. . . but interest rates are the cloud on the horizon

If every silver lining has its cloud, with this year's consumer windfalls it is the prospect that the Bank of England will raise the cost of borrowing again next week to stop the national spending spree getting out of hand. If it does, those pounds 1,000 cheques will carry the penalty of an extra pounds 10 a month on the typical mortgage.

Most economists started out last autumn assuming that people would save the bulk of the handouts they got in the form of shares from building societies joining the stockmarket, and would spend perhaps a tenth of it. But opinion surveys, and the first couple of flotations, indicate that up to one-third of the money will be spent.

In addition, estimates of the size of the total windfall have grown to stand at about pounds 29bn now.

That could mean pounds 10bn extra flowing into high street tills during the next two years, compared to an annual consumer spending total of pounds 470bn.

A quarter of the Halifax's beneficiaries have said they will sell their shares immediately, making that pounds 3bn-4bn burning a hole in people's pockets next week.

"This is free money. It's there to be spent," said Ciarn Barr, an economist at City investment bank Deutsche Morgan Grenfell. "We run the risk of an outright boom. But the authorities will be much faster to react by raising interest rates than they were in the late 1980s."

The risk of a consumer boom arises because the share windfalls are arriving on top of rising real incomes, falling unemployment, and a strong recovery in the housing market.

Michael Dicks, a City expert at Lehman Brothers, estimates that pounds 10bn extra will "leak" into consumer spending from rising house prices alone.

If there is a single symbol that captures the risk of an impending Eighties- style boom, it is that two of the fastest- expanding retail chains are specialist candle shops and coffee bars selling pounds 1.80 cappucinos.

Although the big high street retailers complain that shoppers remain very cost-conscious, and their business is certainly not booming, the official figures show that we are starting to spend our money much faster on some items. "Big ticket" items like computers and furniture have done well, so have meals out and leisure activities.

Yet it is a safe prediction that the Bank of England, exercising its new independence, will not let things get out of hand this time. Its recent Inflation Report indicated a clear preference for further rate rises, and soon.

Mortgage lenders would be likely to follow another move by the Bank, perhaps as early as next Friday, adding up to pounds 10 a month to the typical pounds 50,000 mortgage. This would follow a similar increase earlier this month.

How much further loan costs would have to go will depend on how much the beneficiaries of all this free money decide to spend in the end.

It might be that most of us will decide to splurge only pounds 100 of our pounds 1,000 cheque - that would buy 56 fancy cappucinos or a hundred scented beeswax candles - and put the rest away for a rainy day. But if spending starts to race away, the Bank will be swift to apply the interest rate brake again.