By Kevin Morley
The Government in general and Gordon Brown in particular have done well out of the housing boom over the past decade. Stealth taxation via stamp duty and inheritance tax have enabled them to increase public spending faster than the economy has grown, while lax controls in the credit market have powered equity release to feed consumption growth in the 'spend not save' culture they have encouraged.
They readily blame the sub-prime problems in the USA for the current state of the UK housing market but we believe the real rot is much closer to home!
Northern Rock has little to do with the sub-prime debacle but everything to do with a business model the Government tells us was flawed, but which was regulated and controlled by the FSA and the Bank of England? Indeed the flawed business model they criticized Northern "Wreck's" management for, is precisely the same model they are now wrestling with. They can drop base rates but the real world is running off LIBOR, which is priced against toxic debt not political whim.
At the same time the uncontrolled inflation of house prices has encouraged off-plan investors and buy-to-lets while producing an impenetrable barrier for first time buyers. The Government has of course enjoyed dramatically higher Stamp Duty - £6.4 billion in 2006/7 - to squander on ever increasing Government (out of control) spending. When will they be made to measure the benefits achieved from their expenditure honestly and consider the costs to the economy?
Meanwhile the total lack of understanding of the new-build planning process means we are still building too few dwellings and those we are building are of the wrong type - 50 per cent flats compared with 15 per cent in 1996. Following this, new built flats are now selling at auction 26 per cent below their original selling prices while instead of building more housing starts are actually falling. As if this is not enough, their dogmatic insistence on introducing HIPS, in the face of the best advice from all stakeholders, has added insult to injury in a market already suffering from economic mismanagement over the last 10 years.
I leave you to debate whether all this is incompetence or a deliberate (but failed) attempt to micro manage one of the key drivers of the economy for political aims. Either way if the Government was a public company the senior management would be gone by now!
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