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The British government: ‘We can’t know how bad it will get’
On the one hand, there’s newly soaring inflation. On the other, the politically unappealing prospect of a housing crash.
We know where the Bank of England’s priorities will be. Gordon Brown, as the man who handed the BoE its independence and inflation-targeting mandate, has been keen on emphasising that the low inflation, low debt, low unemployment macroeconomic backdrop meant that the Bank had room to cut rates to get the housing market moving.
Just last month, the prime minister insisted that the drop in house prices was “containable,” dismissing fears of a crash. It is, you see, different this time.
Or not.
First, the CPI figures show inflation surging to 3 per cent. Now, housing minister Caroline Flint has been photographed entering 10 Downing Street with typed notes visible, for the weekly Cabinet meeting.
She too has been keen on parroting (ad nauseam) the line that the fundamentals of the housing market are unlike the 1990s. But it turns out that the government might not be so confident on the housing outlook as they’d have us believe.
FT.com has the full story - with a transcript of Ms Flint’s notes. Here’s a few highlights:
Given present trends, they [house prices] will clearly show sizeable falls in prices later this year — at best down 5-10% year-on-year.
House building is also stalling. New starts are already down 10% compared to a year ago. Housebuilders are predicting further falls. Having seen net additions reach roughly 200,000 in each of the last two years, the figure for 2008-09 is almost certain to be well down on that.
Repossessions are also rising, although we will need to remember that the 2007 figure was only around a third of that in 1991.
—
We can’t know how bad it will get. But we need to plan now to put in place effective measures against the risk that it does get worse and to prepare for the up-turn.
—
But it is vital that we show that this time of uncertainty we show [sic] that we are on people’s side.
Related links
Minister sees ‘5-10 per cent house price fall’ this year - FT.com
Brown battles to deny housing slump - FT.com
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Which word do you not understand Helen ?
Gordon says ” No more boom and bust ! ”
LOL
Just don’t look at the mortgage lending figures released earlier today. First quarter lending the lowest on record since 1975 !
@Monkey: don’t be too hard on them Monkey, they’ve been busy upclassifying Cannabis to Class B and increasing the number of days people can be interned for doing nothing…
Can someone kick your reporter who wrote the story on this in the main paper…. Ms Flint’s notes clearly state “at best down 5-10%”, whereas the FT is reporting govt expecting falls up to “10%”.
Your guy has clearly got it wrong!
well he didnt sell all the gold….yet
Prolonged boom during which neither the govt nor the people put anything aside for the inevitable tougher times ahead. As a country we’re like the banker with the million pound bonus who, instead of buying a million pound house, put his bonus down as deposit on a £5 million house and got an interest only mortgage in the expectation of paying another mill off with next year’s bonus. Meanwhile he blows salary on fine wines, a porsche and holidays rather than saving anything. All good until you lose your job or your bonus. Oops…
Oh come on everybody - surely its all the fault of the rest of the world?
The issue isn’t that the “Government” can’t know how bad it will get.
The main problem is that they dont know how bad it already is!!!
No more boom and bust….
or maybe prolonged boom and the mother of all busts. We will see.
There were supposed to be smug tags round the first one, and sad ones round the second…
*Aussie wife opens door to austalia for taxloss* taxloss
*Kevin Rudd & aussie labour party ruin Australia* taxloss
Dammit Monkey you’re right. Those of us insufficiently rich to move to a tax haven are buggered. Still, look on the bright side, bound to be some bargain buy-to-lets to be found in Grimsby by 2010 and some of those Costa de Sol repossessions will be going for a song. Meanwhile the tories will be back in power reminding us why we all hated them in the 80s and 90s.
The biggest bubble since South Sea is now officially deflating. Thank God. Whatever the Guv does to hold back the tsunami of falling property prices can at best stall the disaster–but the tide will wash away all that speculation in the next 1-3 years and we can return to the halcyon time when estate agents cowered in the shadows, mortgage brokers were as popular as undertakers, and bankers–well, the less said about them the better.
Ando - unfortunately unlike the 70’s the doors to Australia are firmly shut. I mean who woud take us? No-other country seems to offer political asylum … and in any event the argument don’t send me back or I will be punished with an inadequate pension and inhumane congestion charges probably wont work on any government apart from the British one. We’re stuck! Marooned! And half the population of the world would behead us on sight because of our questionable foreign policy anyway.
Down with big government and for god’s sake stop beating us with the tax stick (especially ‘green’ taxes - more carrot less stick please). For the first time in my life I can genuinely see why many people just went and quit the country in the ’70s.
Oh and the price of my fags and beer has gone through the roof too!
Can anyone actually point to an improvement that this government has introduced that has directly (or even indirectly) improved their lives? I can think of the Oyster card but that is about all and I dont think the governement can take credit for that.
Aside from this - increased council taxes, increased fuel taxes, HIPS, I dont have kids so I dont know whether the schools are any better. Fortunately haven’t been to hospital but I dont think there is much improvement there. I mean if you are a GP I believe your wages have gone up a bit but if you aren’t …
Dont get me wrong - I dont mind paying for the less advantaged and I dont want to see people dying in the streets (although around Oxford street they are anyway) but you can’t keep taking more and more off me and deliver nothing in return, ENOUGH is ENOUGH!
If you want to start a revolution just tell me where and when.
Deflation of the housing bubble, inflation of everything else. Suspect the overall effect will be anything but neutral though…
ps notice how Gordon Brown is starting to look genuinely terrified in pics now? I can’t see his government lasting for more than a few more months. Those who have sown by the wind are about to harvest the whirlwind…
If they make any attempt to prop up the housing market and encouraging FTBs to buy into a falling market at massively overpriced values then, yes, it is time for a revolution or leave the country. A whole generation of people have been totally scr*w*d by this Government as it is.
Well they’ve just written a £2.7bn cheque as penance for the 10% tax abolition gimmick.
Prudence vs political expediency. Only ever one winner. So up goes the debt, down goes sterling, up goes inflation etc. etc.
i’m sick of this “Government” too - what a bunch of clueless incompetents. There really is little attraction to working and living in this country for people below 40. The standard of living is appalling compared to other developed countries and the cost of living is extortionate.
Can’t say I’ve any confidence in the other lot either, but this govnt been storing up probs for a long while, & finally coming home to roost. No more easy “raids” to be done (3G sale, utility windfall tax, changing tax payment dates), huge debt, income to shrink and to top it all: NRK.
Extra unfunded public sector pensioners a major prob for the future too.
To attempt to save their skins, they’re trying to “help” FTBs & recent buyers (as well as “hard working families” of course).
Grrr.
If they start giving money away to first time buyers (perhaps stamp duty tax breaks? we will find out tomorrow) then I think its time for a revolution. VP - NI as well. Still, Council tax will continue to rise and I suppose the tax take from insolvency practioners will go up.
Canute? or maybe King John who I think lost the Crown Jewels?
..and it really is laughable when they talk about encouraging first-time buyers (cannon fodder) to buy at/near to the peak of the cycle…
…all in all does not bode well…SNAFU
Gordon can always balance the books by cutting disability allowances and stealth taxing the poor. And of course the new non-dom tax is going to bring in millions!
Apparently under Labours social justice policy 40% of people claim benefits which is up dramatically from 10 years ago. So the government is taxing more and giving more back. And as it is civil servants doing the paper work we can be assured that it is being done efficiently and without too much monetary leakage in Whitehall.
I am sick of this “Government”. They seem to be hoping that if they keep saying that there isn’t a problem then there wont be one and that simply appearing to sympathise without actually doing anything constructive will somehow help too.
Tax tax tax tax tax but where oh where has it all gone?!
Regretting running a deficit at the point in the cycle they should have been running a surplus? I’ll bet..
Wonder what corp tax receipts will look like; won’t be getting as much from the banks. Or retailers. Or housebuilders.
Or stamp duty. Or as much VAT. Or (when unemp finally kicks in) income tax. With money to be paid out in the form of more benefits and 4.2% inflationary rises on public sector pensions.