European solutions and progressive problems

The left has the answers to Europe’s problems, but it is failing to persuade.

The European left is in disarray. The strange brew that Europe has been ingesting of late – a mixture of eurozone crisis, rising unemployment and austerity – ought to clear the way for social-democratic and progressive left parties to storm the polls. But it is xenophobic populists – from the Netherlands' Geert Wilders to France's Marine Le Pen – who are emerging as the mainstream alternative to the centre right as the left falls away from European power like meat grown fat on the bone.

So what is the left doing wrong? That was the question repeatedly asked at an international conference of left-wing leaders in Oslo last week, with the UK's own Ed Miliband in attendance.

The extent of the problem was apparent from how few of those taking to the stage were still in power. One of those, Greece's socialist prime minister, Giorgios Papandreou, declared that Norway was like a refuge for him – which this part of the world was literally once, when his family stayed in Sweden during the years of the Greek junta. But given that Norway's Jens Stoltenberg is one of the few other left-wing leaders also still in power in Europe, Norway is today a refuge for the socialist at the heart of Europe's monetary crisis in a whole other sense, too.

Indeed, look to where left-leaning leaders are in power these days and the answer, as with Norway and Greece, is on the periphery: Spain and Portugal to the south, Austria and Slovenia to the east, Iceland to the north and, in coalition, Ireland to the west. And in most of those, support is waning. Little wonder that Papandreou feels "Europe is wasting its opportunities". He could not have foreseen last week that his words were to be given even greater meaning over the weekend by the mad incident involving the head of the IMF, Dominque Strauss-Kahn, in New York.

When Strauss-Kahn was hauled off a Europe-bound plane at JFK Airport yesterday, accused of the attempted rape of a hotel chambermaid, he was en route to today's crucial meeting of European finance ministers in Brussels. There, he was to deal with the latest phase of the eurozone crisis, in which – prior to fuelling it himself – he had played a central role in dampening down the flames as mediator-at-large.

But DSK, as he is known in France, was also the man tipped to have secured the French Socialist Party nomination for next year's presidential elections and to have restored the French left in the process. The left is now kicked back to the doldrums in France, and the likelihood of a final presidential run-off between Sarkozy and Le Pen considerably greater.

There isn't much that the European left can do about the folly of one man. There may not be all that much it can do about what the US ambassador to the OECD, Karen Kornbluh, a woman with a bird's-eye view of Europe's troubles, calls the "progressive paradox" – that, in difficult times, the people who most need progressive governments are the same ones who stop trusting them.

The blame game

But the left deserves some of the blame for the current low running of its stock. And it seems prepared to admit at least some of this.

In Oslo, it was time for the throwing up of influential hands admitting they had been as bad as the right at saving money in the good times (without doubt one of the reasons that a crisis turned into a recession turned into a global economic downturn). More positively, there were also plenty of encouraging ideas wheeled out for show, if in the manner normally seen at trade exhibitions where gleaming new products are unveiled.

On the state, for example, the left seems to be restoring its belief that reform is needed, not regicide, given that the state is one of the few tools that still works in a crisis. "Keynes is reborn and we support him," declared Prime Minister Stoltenberg, whose government announced its revised budget last week, reducing spending because the growth is already heating up.

The left also sees more clearly than the right the need to address problems of unemployment and market failure together, through workforce-oriented policies. And with a raft of innovative suggestions being floated to do this, from predistribution of wealth to social investment schemes, it is clear that, deep down, the left – socialists and social democrats together – is serious about tackling the inequality that is rotting away at the heart of European prosperity.

But there is one thing that Europe's left patently doesn't have the answer to still. And that worst of all it just doesn't seem to get. Because amidst the many various national political debates going on around Europe a common background note comes through with the chastening shrill of the best-known of all Edvard Munch's paintings, The Scream. It is fear.

Fear of losing one's job if you are a blue-collar worker, fear of being overwhelmed by migrants if you also happen to be white, and fear of joining the deepening migrant class if you yourself are recently arrived. The European left seems happy enough to acknowledge the factors that lead to such fear in the abstract. But they are failing to consider its power. And their lack of a common, commonsensical voice is allowing Europe's strange brew of macroeconomic troubles to become on the ground a far more noxious brew of xenophobia, race hate and social corrosion.

Unlike the left, the populists get this. That is why they are making headway in the polls.

So it may be, as Stoltenberg says – in trade-fair mode again – that what the progressive left and Coca-Cola have in common is that they are both "the real thing". But unless and until the left's leaders start convincing real voters of that, their future – and quite possibly that of Europe with them – looks bleak for many years to come.

Simon Reid-Henry is a lecturer at Queen Mary, University of London.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.