Workforce herded into a rush to the bottom with no security

People and government alike could do with a break. George Osborne might boast of an otherwise mundane 0.6% growth figure but he knows that GDP is still a long way short, 3.3% short, of where it stood fully five years ago. The voters the Chancellor means to inspire are meanwhile well aware of the difference between Treasury charts and reality. A nice housing boom could settle a lot of nerves.

As ever, much of the effect is purely psychological. The British attachment to bricks and mortar is the closest thing many have to a faith. Family, security and prosperity are bound together beneath the roof overhead. When the market collapses, trust in the future subsides. Or so millions believe, devoutly if not, given experience, quite rationally.

The latest RICS report is therefore taken for a ray of sunshine without much argument. Prices increasing; demand increasing; mortgage approvals increasing; confidence and hope abounding. What could possibly go wrong?

By now, Britain should know a bubble when it sees one. Voters should also recognise a manipulative Chancellor. They have experienced bubbles and politicians bearing gifts often enough before. They might manage to erase the memories of these spectacles in their eagerness for good news, but they cannot ignore the fact that a housing boom at this juncture makes no sort of sense. According to the Halifax and other lenders, mortgages offered against four times a single salary are becoming common again. We know where that could lead if Mark Carney and the Bank of England are unable to keep interest rates down, or if international conditions take another turn for the worse. But this nascent housing bonanza is happening at a time of falling real wages and persistent inflation. People are vastly less well off than they were five years ago, yet Mr Osborne, Mr Austerity, is tempting them into debt.

With his Funding for Lending scheme to aid banks and his Help to Buy programme to underwrite mortgages, the Chancellor is promoting a fiction. The Institute for Fiscal Studies says wage cuts in real terms have amounted to 6% in those five years. Set against historical averages, that means people are 15% worse off than they would have been had the bankers not demolished the economy. So who bets on mortgage rates remaining steady?

Consumer price index inflation "fell" (meaning it rose) to 2.8% in July. The retail index stood at 3.1%. This was before the train operators decided, once again, that an inflation increase was the least they could demand of Scottish travellers. People in England and Wales, poor souls, will pay as much as 9% more. For many, the daily cost will be punishing. Simply put, there is no longer a reliable relationship between employment and wages.

Increasing numbers of people are being pushed into the low-wage, no-security world of zero-hours contracts. These are the workers who gave Mr Osborne his supposed employ­ment miracle. In reality, they are making an ever-diminishing contrib­ution to his revenues while he creates a housing boom for the rest, one that does nothing for the economy.

So how does the property market "turn the corner", as RICS and the lenders would say, when real wages are falling and prices generally keep rising? More precisely, how can any of this be achieved without the sort of credit expansion that Mr Osborne would otherwise call unsustainable? On paper, £130bn of state mortgage guarantees might look like a safe enough bet. If there was real growth in the economy, the Government might actually make some money. But what happens if it all goes wrong, if all the happy home owners fail to meet their share of the costs?

The cartels in water, power and transport show no signs of price restraint. The employers stampeding into the twilight world of zero-hours labour show no signs of social responsibility. Standards of living have fallen and are falling for increasing numbers of people. The minority might be able to enjoy a rising property market for now. If the majority are not working productively and earning adequately, however, the Government is asking for trouble. London and the south-east of England aside, private housing in Britain is a giant chain, an interconnected tangle. Whatever the boasts of the lenders, rising prices now are of no help to the first-time buyers whose need is greatest. Yet without that segment of the market, the rest is an illusion utterly dependent on Mr Carney's low interest rate policy. Even the Canadian governor does not promise much more than two years of grace in that regard.

A crash this time will hit a population with little hope of increased average earnings, with precious little in the way of savings, and with few hopes of a global economic pick-up. Even the IMF has told Mr Osborne that he is being rash in stoking a boom. All that this Chancellor can see is an election in 2015. A little hope, even if it is false hope, will do until then. Take that as a mark of his seriousness as a steward of the national finances.

Needless to say, the British economy is no nearer to being rebalanced after three and a half years of coalition. The best that can be claimed are slight improvements for manufacturing and construction to the point where they are no longer dragging GDP downwards. Mr Osborne's recovery meanwhile only embraces a couple of quarters, the kind of span he used to reject as meaningless. But then, he once derided Gordon Brown for claiming to have ended boom and bust.

In all seriousness, you have to ask if this is the best the Coalition can manage. The "road to recovery" was not supposed to take us straight back to where we started. Nevertheless, Mr Osborne is presiding over the expansion of a bubble while the values of annuities collapse thanks to the most expensive and least efficient pensions industry in Europe. Millions will therefore be depending on the property market to provide for old age. As things stand, that's quite a gamble.

Mr Osborne likes to boast of all the jobs he has destroyed and all the jobs he has allegedly created. Given the nature of the employment at stake, it looks like a very poor exchange. Britain's workforce is being herded into a rush to the bottom with neither security of employment, pensions, nor help from the state. The last illusion available is home ownership.

On one level, the Chancellor is cunning. There is nothing people want more than to have an old world restored. Foolish or not, they dream of the days when houses were "earning" more than their occupants. They liked easy credit. They had good times during the last property boom. In the absence of alternatives, they would do it all again in an instant.

It was George Osborne, you will recall, who condemned Labour for encouraging such fantasies. Now he promotes them.