One of the main causes of the UK recession is our attempt to prevent a depression. By lowering interest rates we have stopped the property bubble from being pricked. Thus people are paying their low interest rates on their mortgages and not selling their houses. Lack of supply means that pent-up demand coupled with low building rates is keeping prices high. Plus new buyers have to save more for deposits and
as regulatory change has made the barrier to entry even higher - the days of 125% mortgages seems like a lifetime ago.
Overall, property debt is falling as people in the UK pay off mortgage debt - but this debt pile is enormous and the price of paying it down is the current, long, recession.
By not pricking the bubble, we are left instead with a slowly deflating economy - is this preferable to a crash and boom?
In the US, the ability to walk away from housing debt, in the form of jingle-mail, meant the housing bust has been very bad, but the economy has recovered quickly. In the UK we have a Japanese style zombie economy, caused to a large extent by banks sitting on assets with impaired values that they won't sell becuase the loans are still performing (i.e. payments are being made as the interest rates are low, the banks are still losing money though, as these rates offered in the past are below the banks cost of funds today).
It's easy to say sack George Osborne, but as much as he has made many errors, often by trying to raise taxes, his basic mantra that you can't borrow your way out of a financial crisis is sound. Spain is trying that, the USA is trying that - their national debts are going up much faster than ours, their economies performing only slightly better.
But is a bust the answer? I am not sure myself yet as it will be horrible. Chances are with the euro-crisis we will find out the answer in due course.