The data on Britain's economy continues to improve. The Confederation of British Industry's quarterly service-sector survey showed hotels, bars and restaurants notched up the fastest sales increase since 2007 in the three months to May. A Lloyds TSB survey found that consumer confidence is at a three-year high. Last week figures showed a drop in inflation to 2.4% in April. And Hometrack has reported a 0.4% increase in house prices in May, the fastest rise since 2007, driven by the southeast.
"We shouldn't automatically expect improvements in sentiment to translate into improved consumer spending," said Lloyds' Patrick Foley. Employment fell marginally in the first quarter of 2013 compared to the previous three months. Wage growth is very weak, and still running behind inflation. In short, "the solid foundation of rising household incomes necessary for a long-run recovery in household spending remains lacking", said Capital Economics.
And with exports hardly likely to surge, given the subdued European and global backdrop, it's hard to see where growth will come from. As the IMF put it, Britain is still "a long way from a strong and sustainable recovery". On the other hand, we seem close to re-inflating the housing bubble, even though it barely deflated in the past few years: according to Nationwide, the average house still costs over six times the average salary.
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Ministers "do not attempt to deny" that the government's new Help to Buy scheme "is a blatant attempt to drive up house prices", said Ross Clark in The Times. It may well give consumption a boost and prove popular. But it will leave taxpayers on the hook for risks the banks are not prepared to take, and put a few people on the housing ladder while pushing prices further out of reach for everyone else. Like Gordon Brown before him, Chancellor George Osborne "is putting politics before prudence".
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