The roof is being fixed but beware the house crashing beneath it

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The roof is being fixed but beware the house crashing beneath it

Consumer spending is driving economic growth but household debt and the house price-income ratio is at a record high. Be afraid

Monopoly houses and hotels sit atop penny coins

The UK household debt to disposable income ratio is ballooning. Photograph: Christopher Furlong/Getty Images

We are fixing the roof while the sun is shining. It’s a soundbite that has served George Osborne well down the years and he’s still using it as the rationale for the government’s deficit reduction plan. The chancellor says he is taking advantage of the good times, putting the public finances in the sort of shape that would make the UK more resilient to recession than it was back in 2008.

This proved to be a powerful message during the election campaign because Labour’s lack of economic credibility with voters stemmed from the idea that Gordon Brown spent and borrowed too much, leaving the economy vulnerable when the financial crisis broke.

The reality is that Britain would have suffered a stonking downturn in 2008 whatever the state of the public finances. The sheer size of the City in relation to the rest of the economy meant Britain was going to feel the full effects of the financial meltdown. A more valid criticism of the last Labour government was that at the end of a long upturn that started under the previous Major administration the economy was so unbalanced and heavily reliant on an unsustainable build up of private debt.

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