News from British and Canadian Conservatives

Wednesday, September 03, 2008

Good time to emigrate!

The OECD has today confirmed my assessment of the British economy. It concludes that the UK will be the only one of the G7 western industrialised nations to fall into recession this year. Eleven years of economic mismanagement by Gordon Brown are coming home to roost.

The government's response has been laughable. The package of measures announced to day will have no significant effect, but will add a further $3.2bn to the government's already massive borrowing requirement. Given that we are in this mess because the government overstretched itself during the good times, it is hard to see how moves to stretch itself further in the bad times will get us out of this hole.

This is where the $3.2bn will go:

  • Free five year loans for upto 10,000 first time buyers. Quite what will happen at the end of those five years, when they have to start paying interest on loans for properties that are no longer worth what they paid is unclear.
  • A Stamp Duty holiday for lower cost homes. It failed in 1992 and is doomed to fail again. Properties are falling more than 1% per month, so anyone can save more than the 1% stamp duty by buying a house after the holiday ends!
  • People who can't pay their mortgages can transfer all or part of their mortgage into rent at a reduced rate, which they will pay to councils, associations or developers who take a stake in their homes. I can't see an commercial developer investing in property at this time, so this effectively amounts to the nationalisation of private housing, and of bad debts. It means that taxpayers all have to foot the bill. That will be a particularly bitter pill to swallow for the many young people who have been unable to get onto the property ladder, but will now be expected to subsidise those who were able to afford a home.
  • 5,500 low cost homes will be built by councils and housing associations. Of course, in a time when house prices are in freefall, an increased supply of property is exactly what the market needs. Over the next couple of years we will huge numbers of low cost houses coming to the market anyway, so these 5,500 homes will be but a drop in the ocean.

George Osborne, the shadow Chancellor, said of the package: "This is a short-term survival plan for the Prime Minister, not a long-term recovery plan for the economy. They've had months to prepare and they can't even tell us how much it costs, or where the money's coming from."

It says a great deal about Labour's economic incompetence that in Canada the Conservative government is rising in the polls. In the US, the presidential race is too close to call. In Britain, Labour is polling in the region of 28%, with the Conservatives on around 46%, and they can't even hold on to safe seats like Crewe and Nantwich or Glasgow East! Britain is doomed, and so is Labour.

No comments: