Morning Line: Middle classes on the chopping block

If economic turmoil were a living thing it would be a weed. A glance at this morning’s financial news shows just how far its reach has spread – working its way up between the foundations and affecting all parts of the market.

The papers this morning are filled with the news of crashing house prices and business confidence, as well as increasing numbers of people seeking debt advice.

The Royal Institution of Chartered Surveyors is warning today that the number of housing transactions will drop 40% this year, unless the shortage of mortgages eases. This in turn will lead to an 8% drop-off in consumer spending, with DIY products and home furnishings to be particularly hard hit, perhaps not unsurprisingly.

RICS says that it is difficult to predict when global markets will recover.

It appears to be the battle of the stats today. Lloyds TSB comes up with a 70% howler – the number representing the proportion of companies that are pessimistic about prospects for economic growth. This is down to oil prices, high inflation and the credit crunch, and is the worst figure since the survey began in January 2002.

And nowhere in the UK is business immune according to the Institute of Chartered Accountants in England and Wales, which has published its own similarly gloomy survey. The poll of chartered accountants shows that property, banking, finance and insurance sectors are under most pressure.

Things are now so bad, apparently, that the middle classes are seeking debt advice. The charity Transact says that increasing numbers of people in affluent areas, such as Haywards Heath, West Sussex, and Congleton, Cheshire are seeking help. There has been a 100% rise in the number of enquiries and things are so bad that the charity is having to turn people away.

Reporting the story, The Times says that many of the people seeking help had used credit in their homes to pay for home improvements but were now finding it hard to meet repayments, even if they earned a relatively good salary. The problem with weeds – as all keen gardeners will know – is that they punish complacency.  

The Telegraph has additional ammunition against the middle classes this morning, reporting figures from a second debt agency, Community Money Advice. This agency has reported an 85 per cent increase in people seeking help in the 12 months up to December 2007. It cites the case of a retired bank manager from Haywards Heath with a pension of £40,000 a year who has notched up £100,000 of debt across 20 credit cards and loans. There is surely only so much you can attribute to the credit crunch.   

It appears the government is yet to crack onto the scale of the problem. Although it has added an extra £55 million over the past three years to fund 500 more debt advisers, these have not been aimed at helping the middle classes.  

Tory leader David Cameron is of course quick to capitalise on this. As the Financial Times reports today, Cameron is preparing to call for us all to ‘start living within our means’. According to the pink paper, Cameron will say: ‘With the rising cost of living, taxpayers can't take any more pain, and the economy can't take any more pain without losing jobs to lower tax competitors.’