The only proper forecast I’ve made this year (I’m not counting falling house prices anymore, as I think the argument is pretty much won) is that it will be the year the consumer finally cracks. For the last few years it has seemed improssible that the British could keep spending and spending and spending, but I have constantly underestimated their recklessness. Even in the face of their record levels of personal debt, they have just kept spending. However, if the recent report out from the Institute of Fiscal Studies is anything to go by, the end really is now near.
The IFS claims that with public finances falling deeper and deeper into the red, whoever is Chancellor after the election (and I bet that Gordon Brown is praying it isn’t him) is going to have to raise taxes by ‘at least’ £11bn to sort things out. That’s the equivalent of 3p on income tax, an awful lot of money. So much that I just can’t see Brown or his successor – however clever they are – finding a way to hide it in stealth taxes.
This time round, people are going to notice, particularly as not only is their purchasing power likely to be eroded by inflation at the same time as their taxes rise but they will no longer have the wealth effect of the housing bubble to make them feel rich, even as they are being fleeced by the state. Then surely they’ll think to themselves that they might be able to do without a few of the pointless products they have been habitually buying for years. We’ll soon find out.
In the meantime, I am hoping my flat sells before the spending tap gets turned off completely. This is not just because I want to move, but also because I am having terrible trouble living in the kind of way that I am told viewers expect from vendors these days. After a decade of gawping at interiors shows on TV, people appear to have lost the ability to look at the important things in a flat (how big is it? does the plumbing work?) and are instead obsessed with the irrelevant (the ‘lifestyle’ of the people who currenlty live in it as suggested by their knick-knacks and lighting – both of which I intend to take with me when I leave, by the way).
The upshot is that you’re expected to leave the place both immaculate and littered with scented candles all the time. Luckily there is no shortage of the candles. Not a Christmas or birthday has passed in the last four years when I haven’t received at least four of these utterly pointless gifts (who really spends their evenings bathing by candle light?). On the plus side, pretending I have a ‘lifestyle’ is helping me use them up. Better still, the coming rise in taxation and fall in consumption might mean I don’t get any more.
Extended video interview with Merryn Somerset Webb on the risks of buy to let and the outlook for the UK housing market.