Help to Bubble
Once I’ve finished banging my head against the wall I’ll tell you a story. This story is called the global economic crisis and like so many other post war epics the tale begins in America…
Once upon a time there was a magical and responsibly operated kingdom called ‘the banking industry’, which was ruled over by an evil sorcerer called the US Congress. One day in an act of vanity and greed the evil Congress cast a spell to deregulate ‘the banking industry’ and turn the wise executives which ran it into a group of psychopathic kleptomaniacs (Not that anyone who could have prevented that noticed it at the time). Like all good fairy tale kingdoms, the peasants who inhabited the never-ever-land of cheap lending were happy, care free souls and so in the blink of an eye they exchanged their feudal squalor for pine wood dwellings which they could ill afford. And so every one lived happily ever after until someone asked who exactly was going to pay for all this. Then no one was happy again, the End. *Sound of children crying*
If you’ve read this far do forgive me for the utterly condescending way in which I conveyed that chapter of recent economic history, it’s just that every time the UK government opens its mouth at the moment I feel like I’m dealing with a bunch of toddlers.
We’re in the middle of the UK political conference season as I write this (29th Sept) and this morning while speaking to the Andrew Marr show, our dear Prime Minister David Cameron had announced that he plans to push on ahead with what he’s calling a ‘Help to Buy’ scheme in which the UK government would allow people in England to take out 95% mortgages with the state helping to cover part of the deposit.
Now if this prospect doesn’t set the alarm bells of sub prime lending ringing in people’s ears I do not know what will. Sub prime is the practice of making loans to people who may have difficulty maintaining the repayment schedule, such as people who would need a ‘Help to Buy Scheme’ in order to make just the deposit.
This didn’t work in the US when the banks were lending in such a way so there shouldn’t be a reason for one to believe it will work now, even with the states money.
Now while I’m aware that there is a housing crisis in this country and that the people of this country desperately need more homes building, it is my suspicion that Help-to-Buy will not stimulate construction but inflation. And as I’ve already pointed out, for the type of people to which Help-to-Buy is aimed, house prices are already expensive enough.
So why is the government doing it?
Well it might be down to a fairytale reasoning of vanity and greed. You see the housing crisis is really caused by a lack of homes, which has in turn inflated the value of the few properties that are available. And where did this problem start? Hmmm… let me think about it. I don’t suppose it could have been that vanity project of selling off the council homes overseen by the last Conservative government could it?
Yes. In the mid 1980’s the Conservatives in their greed sought to make their books look a bit better by privatising social housing. This effort should also be considered a vanity project, because to an Eton schooled son of the Cotswold’s it smacks of inspiration, empowerment and entrepreneurialism (greed). In the blink of an eye you could transform several thousand working class families into lower middle class home owners (and hopefully Tory Voters), proprietors of an asset which if properly managed will increase in value, thus ensuring a chance of further, future social mobility.
Or on paper anyway. More likely you’re assets value will increase if the homes which can’t be sold are demolished and the state instead of building new homes with the revenues from those sold pisses the money it’s earned up the wall on tax cuts. To make what easier? Or right lending! Does anyone remember where that leads us?
Who wants to guess the next part of the story, anyone?