Come back, Giro

Since nationalisation of the banks seems to be an inevitable consequence of the government's current economic strategy, Vince Cable's suggestion that "we need a serious debate about what it could mean" is an excellent one ("It's time for us to make the rules", 22 January). Among the matters which should be debated is the total amount of the "horrendous losses" which the state (ie the taxpayer) will have to absorb, and whether these losses can be absorbed without Britain becoming subject to an IMF restructuring programme, with all of its implications.

He suggests that there may be better alternatives to bank nationalisation. Perhaps the Post Office Girobank, which Whitehall ran quite successfully for many years, could be resurrected. This bank could provide the means of putting government investment into the system and, in the present circumstances, would attract depositors from failing banks, thus providing new investment funds independent of state subsidy. The statement that "Whitehall long ago lost the capacity for competent state capitalism" seems a strange objection in view of the fact that competent bankers have made such an excellent job of destroying the banking system and Britain's economy. It is difficult to imagine that Whitehall could do worse.

Jean Johnson

Fleetwood, Lancashire

Unlike Vince Cable, I am not an economist. But I have been a customer of the Co-operative Bank for many years, so I was surprised not to see it mentioned in his salutary and balanced piece on The End of Banking As We Know It.

Jim Trimmer

Kingston upon Thames

Just recently Google has brought out with a great deal of alterations and improvements to their prominent search system, including Googles Knowledge Graph Release. Read More...

This article first appeared in the 02 February 2009 issue of the New Statesman, Interview: Alistair Darling

Photo: Getty Images
Show Hide image

How can Britain become a nation of homeowners?

David Cameron must unlock the spirit of his postwar predecessors to get the housing market back on track. 

In the 1955 election, Anthony Eden described turning Britain into a “property-owning democracy” as his – and by extension, the Conservative Party’s – overarching mission.

60 years later, what’s changed? Then, as now, an Old Etonian sits in Downing Street. Then, as now, Labour are badly riven between left and right, with their last stay in government widely believed – by their activists at least – to have been a disappointment. Then as now, few commentators seriously believe the Tories will be out of power any time soon.

But as for a property-owning democracy? That’s going less well.

When Eden won in 1955, around a third of people owned their own homes. By the time the Conservative government gave way to Harold Wilson in 1964, 42 per cent of households were owner-occupiers.

That kicked off a long period – from the mid-50s right until the fall of the Berlin Wall – in which home ownership increased, before staying roughly flat at 70 per cent of the population from 1991 to 2001.

But over the course of the next decade, for the first time in over a hundred years, the proportion of owner-occupiers went to into reverse. Just 64 percent of households were owner-occupier in 2011. No-one seriously believes that number will have gone anywhere other than down by the time of the next census in 2021. Most troublingly, in London – which, for the most part, gives us a fairly accurate idea of what the demographics of Britain as a whole will be in 30 years’ time – more than half of households are now renters.

What’s gone wrong?

In short, property prices have shot out of reach of increasing numbers of people. The British housing market increasingly gets a failing grade at “Social Contract 101”: could someone, without a backstop of parental or family capital, entering the workforce today, working full-time, seriously hope to retire in 50 years in their own home with their mortgage paid off?

It’s useful to compare and contrast the policy levers of those two Old Etonians, Eden and Cameron. Cameron, so far, has favoured demand-side solutions: Help to Buy and the new Help to Buy ISA.

To take the second, newer of those two policy innovations first: the Help to Buy ISA. Does it work?

Well, if you are a pre-existing saver – you can’t use the Help to Buy ISA for another tax year. And you have to stop putting money into any existing ISAs. So anyone putting a little aside at the moment – not going to feel the benefit of a Help to Buy ISA.

And anyone solely reliant on a Help to Buy ISA – the most you can benefit from, if you are single, it is an extra three grand from the government. This is not going to shift any houses any time soon.

What it is is a bung for the only working-age demographic to have done well out of the Coalition: dual-earner couples with no children earning above average income.

What about Help to Buy itself? At the margins, Help to Buy is helping some people achieve completions – while driving up the big disincentive to home ownership in the shape of prices – and creating sub-prime style risks for the taxpayer in future.

Eden, in contrast, preferred supply-side policies: his government, like every peacetime government from Baldwin until Thatcher’s it was a housebuilding government.

Why are house prices so high? Because there aren’t enough of them. The sector is over-regulated, underprovided, there isn’t enough housing either for social lets or for buyers. And until today’s Conservatives rediscover the spirit of Eden, that is unlikely to change.

I was at a Conservative party fringe (I was on the far left, both in terms of seating and politics).This is what I said, minus the ums, the ahs, and the moment my screensaver kicked in.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.