By . Wills Robinson . PUBLISHED: . 07:34 EST, 28 December 2013 . | . UPDATED: . 12:52 EST, 29 December 2013 . Bubble: The Chancellor risks pumping up a fresh housing bubble with the Help to Buy scheme, warns economists . Britain's economic recovery is under threat from inflated house prices and debt, a leading think tank has warned. In a gloomy New Year message, the Institute for Public Policy Report (IPPR) predicted a new 'debt bubble' is on the way as families continue to live beyond their means by taking out cheap mortgages under the Government's Help To Buy scheme. The policy was set up last year to help people get onto the property ladder, but the economists believe it could lead to an unmanageable level of demand for new houses and increasing levels of household debt. Economic growth in Britain, which is at its strongest since 2007, is being fuelled by higher consumer spending and increased rates of borrowing. This, in turn, is leading to an increase in household debt, which caused the recession to 'deepen' after 2008. Personal debt is expected to rise to 160 per cent of personal income by 2018, and could cause the bubble to burst. The chief economist of the Institute for Public Policy Report (IPPR), Tony Dolphin, took aim at the Help to Buy scheme. He said there was a 'fundamental flaw' in the way the economy was run and condemned Chancellor . George Osborne’s promise of a recovery led by the difference manufacturing and exports, which is running at a deficit . ‘The Chancellor risks pumping up a fresh housing bubble with the Help to Buy scheme’, he said. Some . economists, including Dolphin, are worried that this is pushing up . house prices to artificial levels, as demand outstrips supply of new . homes. Dolphin pointed . out that house prices have risen by 6.5 per cent across the UK in the 12 . months to November, and growth in London has hit double digits. The Bank of England has responded to these fears by promising to keep a close eye on the housing market. The . Office for Budget Responsibility believes debt will start to . increase again in relation to incomes. ‘In the global economy we are truly living beyond our means, and have been doing so for three decades,’ said Dolphin. Obstacles: People taking out cheap mortgages to buy homes is fuelling levels of household debt and could hamper Britain's economic recovery . He . also ridiculed the pledge by Osborne in his March 2011 Budget for a . ‘march of the makers’ – an economic recovery led by manufacturing . industry boosting exports and investment spending. It . comes after latest figures from the Office for National Statistics . revealed that a slump in exports had led to a huge increase in the UK’s . current account deficit – the difference between what Britain . earns from abroad and what it pays out to overseas countries. This . ballooned to £20.7billion from £6.2billion between July and September.
Institute for Public Policy Report (IPPR) made the gloomy prediction .
Claims the Help To Buy scheme is creating a huge demand for homes .
Policy set up by the Government to help people onto the property ladder .
Household debt expected to rise to 160 per cent of personal income by 2018 .
By . Wills Robinson . PUBLISHED: . 07:34 EST, 28 December 2013 . | . UPDATED: . 12:52 EST, 29 December 2013 . Bubble: The Chancellor risks pumping up a fresh housing bubble with the Help to Buy scheme, warns economists . Britain's economic recovery is under threat from inflated house prices and debt, a leading think tank has warned. In a gloomy New Year message, the Institute for Public Policy Report (IPPR) predicted a new 'debt bubble' is on the way as families continue to live beyond their means by taking out cheap mortgages under the Government's Help To Buy scheme. The policy was set up last year to help people get onto the property ladder, but the economists believe it could lead to an unmanageable level of demand for new houses and increasing levels of household debt. Economic growth in Britain, which is at its strongest since 2007, is being fuelled by higher consumer spending and increased rates of borrowing. This, in turn, is leading to an increase in household debt, which caused the recession to 'deepen' after 2008. Personal debt is expected to rise to 160 per cent of personal income by 2018, and could cause the bubble to burst. The chief economist of the Institute for Public Policy Report (IPPR), Tony Dolphin, took aim at the Help to Buy scheme. He said there was a 'fundamental flaw' in the way the economy was run and condemned Chancellor . George Osborne’s promise of a recovery led by the difference manufacturing and exports, which is running at a deficit . ‘The Chancellor risks pumping up a fresh housing bubble with the Help to Buy scheme’, he said. Some . economists, including Dolphin, are worried that this is pushing up . house prices to artificial levels, as demand outstrips supply of new . homes. Dolphin pointed . out that house prices have risen by 6.5 per cent across the UK in the 12 . months to November, and growth in London has hit double digits. The Bank of England has responded to these fears by promising to keep a close eye on the housing market. The . Office for Budget Responsibility believes debt will start to . increase again in relation to incomes. ‘In the global economy we are truly living beyond our means, and have been doing so for three decades,’ said Dolphin. Obstacles: People taking out cheap mortgages to buy homes is fuelling levels of household debt and could hamper Britain's economic recovery . He . also ridiculed the pledge by Osborne in his March 2011 Budget for a . ‘march of the makers’ – an economic recovery led by manufacturing . industry boosting exports and investment spending. It . comes after latest figures from the Office for National Statistics . revealed that a slump in exports had led to a huge increase in the UK’s . current account deficit – the difference between what Britain . earns from abroad and what it pays out to overseas countries. This . ballooned to £20.7billion from £6.2billion between July and September.
Institute for Public Policy Report (IPPR) Help To Buy scheme. The policy was set up last year to help people get onto the property ladder, after 2008. Personal debt is expected to rise to 160 per cent of personal income by 2018, and