Bored with economic ills? Let's use the Samoan solution

Simply scrap 2012 and move to 2013 where things can only get better.

As both Labour and the Tories squabble over the way ahead for Britain in 2012, neither seems to have considered the Samoan solution. This is a once in a lifetime panacea for all economic ills, available, like those sale bargains, for one day only.

Because it straddles the International Date Line, Samoa has the option of looking either east or west for its time. Concerned that it was out of kilter with its main market, Australia, the tiny Pacific island has come up with a unique solution.

To align its time with its main trading partners, Samoa, along with neighbouring Tokelau, has scrapped today -- December 30. When the citizens of Samoa went to bed yesterday it was Thursday, and when they woke up it was Saturday. Geordie drinkers of Newcastle Brown Ale will know the feeling, but this time there is no headache or embarrassing memories (unless of course you are a Geordie in Samoa). But we digress.

The Samoan solution, once applied to world economics, releases us from the pro- and anti-Keynsian debate of now into a new world of simple solutions to present problems.

Ed Miliband and his alter Ed --- the other one -- are ending this year as they began it: in the doo-doo. It is said that apart from leading the nation into a chorus of "Always Look On The Brightside", they have nothing to offer.

But if they seize the Samoan solution, then they have. Simply scrap 2012 and move to 2013 where things can only get better.

Some might argue this is a nonsense approach to economics -- but then, have you read the alternatives?

 

Peter McHugh is the former Director of Programmes at GMTV and Chief Executive Officer of Quiddity Productions.

 

Peter McHugh is the former Director of Programmes at GMTV and Chief Executive Officer of Quiddity Productions

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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.