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
iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

Read Next
Prince William and his wife Catherine, Duchess of Cambridge show their newly-born daughter, their second child, to the media outside the Lindo Wing at St Mary's Hospital in central London, on 2 May 2015.  

The Only Way is Ethics: The birth of a royal baby will not top the news for long

Will Gore
Mosul falls: Talk of Iraq retaking the town, held by IS since June, is unconvincing  

Isis on the run? The US portrayal is very far from the truth

Patrick Cockburn
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk