HENRY FORD said that it was customers, not employers, who really pay workers’ wages; employers merely look after the cash. Ford also thought economies did best when workers could afford to buy the goods that they make. These old American ideas do a good job of explaining Britain’s consumer slump. Digging into a typical household’s accounts suggests when it might end.

Spending by private households is the biggest slice of GDP, accounting for 63% in 2012. It has been remarkably weak, even by comparison with previous recessions (see chart). To see why, start with the accounts of a typical household in 2012. On the top line are median pre-tax wages of £37,000 ($56,000). Tax and national insurance take £9,400 leaving disposable income of £27,600. Next a host of unavoidable bills have to be paid. Borrowing, mainly mortgage payments, drains £7,700. With council tax, utilities and petrol costs running to £5,000 a year, the average Briton was left with close to £15,000. During the boom years income and outgoings moved in ways that made household finances glow. Average weekly earnings grew at 4% a year between 2001 and 2007, while prices went up by just 2% a year. Workers’ buying power increased steadily and strong private consumption underpinned rising GDP. But in 2008 the numbers flipped. Since then pay increases have been 2% a year, price increases above 3%. Workers’ cash buys less and less. A glance at Britain’s strong employment figures might suggest that wages should recover some of their old vigour soon: surely firms hiring more must pay more? But strong jobs numbers do not always translate into better pay. Over the long run wages tend to move in line with productivity. In Britain, growth in output per worker is low relative to other countries and to other recessions. Whereas the productivity slump is puzzling, the puny wage increases are not. That makes the prospect of rising prices all the more painful. Energy bills are an ongoing worry. In 2011 and 2012 gas charges rose by close to 10%, electricity by more than 6%. Another price hike of up to 10% could be coming in the autumn, according to Amit Kara, an economist at UBS, a bank. Overall, the impact of these prices and other “administered” prices like tuition fees imply that even if all others are flat, inflation would still be 1% in 2013.

That is worrying, since other prices are highly unlikely to stand still. Firms facing higher energy bills tend to pass on cost increases. Another worry is the continued fall in sterling says Mr Kara. The pound has depreciated by close to 6% in 2013 against the currencies of Britain’s main trading partners. When the pound loses value imports become more expensive, cutting buying power.

Banking on spring

Some relief may be on the way. With an average mortgage of £113,000 and an interest rate of 3.4%, Britons shell out £3,800 a year on interest payments. Slugs of quantitative easing (QE), in which bonds are bought with newly created money, have done little to lower household borrowing rates, in part because banks faced a spike in their own borrowing costs as the euro crisis intensified. A new scheme—funding for lending—has targeted bank funding costs, which have fallen sharply since last summer. There are early signs of a broad easing as banks start to pass the savings on. Homeowners with a decent deposit can refinance mortgages at 1.75%, saving the average household £1,860 a year. Easier borrowing is one reason household cashflow should rise this year.

Lower mortgage rates may mean knock-on benefits for renters too. As landlords’ borrowing costs fall, competition should keep rental rates at bay. That would help a lot, especially in London where rent payments can take up to 60% of pre-tax income, according to Shelter, a charity. Renewed efforts to boost the housing supply through new buildings and office conversions would help too.

Cheaper borrowing will certainly free up cash. But whether that leads to stronger consumption and economic growth depends on whether the cash is saved or spent. At present British households are firmly in saving mode. The saving rate, which fell from 6% in 2001 to zero by 2008, jumped and has been around 7% for five years. That has allowed Britons to lower their debt-to-income ratios rapidly, by a quarter in four years.

This high rate of saving and fast pace of deleveraging mean that Britain does not need to return to a debt-fuelled spending spree. All that is needed is for the pace of saving to slow. If the saving rate fell to 4%, that would give a spending boost of £41 billion, lifting GDP by 2.7%.

And there are signs that firms’ borrowing costs could ease soon too. Senior Bank of England officials have recently backed radical ideas to release fresh credit: from negative interest rates to the break-up of RBS, a state-owned lender. With these activist ideas, monetary policy is likely to work in firms’ favour. Cheaper credit to new and lively firms could lift productivity and, in time, wages.

At the moment consumer spending is under the cosh. But it could come good—just as exports could rise, and companies could start spending some of their colossal cash piles, boosting Britain’s economy. What nobody knows is when.