Recovery 'built on housing bubble and consumer debt'

Britain's rapid growth is built on a housing bubble, showing the economy remains "fundamentally flawed", IPPR warns.
Britain's recovery may not be sustainable because it is built on mounting household debt, a leading think tank has warned.

Growth is being driven by a housing bubble, fuelled by the House to Buy cheap mortgage scheme, which is encouraging families to borrow and spend more, economists fear.

The recession was worsened because of a “massive build up” of household debt before 2008, and that is due to rise again to 160 per cent of income by 2018. It means the rapid growth could prove “unsustainable and bittersweet,” according to the Institute for Public Policy Research.

Britain is now on course to grow at almost 2 per cent this year, the fastest rate since 2007. Unemployment is also falling more rapidly than expected and stands at 7.4 per cent.

But despite Mr Osborne’s hopes of rebalancing the economy towards manufacturing and exports, much of the growth has been driven by higher consumer spending. Britain’s current account deficit has deteriorated significantly in recent months to the highest level since 1989, as consumption continues to outstrip foreign exports.

http://www.telegraph.co.uk/news/politics/10539945/Recovery-built-on-housing-bubble-and-consumer-debt.html

The symptoms of the economic recovery are exposed as being built on consumer spending but eventually people will run out of money due to a drop in living standards much of it caused by prices rising faster than wages and the lack of proper jobs paying decent wages and sufficient working hours. People are worse off now than they were in 2010 and the rise in people resorting to the indignity of being directed to food banks shows just how bad it is for so many of the citizens of this country.

Shameless.

Exactly. People going on about people getting into debt, but without that debt we would have no recovery. Its a house of cards that will come tumbling down.

And what would increased public sector spending as suggested by labour be built on? Oh yeah that would be the government getting into debt  

Recovery has always meant spending - Labours way is for the government to borrow money to put in peoples pockets so they spend it but then there is no new income stream to service the debt. The coalition way is for private sector borrowing resulting in people spending but that spending is resulting in increased employment which is resulting (so far) in people being better able to service the debts.

The dodgiest part of the whole thing is the housing part which is being driven by government borrowing to provide lending to private individuals which combined with out of control immigration causing pressure on accommodation is resulting in housing bubble. The government would be better advised to use the money it is putting into housing into paying for road repairs.

Sassy wrote:Exactly.   People going on about people getting into debt, but without that debt we would have no recovery.   Its a house of cards that will come tumbling down.

You get the point but regrettably many don't. Without debt our economy would go bust.

Without people spending there would be no economy, and at a time when people have no money, the Chancellor must be rubbing his hands in glee that they are borrowing to make it look like a recovery, so he can claim at the next election he has done a good job. Wool, eyes, over.

Sassy wrote:Exactly.   People going on about people getting into debt, but without that debt we would have no recovery.   Its a house of cards that will come tumbling down.

You worry about the odd person getting in to debt yet you're absolutely desperate for Labour to get in so they can get in to debt on your behalf, give all the money to people on benefits so that hard working people on £20,000 - £40,000 can pay it all back for you.

Sassy wrote:Without people spending there would be no economy, and at a time when people have no money, the Chancellor must be rubbing his hands in glee that they are borrowing to make it look like a recovery, so he can claim at the next election he has done a good job.   Wool, eyes, over.

Exactly. And the Which? survey on Christmas spending states that around 2.5 million will take more than six months to pay off December’s debts so they will be unlikely to be contributing to growth in 2014.
Nevertheless, I'm sure George will pull a few rabbits out of the hat to cover that somewhere in the figures.

Good evening Folks.

And yes,I am saying this as sarcastically as I can......'Do please tell me what alternative plan the amazing Labour/failure party have to deal with the recovery? Do enthrall me with their business acumen as I'm waiting with..........bated breath'.

BigAndy9 wrote:

Sassy wrote:Exactly.   People going on about people getting into debt, but without that debt we would have no recovery.   Its a house of cards that will come tumbling down.

You worry about the odd person getting in to debt yet you're absolutely desperate for Labour to get in so they can get in to debt on your behalf, give all the money to people on benefits so that hard working people on £20,000 - £40,000 can pay it all back for you.

How do you know that? Cameron keeps telling the electorate that Labour don't have any policies.

Is he correct?

Very much correct, what are their policies being as they change daily?

And of course, this Government hasn't got a higher debt to GDP than Labour have they lol

PhilDidge wrote:Very much correct, what are their policies being as they change daily?

Right, so people can't claim that Labour will splash the cash on running the country then.

Irn Bru wrote:

PhilDidge wrote:Very much correct, what are their policies being as they change daily?

Right, so people can't claim that Labour will splash the cash on running the country then.

Oh they can when they have a track record of doing so

Shady wrote:Good evening Folks.

And yes,I am saying this as sarcastically as I can......'Do please tell me what alternative plan the amazing Labour/failure party have to deal with the recovery? Do enthrall me with their business acumen as I'm waiting with..........bated breath'.

HAR HAR HAR! I didn't think that I'd get a swift response to this question.

PhilDidge wrote:

Irn Bru wrote:

Right, so people can't claim that Labour will splash the cash on running the country then.

Oh they can when they have a track record of doing so

Oh really!!!

Let me quote you something from The Institute of Fiscal Studies - 2010

By 2007 Labour had reduced public sector borrowing slightly below the level it inherited from the onservatives. And more of that borrowing was being used to finance investment rather than the day to day running costs of the public sector. Labour had also reduced public sector debt below the level it had inherited. As a result the ‘golden rule’ and ‘sustainable investment rule’ that Gordon Brown had committed himself to on becoming Chancellor in 1997 were both met over the economic cycle that he eventually decided had run from 1997

And of course when in opposition George Osborne also pledged to match Labour's spending plans indeed increase them. And he also called on the Labour government look across the sea to Ireland and model our economy on their policies. Pity that when he came to government he had to bail them out with a 7.5 Billion
loan to help keep them afloat. Lucky he was not in power when the sh!t hit the fan then.

Oh deary me

Now that's funny!

Sassy wrote:Now that's funny!

You really need to read this. A couple of pages will do before you crack up

Britain can learn from Ireland’s economic success

GEORGE OSBORNE MP Shadow Chancellor 23rd February 2006

Speech to the University College Dublin’s Michael Smurfit School of Business

http://conservativehome.blogs.com/torydiary/files/george_osborne_speech.pdf

I remember it. Then a few months later the celtic tiger turned into a starved kitten lol

It is said an interest rate rise is on the way. That will push 2 million to the edge.
And the govt still push their help to buy scheme which is not as helpful as it may appear.
Exactly the same as last time round encouraging more borrowing instead of investing in social housing. They still want us dependent on their friends the bankers.

http://www.thisismoney.co.uk/money/mortgageshome/article-2530717/Interest-rate-rise-push-two-million-families-brink.html?ito=feeds-newsxml

NemsAgain wrote:It is said an interest rate rise is on the way. That will push 2 million to the edge.
And the govt still push their help to buy scheme which is not as helpful as it may appear.
Exactly the same as last time round encouraging more borrowing instead of investing in social housing. They still want us dependent on their friends the bankers.

http://www.thisismoney.co.uk/money/mortgageshome/article-2530717/Interest-rate-rise-push-two-million-families-brink.html?ito=feeds-newsxml

Very worrying, I would suggest anyone with a mortgage at least considers fixing their interest rates if they can   Unfortunately often these kinds of deals aren't available to those who probably need them the most as you need a good loan to value ratio.

If they do increase as much as being talked about it will be a disaster.

PhilDidge wrote:

Irn Bru wrote:

Right, so people can't claim that Labour will splash the cash on running the country then.

Oh they can when they have a track record of doing so

...fgs sake Didge, make your mind up as you and some others were rabbiting on about how Labour would have made severe austerity cuts had they got in at the last election, Darling did say cuts would have to be made, but he never said they would be as brutal as the cuts this coalition have made...

So are you now saying Labour would have done nothing but spend?