Michael Harrison's Outlook: Mr Bean and the trillion-pound time bomb

FitzGerald's farewell; IoD posting

A Billion here, a billion there, and, before you know it, the country's household debt will have hit the magical £1 trillion mark. Gosh, it might even happen today. The Bank of England's chief beancounter does not seem unduly worried about this "debt time bomb". Charles Bean, chief economist and member of the Monetary Policy Committee, says that much of this borrowing is being used to purchase assets and not to fuel the consumer boom which has been keeping the economy afloat for the past three years on a tide of low interest rates and easy credit.

A Billion here, a billion there, and, before you know it, the country's household debt will have hit the magical £1 trillion mark. Gosh, it might even happen today. The Bank of England's chief beancounter does not seem unduly worried about this "debt time bomb". Charles Bean, chief economist and member of the Monetary Policy Committee, says that much of this borrowing is being used to purchase assets and not to fuel the consumer boom which has been keeping the economy afloat for the past three years on a tide of low interest rates and easy credit.

In fact, the households saving rate is only two points below its 40-year average, he chirps, and the higher levels of debt taken on by households have broadly been matched by higher financial assets. Mr Bean also points out, politely as he can, that those who find it hardest to service their borrowings account for only a small amount of overall spending so even if a debt tsunami washes them away, it will not affect the economy in any material fashion.

But plenty of others are beginning to worry because what underpins this mountain of debt is a housing market that is vastly overvalued, perhaps by as much as a third. When this bubble bursts and the reckoning happens, consumers will run for cover, debt repayment will take precedence over consumer spending and the economy will slide into recession.

Moreover, arrears are being accumulated by those who can least afford it - lone parents, families with babies, those in their twenties and recently separated couples.

There are enough straws in the wind to suggest that the housing boom is, at last, beginning to run out of steam. Court actions for repossessions - a better indicator of the pain inflicted by recent rate rises than the historic number of possessions - are at a three-year high.

And HBOS, the leader in the mortgage market, has begun to draw in its horns. Its share of net lending has fallen from 31 per cent to 17 per cent in the past three years and it is becoming more risk averse, both in its lending multiples and its loan to value ratios. In part this is the mechanistic reaction to be expected of the market leader in an environment where house prices and interest rates are both continuing to rise.

But someone is filling the void left behind, which raises the question of how many lenders are over-exposing themselves through excessively aggressive deals and loans which exceed the value of the house.

The Bank persists with the fiction that it is using interest rates to target a given rate of inflation and not to control the housing market, and yet a further increase in rates next month is all but certain.

But if the instincts of the big mortgage lenders are correct then there may only be one more rate rise after that before the cost of borrowing reaches a plateau or even starts to come down. There is, after all, an election less than a year away and little inflationary pressure elsewhere pushing rates in a higher direction.

FitzGerald's farewell

Niall Fitzgerald lost the way a long time ago as he attempted to follow his Path to Growth at Unilever. Now, as he prepares to leave the food and consumer goods giant for the chairmanship of Reuters, he will have to positively hack his way out of the wilderness.

What began five years ago as a plan to grow the sales of Unilever's top 400 brands at a compound rate of 5-6 per cent a year has turned into a scramble to prevent them falling, as they did for the first time in the second quarter of the year.

The company may have pioneered the use of fat women in its adverts to promote Dove firming lotion - one of its runway brand successes - but elsewhere the pickings have been slim.

The tribulations of Slim-Fast have been well documented. But now even Walls ice cream sales have gone on a diet - the victim of a cold start to the summer and weak consumer confidence, says Unilever; the result of some tired brands and poor management, say competitors. Unilever shares have underperformed the sector for the past year and yesterday they lost more weight.

In fairness to the outgoing Unilever chairman, no one can say how desperate the situation would have been had he not set off on his journey when he did. Although the business still looks less-focussed than food rivals such as Nestlé and Danone, it is a good deal trimmer than it was five years ago when Unilever still had 1,600 brands fighting for the consumer's attention.

Nevertheless, it is hardly the best of mantles to hand on to his successor, Patrick Cescau. Profit targets have only been hit thanks to relentless cost-cutting, of which there is more to come, and the quality of earnings has been flattered by the group's lower tax rate and interest charge.

Following the decline in top line sales, it may only be a matter of time before the profit warning arrives. If only a little magic could rub off from Scarlett Johansson, who will be promoting Unilever's latest fragrance, cK Eternity Moment, for the rest of the year.

IoD posting

The Institute of Directors has got itself a new director-general. Miles Templeman begins his five-year sentence in October, by which time he will presumably have sorted out what to do with his bar job at Eldridge Pope.

Seven months as part-time executive chairman (an oxymoron if ever there was one) at the ailing "pubs, inns and bars" group, as it tautologically likes to style itself, would be enough to give anyone a hangover. So perhaps even a job with as moribund an organisation as the IoD will come as a welcome relief.

Mr Templeman describes the posting as a challenge and, boy, he can say that again. He needs to sit down with a stiff drink and work out what the IoD is actually for, apart from providing a cheap venue for lunch in a rather splendid building with an agreeable address on Pall Mall.

He only became a member when he was first approached about the job a few months back and, even though he was at the Albert Hall when Gerald Ratner famously crapped on his products and his reputation, he hadn't realised he was at an IoD convention, the highlight of its year.

Among the myriad number of business lobby groups all fighting to make their voices heard, the IoD has, after 100 years of existence, become an afterthought, squeezed between the heavyweight frame of Digby Jones at the CBI, who has comprehensively captured the business policy agenda, and a New Labour administration, which regards directors with barely disguised contempt.

George Cox, the present incumbent, belatedly recognised this, dispensed with the services of Ruth Lea, the IoD's head of policy, and turned it into much more of a professional service and advice provider. In the process he staunched the loss of members. If he has a taste for it, then Mr Templeman needs to do much more of this kind of thing because the title "company director" has become a term of abuse, a byword for fat-cattery, greed and low moral standards.

Mr Templeman says there is a worthwhile case for all board directors to hold a mandatory qualification in good corporate governance. If he is to do justice to his full-time job at the IoD, he might like to start by paring down his own list of directorships, which runs to six, including Eldridge Pope. In the interests of good communications with shareholders, he might also have clarified whether he will still have a role at the pubs company before allowing the IoD to trumpet his appointment. Not the most auspicious of starts.