People are finally spending more on their cards

Is this the sign we've been waiting for?

I may just have spoken to the most optimistic and cheery senior UK-based banker for many a year.

Dave Chan, CEO of Barclaycard Europe, is not just chirpy about the prospects for UK plc; he says that there is evidence going back to the second quarter of the year that we may have turned a corner. In short, people are spending more on their cards.

In May and June, "nominal spend" – that is expenditure taking account of inflation – of Barclaycard cardholders rose for four months in a row for the first time in three years. Given the importance of consumer spending as an engine of growth and with expenditure now on a gentle upward trend, we may indeed be witnessing the recovery starting to gain momentum.

That is however only part of the story. The clever number-crunchers at Barclays have been analysing just what exactly we are using our cards to purchase. There are signs that discretionary expenditure is rising including purchases such as foreign holidays Perhaps the real clincher to back up Chan’s optimism relates to card expenditure on home improvements.

In the past couple of months he says that there has been a big uplift in expenditure in this sector.

Meantime, UK unemployment remains stubbornly high at 7.8 per cent. If the Bank of England forecasts for GDP growth are accurate – and here it has a decidedly mixed track record – we will only enjoy growth of 1.4 per cent this year and 2.3 per cent next year.

For those of us old enough to have lived through economic upturns following past recessions, such relatively low rates of growth are way below the growth levels witnessed during the Thatcher second term and Blair’s first term.

The chances of UK unemployment falling below 7 per cent and the trigger for a change in UK monetary policy – that means higher interest rates to you and me – is slim in the next three years. That inevitably will impact the prospects for the share prices of the major UK banks.

As for home improvements major players, such as B&Q’s parent Kingfisher, there may be renewed interest in how its share price performs. Analysts following Kingfisher are divided with six rating the stock a sell, seven say hold with 13 recommending a buy.

Time will tell if Chan’s grounds for optimism are well founded.

I am glad to report, that at no time during the course of a lengthy conversation did he use the phrase “green shoots” (Norman Lamont circa the 1991 recession).

A handful of credit cards. Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.