Darling, what are you on about?

It is the still, small voice that the soul heeds, not the deafening blasts of doom: William Dean Howells

Golly. I thought I was full of doom and gloom about the state of the economy, but then I’m a journalist and we’re supposed to have a dark side.

But when you’re the Chancellor of the Exchequer, we might be forgiven for expecting you to sound a little less like Private Fraser in Dad’s Army and be a tad more positive.

After all, if the economy’s going to pot and it’s on your watch, who’s going to get the blame? Yes, that’s right, Alistair, darling. You are. Even though it was your predecessor who first took a thriving economy and knocked the stuffing out of it, wrecking our pensions in the process (and got promoted!);

I’ll grant that, perhaps, neither of you could have forseen the mess that the US mortgage market would become. Nor, perhaps, that it would impact quite so badly on our own market, nor, even, quite how quickly the lack of credit would cause the housing market to crumble. Although, presumably, you employ economics experts around you who could have done so.

Well, now you have been forced to come up with a series of headline-grabbing measures to boost the ailing housing market. Stamp duty will be lifted for a 12 month period on properties up to £175,000, and first-time buyers can have free home loans for five years to help them get on the housing ladder, if they are buying a new property.

First-time buyers are, it’s true, very important in getting the housing market moving. However, this does rather seem like you are bunging a few sticking plasters onto a broken leg in the hope that it will mend eventually.

Some of the underlying causes of this mess include the fact that too many people had 125% and 100% mortgages on properties, which is fine in an ever-increasing market, but it leaves them with negative equity the second that house prices started to stablise.

Home-buyers will, through the HomeBuy Direct scheme, be able to get an equity loan of up to 30% of the value, co-funded by the government and the developer, free of charge for five years. They still have no actual owned equity in the property. And anyway, what happens then? Presumably the Government believes that the credit crunch will be over and they will be able to use the higher price of their home to pay the interest then due on the loan. Aren’t we then back to where we began, with rising house prices being used to fund spending?

I don’t claim to understand the real economics of all this, but I don’t see how it is going to help housebuilders to build more houses and builders merchants to sell more building products. And that’s the kind of government help we need to see.

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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