Economy ‘skating on thin ice’

An influential forecast group is concerned about the risks individuals, firms and ministers are taking with borrowing. Ernst & Young’s Item Club spring forecast said people are “overly relaxed about risk” and are “spending as if it was going out of fashion”.

Club chief economic adviser Peter Spencer said: “The bottom line is that we are all living beyond our means.”

“Ultimately we are all skating – not to say wobbling – on thin ice,” he added.

The report highlights the current deficit in the public sector and expresses surprise that it built up at a time of economic strength and buoyant tax revenues.

“If the Chancellor is forced to borrow so much when the economy’s so sweet, what will happen when it turns sour?” Mr Spencer asked.

The Item club also says that the business sector is driving economic growth faster than either government or consumer spending.

It points out that business investment at the end of 2006 was 13.5% higher than it had been the previous year.