This Nulab government went one better than the normal system of pork-barrel spending. As well as just bribing people with their own tax money, they dusted down the age-old wizard wheeze of bribing people with their own debts.
Jock Coats linked to coverage of Eddie George's evidence to the Treasury Select Committee of early 2007:
"In the environment of global economic weakness at the beginning of this decade... external demand was declining and related to that, business investment was declining. We only had two alternative ways of sustaining demand and keeping the economy moving forward - one was public spending and the other was consumption. We knew that we were having to stimulate consumer spending. We knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term. But for the time being, if we had not done that, the UK economy would have gone into recession just as the United States did."
He said he was "very conscious" that stimulating consumer demand could give rise to problems in the future. "My legacy to the MPC, if you like, has been 'sort that out'," he said. Under Lord George's governorship, rates were slashed from 6 per cent in 2001 to 3.5 per cent in 2003, pushing house price inflation above 25 per cent and high street spending growth to its highest since the late-Eighties boom.
Which, apart from showing up BoE independence to be a total sham, confirms my long held suspicion that the last ten years of house price boom and 'feelgood' factor were conspiracy rather than cock-up and hardens my support for Land Value Tax - a tax which would keep house prices low and stable and prevent future governments from pulling this sort of scam.
Don't forget that the Tories will regain power in 2010, just when house prices are in meltdown. It is a pretty foregone conclusion that house prices will then stabilise and then pick up again, and they will repeat the massive economic fraud that is now starting to unravel for Nulab.
Ah well.
Probably
51 minutes ago
4 comments:
I've always said the political system is based on bribery.Vote for us and we'll do our best to see your house goes up in value.(Not much we can do about jobs but not to worry).The Tories started this scam when they got rid of Schedule A in early 60's for straight political reasons.They stuck to it through hell and high water: the Barber boom, run-away house price inflation (it had been pretty flat for years),bank rescues (discreet in those days) union catch-up pay demands,the three-day week, Thatcher: the catalogue of disasters is endless ( OK not all of this is attributable to the abolition of schedule A but most has a strong connexion) .Labour and the liberals ( as then was)couldn't really compete, the previously successful Labour offer being steady dead-end employment and a council house.
What is truly alarming is that there is no plan B.Supposing house prices level off and stay level? What are the parties going to do then poor things, when the big bribe loses its effect?The Tories are laughing at Brown's disasters but as the Incoming Government (lets face it)they are not really equipped to provide jobs and untaxed unearned income from houses (which is what Schedule A taxed)is probably no longer available to them.The laughter of thorns crackling under a pot.
Exactly. I can see the Tories gloating already ca. 2015 "See! You voted for us and now house prices are going up again! Only it's sustainable this time!"
We have to track down how domestic rates and Schedule A taxation really worked - they must have added up to something vaguely like a progressive property tax. Which may explain why house prices (as a multiple of incomes) were pretty flat between 1950 and 1970 - also partly explainable by the fact that both big parties were in favour of having lots of new homes built. Those were the days.
In the 50s-70s credit was harder to come by than the 90s and early 00s far. You only got a mortgage from a building society and they could only lend money they had from savers - that was a big brake on house prices, too.
The runaway house prices in the last few years is caused by easy availability of cheap credit, as much as anything else.
Given the difficulty lots of banks are now in, I can't see the Tories making easy credit available at the wave of a policy wand.
marksany, that is true - but
a) It is difficult to enforce 'sensible banking' (although words in ears and quiet threats and muttering might do the trick).
b) the government might well WANT there to be reckless lending - this last gummint was definitely in on the scam and deliberately turned a blind eye to e.g. Northern Rock who were flouting all the rules about sensible banking/lending. And as dbc points out, there is no reason to assume that the Tories will be any better.
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