From The Guardian's readers' letters:
Alistair Darling's "Clueless in Lewis" interview is more alarming for the fact that the Conservative opposition has even less idea and that this lack of basic economic understanding has been around for decades. You cannot lower interest rates to stimulate demand without cheap credit being diverted into house-price rises and then bubbles. The answer is to block the credit going into housing with a tax. As the inflationary element in the price of a house is the land underneath, that is what you tax. It really is as simple as that.
DBC Reed, Northampton
As a simplification campaigner, I'm not sure I could ever top that.
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4 comments:
Every now and then I see an article encouraging people to build their own "homes". If the great bulk of the cost of a house is the cost of the land, then presumably you can't save much by building yourself. Can that be right?
That's correct.
The gummint made a great show of these £60,000 homes. Problem was, they cost £60,000 to build but there's £120,000 or so to pay for the land value plus bits and pieces.
The gimmick being, it is The State (i.e. local councils) who dictate the cost of building land by being more or less generous with planning permission, which I know is a bit of a sore topic with you ...
Actually, you raise the Bank reserve requirements in response to credit creation.
AC1, sure. But the point is that low interest rates are A Good Thing if they are enabling the economy to grow and A Bad Thing if they are just inflating land values.
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