Fortsätt till huvudinnehåll

Fanny may in the U-kay

The government's announcement of guarantees for 95% mortgages for house purchase, suppported by both Prime Minister Cameron and Deputy Clegg, demonstrates either an absolute lack of understanding of the nature of the problem, or moral cowardice, or both.

The aim, we are told, is to "unstick the housing market", which has stagnated due to the banks' refusal to give mortgages larger than 80% of the value of the property they are lending on.

Fanny May = taxpayers will pay

This sets the scene for a UK run of the Fannie Mae debacle. It will also pump up the housing bubble for a while. The government is doing the very thing it should not be doing.

If the housing market worked as advocates of the free market assure us it does, then the price of houses would drop to market-clearing levels. Some building firms would lose a lot of money, having bought land at the height of the boom and found themselves stuck with it in what they call their "land banks". That's market forces for you. They misjudged and overpaid. According to the principles of market capitalism, they would be allowed to fail for their mistake. But in the re-worked style of capitalism that is now being imposed in Britain, capitalists who get it wrong are handed out welfare at the expense of the taxpayers. It gives rise to moral hazard in a strangely reversed mirror-image style of socialism.

There are, apparently, about 300,000 housing units for which planning consent has been given but which have not been constructed. This is the "stickiness" referred to but the real cause is that the developers are asking too much and refuse to drop their prices to take account of the present state of the market. And so the taxpayers are being asked to pay for the developers' mistakes, and pay they will, because there will be defaults on some of these 95% mortgages

What should have happened was that the developers should have been made to pay the price. After all, they were happy to rake in the profits when land values were rising. Apart from having to provide a bit of social housing or planning gain, they enjoyed rich pickings from the increases in land value released by planning consents.

To get development moving again, all the government needed to do was to announce that as from 6 April 2013, sites with planning consent would be subject to the same Council Tax as if the development had been constructed. The sites would have been built on and the exchequer would have received useful extra revenue. It would not have been LVT but the end result would have been similar.

Kommentarer

Populära inlägg i den här bloggen

The dreadfulness of British governance

I wrote to my MP on two entirely separate issues recently. The first was to do with the replacement for the Inter City 125 train, which at £2.6 million per vehicle, is twice as expensive as it ought to be. The second concerned the benefits of a switch from business rate and Council Tax to a tax based on site values. In both cases, the replies were full of spurious, unsubstantiated assertions and completely flawed arguments. This is typical. You will not get an iota of sense from the government on any area of public policy at all - finance, economics, trade and employment, agriculture, housing, health, transport, energy. All junk. If you write to your MP you will invariably receive answers that are an insult to your intelligence, no matter what subject you are writing about. Of course they cannot understand statistics. They are innumerate. Whitehall is staffed with idiots with a high IQ. Look at their IT projects. And mind your purse, they will have that too.

How much more will the British tolerate?

The British are phlegmatic, tolerant and slow to rouse. Thus there was no great reaction after the terrorist attack in July 2005. The murder of Lee Rigby created a sense of outrage, but nothing more, since it appeared to be an isolated incident. Two serious incidents within a fortnight are another matter. Since the first major terrorist incident in 2001, authority has tried to persuade the public that Islam is a religion of peace, that these were isolated events, or the actions of deranged "lone wolves", having nothing to do with Islam, or to reassure that the chances of being killed in a terrorist attack were infinitesimally small. These assurances are are beginning to wear thin. They no longer convince. If government does not act effectively, people will take the law into their own hands. What, however, would effective action look like? What sort of effective action would not amount to rough justice for a lot of innocent people? Given the difficulties of keeping large n...

Battery trains fool’s gold

A piece by the railway news video Green Signals recently reported the fast charging trials for battery operated electric trains on the West Ealing to Greenford branch, in west London. In a comment under the video, I described the project as technological overkill, bearing in mind that before dieselisation in the 1960s it was worked by the tiny steam locomotives of the Great Western 1400 class, a 1932 design based on an 1870s design. The money that has been spent on the experiment would have paid for a small fleet of the old things. Elsewhere in the comments, I was critical of the 800 series trains. This produced a response from the makers of the video, as follows. “I may be grasping at straws here but I am guessing you don't like 8xx series trains all that much and rather wish we still had Kings, Castles and (for the branches) 14xx's. Fair? ” My reply was as follows... Yes you are grasping at straws. The model for long distance stock is the class 180, which is a 23 metre veh...