Comment: Chancellor’s got nothing to shout about

Jeff Salway. Picture: Jane Barlow
Jeff Salway. Picture: Jane Barlow
Have your say

THERE’S been an unsettling familiarity about some of the data filtering out of the Bank of England over the past few weeks.

Its latest money and credit figures reinforce the growing impression that we’re increasingly at risk of repeating the mistakes of the noughties debt boom.

Borrowing on credit cards and loans is growing at a rate not seen since the halcyon/lunatic (delete as you feel appropriate) days of the mid-noughties. Mortgage borrowing is piling up too and fresh evidence of rising house prices is greeted with cheers.

The buy-to-let demand that was a feature of the pre-crunch debt boom has also returned. Buy-to-let loans now account for almost a fifth of all new mortgage borrowing, a figure that contributed to the Bank warning last month that buy-to-let borrowers may be putting themselves and the wider economy at risk by taking on too much debt and pushing house prices up.

All this while wage growth remains sluggish, a factor pointed out by ratings agency Moody’s when it cautioned in July that UK consumers are increasingly vulnerable to serious difficulties if economic conditions take a turn for the worse.

There are concerns on the regulatory front too, as the Treasury looks to replace Martin Wheatley as chief executive of the Financial Conduct Authority with someone more “industry friendly” and less worried about conduct and consumer protection.

Growing calls for regulators to ease up on banks forced the deputy governor of the Bank of England to last week stress that policymakers shouldn’t turn back the “regulatory dial”.

We’re clearly some way off the excesses of 2005 and 2006, but it seems that in terms of attitudes and culture, we’re heading back that way.

This time 10 years ago personal bankruptcies were soaring and mortgage arrears and repossessions were rising rapidly. Yet the government and the regulator sat on their hands as banks dished out credit to anyone walking by with their hands open and lenders decided mortgage deposits were a quaint relic of the past.

In July 2005, Martin Wolf asked in the FT if the wheels were about to come off an economy that had enjoyed 51 successive quarters of economic growth. But his concerns were drowned out amid the triumphalism and delusion.

It was with triumphalism that the present Chancellor greeted news last week that the economy grew in the second quarter by a measly 0.7 per cent, claiming preposterously that it is “motoring ahead”. Quarterly growth during George Osborne’s tenure still hasn’t hit the 1 per cent recorded in the final quarter of the last Labour government.

In the absence of productivity, the government is relying on a debt-fuelled recovery in which house prices keep rising, low interest rates encourage more borrowing, social security cuts force low income families to take on expensive credit and household debts continue to climb.

Osborne is fond of using the nonsensical analogy of the UK economy and household finances. But anyone running their finances the way he runs the economy, with a disregard for the lessons of the past, will soon be in trouble.