Monday, 21 November 2011
More for the bankers
The Westminster coalition has revealed plans today to “assist” the flagging housing market by underwriting mortgages with £400 million of tax-payers’ money. While the finer details of the plan and whether it applies to Wales are yet to be revealed, the stated aim of the 'Get Britain Building' initiative is to reduce deposits for newly built homes.
No one can deny that the construction industry is in need of a boost. That message came loud and clear last week with the launch of the Wales Construction Federation Alliance in Cardiff Bay. Housing building is undoubtedly one of the best ways to stimulate an economy. The housing charity Shelter, amongst others, has shown that for every £1 of public money spent on house-building, the economy gets £3.50 back. There is a strong imperative to provide affordable housing in Wales where social housing is more scarce than in England.
However, the latest gimmick from the Con/Dems is an ill-thought out response to these challenges. The banks, propped up with tax-payers cash have carried on their 'business as usual' with the culture of excessive pay and bonuses persisting unhindered by the mistakes of the past. With a 100% guarantee applied to their lending decisions, isn't there a big risk of mistakes repeating themselves? It was irresponsible lending in the US sub-prime mortgage market that lit the touch paper for the casino capitalism bonfire of 2008 that is still raging today. How do we know that George Osborne won't sanction even more reckless borrowing with a cast-iron guarantee to mortgage lenders? As Mervyn King said in August 2008:
"We don’t guarantee lending to other forms of borrowing; we don’t guarantee lending to manufacturing borrowing...it would be a very dangerous move to move to a situation where the government saw its major role as guaranteeing lending...why should the taxpayer take on the risk of borrowing by individual borrowers some of whom are risky it’s the lenders who should take the risk. And what we saw in the first half of 2007 was that not enough attention was paid to monitoring the riskiness of that lending.”
Furthermore, wrapped up in today’s announcement is an offer of a heavy discount on council houses – worth up to 50 per cent – in a bid to persuade people to buy their homes. This will further exacerbate the scarcity of social housing and increase waiting lists. When little or no social housing building is taking place, this is an irresponsible and ideological move by the Con/Dem coalition. Thatcher’s right-to-buy scheme of the 1980s may have had its supporters but the heavy discounts, allied with a failure to replenish housing stock, laid the seeds for the shortage of social housing we have today.
We need a major social housing programme to provide the much-needed shot in the arm for the construction industry and to shorten the creaking housing waiting lists of local authorities across the UK. This would provide an asset for the public who will own the housing at the end of the investment. Under today's announced plans there will no tangible pay-back to the tax-payer. Mortgage lenders, bankers and private house builders will be the main beneficiaries.
The Westminster Coalition is keen to trumpet at every opportunity how their interest rates on borrowing are very low because of its austerity programme (or socially regressive and ideological war on the public sector and people on the lowest incomes, depending on how you look at it). Why not use these low borrowing rates to carry out a bold and ambitious social housing programme that will give people homes, jobs and help to build up the public asset base? The answer is ideological.