UK Proposes Housing Market Rescue

The collapse of the mortgage market in the UK is the prime reason that the Organization of Economic Co-Operation and Development says the British economy is tanking. So, Prime Minister Gordon Brown’s government is offering some help in the form of tax relief and £1 billion in cheap loans. Communities Secretary Hazel Blears said the package could not “transform the world,” but could “make a big difference to those people that are struggling.” It also won’t fix Britain’s economy.

Those buying homes worth up to £175,000 will not have to pay the 1% stamp duty, Chancellor Alistair Darling has announced, which will save buyers a maximum of £1,750. The new tax-free level will be frozen for the next year. In announcing the move, he said, “We are facing difficult times - we are in a situation where you are facing the combination of the credit crunch with high oil and food prices. We haven’t seen this since the 1930s. I believe the package we have announced today will help us get through what is undoubtedly a difficult time. I am optimistic that we will get through it.”

Sue Anderson, a spokesman for the Council of Mortgage Lenders, pointed out that this doesn’t address the real issue, which is the availability of a mortgage in the first place. “This particular move doesn’t go far enough in terms of the starting threshold,” she said. “It is questionable whether it will incentivise [sorry, but she really said that rather than “motivate”] buyers who wouldn’t have entered the market anyway.”

Roger Humber, spokesman for the National Federation of Builders, went even further in his criticism of the measures, “Today’s proposals do not address the core problem, which is the collapse in mortgage availability.” He added that the proposal was “little more than a political sticking-plaster.” For speakers of the American variety of English, that’s a Band-Aid.

Worse, this program will undermine the public finances to the tune of £600 million. The Telegraph reported, “The Government borrowed £19.1 billion between April and July - £10.7 billion more than in the same period last year, and debt could spiral further amid falling tax receipts. Howard Archer, the chief UK economist at Global Insight, said: ‘The public finances are taking a bit of a kicking from all directions at the moment.’ He added there was ‘no way’ that the Chancellor could meet the Government’s rules on borrowing, which are currently under review by the Treasury.”

George Osborne, the Conservative Party's economic spokesman, got it right when he noted, “what we will see in the coming weeks is a desperate and short-term survival plan for the prime minister rather than the long-term economic plan the country needs.” Mr. Brown was a far better Chancellor than he is a Prime Minister.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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