Blog 2023 Malcolm Blair-Robinson

Osborne  has delivered a budget for 2013,  the centre piece of which is little short of financially ridiculous. The great economic disaster of ranking property as the mainstay of the economy, fuelled by excess credit providing mortgages which require little to no equity stake from the buyer, only correctable through house price inflation, was the wick which sustained the borrowing fuelled fire which burned down the whole economy. To come forward now with a plan to set off down the same route hoping for house industry led recovery is grossly irresponsible, economically insane and politically dishonest.

Osborne’s reputation as a coherent chancellor who is master of his brief, is entirely and forever, shot. The banks and building societies with the urging of the FSA have been getting their lending house in order and have returned to matching loans to risk and ability to pay. They know that houses remain substantially over-valued and that sustained economic recovery can never be secured if the average price of a home is more than two and a half times the average income. Anything over that and mortgages or rents begin to take an ever higher percentage of income leaving none over for other spending. This fuels more borrowing. It is a vicious cycle which knows no borders. The countries in the world with the highest proportion of home ownership through mortgages have had the biggest financial bust  in the global crash. The United Kingdom has the biggest volume of external debt of any country in the world except the US.

To fling twelve and a half billion of taxpayer risk to cover one hundred and fifty billion of sub-prime mortgages and encourage another bout of profligate lending will either fail, because even now it is already a policy mired in confusion and double speak from a  befuddled Treasury,  or succeed in starting a new wave of house price inflation. This cannot be right. No economist in their right mind would propose it.

That tells you all you need to know about this government and more than you ever feared about the Tory party’s financial acumen.

This entry was posted on Thursday, March 21st, 2013 at 5:41 pm and is filed under Malcolm Blair Robinson. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.