Addicted to debt: The UK recovery is under way, and it is fuelled by the same disastrous borrowing as before

The bad news contained within the good is that our recovery is déjà vu all over again

Share
Related Topics

The prediction by the Centre for Economic and Business Research (CEBR) this week that the British economy could overtake -Germany’s by 2030 went down as well as a potent eggnog during the festivities. But before we have even had time to lay down a decent New Year’s hangover, a cold shower has arrived from the Institute for Public Policy Research (IPPR), which points out that, long before we reach the sunlit uplands of European supremacy, the policies of our present government risk plunging us head first back into the valley of out-of-control debt.

The Independent enjoys good news as much as anyone, but the IPPR’s grim warning is based not only on hard statistical fact but also on a canny reading of the obsessively short-term way our rulers’ minds work. Gordon Brown’s belief that the Noughties’ boom would not end in a bust looks ridiculous now, but booms do not have to go on indefinitely to have the desired electoral effect.

The economic uptick over which George Osborne was crowing in his Autumn Statement is real enough, and very welcome. Inflation has fallen to a four-year low of 2.1 per cent, providing at least temporary relief to household budgets squeezed year after year by record low wage growth.

And the prediction by the Office for Budget Responsibility (OBR) that the British economy could grow next year by as much as 2.4 per cent is greeted with open-mouthed envy and incredulity across much of the eurozone, where the risk of Japanese-style deflation and its accompanying misery continue to stalk the land.

But the bad news contained within the good is that our recovery is déjà vu all over again. As the IPPR observes in its analysis, the return to growth we are enjoying is not proof that we have rooted out the sources of our age-old problems, but that once again those problems are being conveniently masked by a new housing price bubble.

Through the years of austerity, British households have cut debt as a share of their income to about 140 per cent, but the OBR fears that it could rise to hit 180 per cent by 2018. And the engine that will pull us clear of debt is still weak: unemployment is stubbornly high, investment low, our export performance weak, and 2013 will be the 30th successive year in which the UK posts a deficit on its current account balance.

Meanwhile, George Osborne’s Help to Buy mortgage scheme has contributed to house price inflation which is now averaging 6.5 per cent across the country and has reached double digits in London.

In 2011, Mr Osborne told the Conservative Party Conference: “We have to help business create tomorrow’s jobs… We’re going to get Britain making things again.” But he has funked that challenge, resorting instead to the age-old stratagem of priming the housing market. That may, as he clearly believes, be enough to get his party through the next election, but it will end in tears.

React Now

Latest stories from i100
SPONSORED FEATURES
iJobs Job Widget
iJobs General

Recruitment Genius: IT Support Engineer

£18000 - £26000 per annum: Recruitment Genius: This is an opportunity for an I...

Recruitment Genius: Project Assistant

£17000 per annum: Recruitment Genius: They are a leading company in the field ...

Recruitment Genius: DBA Developer - SQL Server

£30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Office Manager

£26041 - £34876 per annum: Recruitment Genius: There has never been a more exc...

Day In a Page

Read Next
Larry Fink, the boss of fund manager BlackRock , is among those sounding the alarm  

Not all discounts are welcome: Beware the myopia of company bosses

Ben Chu
Cilla Black lived her life in front of the lens, whether on television or her earlier pop career  

Cilla Black dead: A sad farewell to the singer who gave us a 'lorra, lorra laughs'

Gerard Gilbert
Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

Vegetarian food gets a makeover

Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen