The Deputy governor of the Bank of England is the latest distinguished authority to raise concern about the house price boom, of which the government is more or less in denial. This blog and others have been warning since 2009 that another housing boom would be a disaster, yet the government has organised a recovery programme setting this economically poisonous process in train. It was a mistake to fund Help to Buy without having in place a clear correction system like bank rate, which would be triggered if prices rose faster than inflation. It was also a mistake to launch it without a major and strident housebuilding programme, not the piffling affair we have at the moment. Macmillan built 400,00 houses a year. So can we.
It should come as no surprise in the end that this Tory blind spot has yet again intervened to put economic prosperity at risk. Every Tory led government since Sir Alec Douglas Home took office in 1963 has engineered a housing boom which then has been followed by a bust. Last time flashy New Labour embraced the thrill of illusory wealth fuelled by the biggest debt mountain in the world except for the US, leading us to the biggest bust ever.
What is sad is Labour now has the greatest opportunity since 1945 to really show it stands for a different economic structure, not based on some muddled ideology but on practical arithmetic and public interest in a fair society which prospers for the common good. It does not measure up. All we hear of is ‘initiatives’ and tinkering at the margins, much of which is worthy, but all of which is forgotten five minutes after it is announced. None of it creates a narrative of hope, nor paints a picture of a future worth aiming for. Perhaps a plan to tackle what will soon be the housing crisis would be a good place to start afresh.
Meanwhile in the Tory headquarters champagne flows in celebration that Britain has the fastest growing economy in the G7. Yes well. Remember Ireland. In Ulster average house prices fell by fifty per cent and they are still down there. If prices go on rising in England at five times the rate of inflation and significantly ahead of wages it will happen here for sure. This is a dangerous moment.