alas) her New Labour successors, for the first time since the 1920s, growth went almost entirely to those at the top. People like Boris and former oilman Duncan saw their real incomes soar – and shoot off far beyond everyone else. So to keep up, the middle class and the poor turned to credit. They stayed with the rising tide by building a life-raft out of credit cards and personal loans.

But now the chickens we bought on Visa are – for many of us – coming home to roost. There are 20,000 debt collectors in Britain chasing £20bn of overdue debt. In this slump, one business is booming: private debt collection agencies. They buy debts from banks at very low rates – as little as 6p in the pound – and then chase them hard, often demanding immediate, full repayment from the unsuspecting debtor.

While Johnson and Duncan were whining that their super-incomes are a pittance, I was prying into this shadowy world, and finding people who really are left with something close to "rations."

Nick Pearson, the director of the Debt Resolution Forum, says many debt collection firms are "out of control". Their job often involves chasing debtors who have been lost – and one way of tracking them down is a "fishing expedition". If Mike Jones from Edgware owes £2,000 and the creditor lost touch with him, they can write to every Mike Jones in Edgware demanding he pay up – and threaten he'll get a credit blacklisting and be taken to court if he doesn't.

This often ends with non-debtors being harassed and intimidated. For example, Beryl Brazier, a 61-year-old widow from Derbyshire, was amazed to be told by debt collectors she had to pay a £17,500 debt. She explained she had never taken out any such loan, but they wouldn't leave her alone. They said they would seize her house if she didn't pay. Many people pay up just to stop the harassment: there is no legal aid to defend yourself with any more. So, after three years of fear, she drowned herself in a lake.

When a genuine debtor is found, the agencies frequently exceed the rules in an attempt to shake money from people faster and harder than they can afford to pay it – sometimes needlessly leaving them homeless or on benefits.

For a recent edition of Channel 4's Dispatches programme, the journalist Tom Randall went undercover at Marlin Financial Services, one of the leading debt collection agencies in Britain. It picks up debts from HSBC, Lloyds and others. After it bought a fresh batch of debts from Yorkshire and Clydesdale Bank, he was instructed by his supervisors not to accept payment by instalment but to demand full payment within 14 days. "Tell them ... you're going bankrupt," his supervisor announced. Randall was also told he could point out that "others" had borrowed yet more money to pay off their debts.

It costs these firms man-hours to slowly regain a loan over years. It is more cost-effective to reclaim it all in one lump sum, even if that means repossessing a house and putting a family out on the street. We as tax-payers then have to step in and help them out, so this is yet another area where people are hurt and all of us pay out just so a few at the top can profit.

Later, Randall was told off for giving a two-week reprieve to a man whose baby had just died. His supervisor said: "I would have said to him probably: 'I'm really sorry for that but you've not paid since October, what would your reasons for that be?'" Then the supervisor shrugged and said: "Tough, mate."

In his training, the person held up as the company's top collector was a man called Mark. They said he "uses stuff we perhaps wouldn't want to be used but he brings [in] the money... He is good." Mark seemed to have walked off the stage of a David Mamet play. He said proudly: "The easiest way I can explain collections to you ... It's pantomime. It's all an act."

He gave an illustration. In front of Tom, he called up a woman in debt who was paying off £20 a month. She explained that she and her husband had had to go on to disability allowance and were paying the most they could afford. He threatened her with bailiffs, saying while she was on hold: "Twenty quid is shit, man... Scare her a bit."

He said that if the firm didn't use threats: "We're fucking ourselves and, if we fuck ourselves, the profits are going to go like that." He indicated down. Later, Tom saw Marlin staff impersonating solicitors. Marlin said it operated within the rules, it trained its staff to be respectful at all times and these were "exceptions" that had resulted in retraining.

If this out-of-control industry starts to crack the whip, then another out-of-control industry is sent in – the bailiffs. They are free to charge huge "fees" for seizing your property, sending your debt spiralling even further. The Citizens' Advice Bureau gave me an example of how they routinely operate. A man owed £12 to a catalogue that he failed to pay. Bailiffs turned up at his home demanding £400, saying the increased amount included their fees. When he refused to pay such a huge amount, they seized the Motability scheme car he needed to get to hospital to have kidney dialysis three times a week and drove it away.

A National Debtline study found that 40 per cent of bailiffs lie about their powers of entry. Half levied unfair fees, and a quarter even threatened the debtor with imprisonment. Anthony Lewisohn, an 82-year-old retired judge from Surrey, was amazed when bailiffs turned up on his doorstep demanding payment of more than £500 for a parking fine he had never heard about. It turned out they had been sending letters to his old address – but still they forced him to pay. Lewisohn calls them "thugs."

The poorer you are, the easier it is to become trapped in this system. If I need a new washing machine, I can go and buy one upfront from Curry's for £337. If I have to take a loan from one of the "alternative credit agencies" for the poor, I pay 254 per cent APR. The same washing machine ends up costing £1,137. The Government should be banning these practices, and guaranteeing reasonable credit for the poor.

Of course, debt is an essential part of our economy and people do have to pay their debts. Those who have the cash but refuse to cough up need to be compelled. But there are far better ways than this cruel and irrational system. Judges should be empowered to study a debtor's accounts and set a realistic amount to be deducted automatically each week from their wages or benefits. The amount should – by law – be required to keep them and their children above the poverty line.

We will eventually regard our current system with the same shame we feel when we learn that Charles Dickens spent his childhood in a debtors' prison. Even the most egregious acts by debt collection agencies and bailiffs now pass unpunished.

In theory, the Office of Fair Trading regulates debt collection. Last year, it found that 13 companies had breached the rules in serious ways – but it refused to publicly name them, and it has never fined these companies a penny. Bailiffs are subject to even more toothless oversight. The Government first said it would regulate them in 2003 – but now it says it will happen in 2012.

This story tells us something dark about Britain today. When the rights of rich people are threatened, the state swoops in fast: every day, there are arrests for counterfeiting designer clothes and pirating DVDs. When the rights of the rest are threatened – in much more damaging ways – the state becomes sluggish and forgiving.

Yet still the wealthy moan that they are the ones being hard done by. If you want to know what rations are like, Mr Duncan, try having a debt collection agency chasing you, and bailiffs thwacking at your door.

j.hari@independent.co.uk