Gordon Brown made his crucial speech to the Labour Party conference standing in front of the words 'Securing Britain's economic recovery'. But the latest batch of data shows what an uphill struggle that will be. In August, house prices edged down for the first time since April, according to the Land Registry, while mortgage approvals also slid.
It seems the Bank of England's quantitative easing (QE) policy is not gaining traction, according to its preferred measure of money supply growth. Households repaid unsecured debt for the second month running in August, while the household saving rate has hit a six-year high of 5.6% of income. Meanwhile, the government announced a £100m extension to the car scrappage scheme.
What the commentators said
It's not just on the "esoteric" money supply figure that QE "might be judged to be failing", said David Prosser in The Independent. The hope was that the cash would bolster bank lending, yet the latest figures for consumers and businesses reveal "there is some way to go".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Nor can we count on consumption 65% of the economy to power the recovery, noted Capital Economics. The savings rate is still below its long-run average of 8%, having hit double digits in previous recessions. With debt at record levels, access to credit constrained, and job insecurity mounting, households will continue fixing their finances. Looming tax rises also bode ill for the high street. Consumer spending, now 3.6% down on a year ago, is likely "to remain subdued for some time", said Asda's Andy Clarke.
And the extension of the scrappage scheme merely shows the government isn't confident that the economy is ready to stand on its own two feet. Not that this scheme will help. As David Wighton pointed out in The Times, most of the cars bought so far have been imported smaller models, so there hasn't been much of a boost to the British car industry.
In any case, the scheme is "merely bringing forward sales" that would have been made later. In France, the end of a scrappage scheme in the mid-1990s led to a 20% plunge in car sales, said Prosser. The scheme does nothing to change the fact that the economy, as the FT put it, is not set for a strong rebound, but is merely "limping towards recovery".
-
What happens if you can’t pay your tax bill, and what is "Time to Pay"?Millions are due to file their tax return this Friday as the self-assessment deadline closes. Though the nightmare is not over until you pay the taxman what you owe - or face a penalty. But what happens if you can't afford to pay HMRC your tax bill, and what is "Time to Pay"?
-
What does Rachel Reeves’s plan for growth mean for UK investors?Rachel Reeves says she is going “further and faster” to kickstart the UK economy, but investors are unlikely to be persuaded
