By Dr Steve McCabe

Some seven years on from the 2008 GFC (Global Financial Crisis) it seems that memories are fading as to what caused a crash that, as well as being compared to the infamous 1929 Wall Street Crash, wrought havoc in markets across the world. It’s worth remembering that the 1929 crash in America led to the Great Depression and, many contend, indirectly led to the rise of Nazism and the truly dreadful second-world-war.

Thankfully though the 2008 GFC has caused immense financial suffering we have largely not seen the calamitous rise of Fascism; the rise of Daesh may be many things but not the collapse of the ludicrous sub-prime market in America.

Here in the UK though we are told by Prime Minister ‘in waiting’ George Osborne that though things are still difficult – we need to keep pulling in our belts to pay off the debts that were caused by New Labour’s profligacy – the economy is now firmly in recovery. The economy is growing, unemployment is down, wages are going up and we continue to enjoy record low interest rates.

What’s not to like?

Well, quite a lot.

The announcement by the non-government Office for Budget Responsibility (OBR) that British families are spending beyond their means is cause for concern. The OBR reckons that on average each family in the UK borrows around £1,500 which is creating a collective debt of £40 billion.

As many economists, including myself, have long warned, the economic recovery is a myth built on vastly increased consumption. A cursory examination of the economic growth figures that Osborne clings onto shows that far too much reliance is placed on services including retailing and far too little on making things that can be exported.

No wonder we have a balance of payments crisis that is eye-watering in size.

Add into the equation the regular announcements being made that house prices and rents will continue to rise and you have a noxious brew.

No wonder many are suggesting that the conditions are being created for another economic collapse here in the UK.

Indeed, the OBR themselves are predicting that within five years Britain’s household debt-to-income ratio will reach 163 per cent which is alarmingly close to the figure of 168.2 per cent reached in 2008.

And in another warning of how potentially bad things may be, the OBR have estimated that borrowing for the financial year 2015-16 will be £68.9 billion which is well below what was achieved last year (£90.1 billion).

Remember that ‘Gorgeous’ George has promised that by 2020 – when he hopes to be in 10 Downing Street – we will have eliminated the dent caused by the difference between government spending and revenue.

So, it appears, things are not getting any better and, worryingly, they could get a whole lot worse.

A walk down any high street will tell you that retailing is suffering and following the damp squib of ‘Black Friday’ we now have ‘Panic Saturday’ undoubtedly to be joined by ‘Crazy Sunday’, ‘Mad Monday’ and so on.

The majority of Britain’s retailers, or those that survive, are in a permanent state of life support and having to flog goods at lower prices to shift stock.

But don’t worry, we are told, you can wrack up debt on your credit card or bank overdraft.

Sadly, though, Citizens’ Advice reports on having to deal with a disturbing number of people who are unable to pay their debt and are finding themselves being drawn into the clutches of so called payday lenders who really are a scourge on the poorer members of our society.

Once we follow America and start raising interest rates the vista becomes even worse.

Perhaps it’s wise to listen to what former Business Secretary Sir Vince Cable, ever a voice of sanity had to say when he spoke to The Independent in November.

“We’re back on the treadmill of growth being sustained by personal borrowing. Much of it is against an inflating housing stock. Taken together with other indicators like the very weak external deficit position, it suggests we’re getting back to the old and unhappily discredited forms of economic growth.”

The trouble is, Vince and others like him, are seen as harbingers of doom and should support the miracle achieved by Osborne.

What is needed is some serious opposition.

Unfortunately for the foreseeable future that is not likely.

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Dr Steve McCabe

Dr Steve McCabe

Birmingham City Business School