SocGen strategist excoriates Osborne over Help to Buy

"He may really deserve to be called a moron".

Albert Edwards, a strategist at Societe Generale with a reputation for pessimism, has released a strategy note excoriating the Chancellor for the Help to Buy scheme, which will subsidise mortgages for buyers of new-build house. Via Business Insider and FT Alphaville, some of the choicest quotes:

George Osborne in his March budget proposed an unusually misguided piece of government interference in the housing market. The measures will see government provide lenders with a guarantee of up to 20 per cent of a mortgage in an attempt to encourage lending to borrowers with small deposits. This means that if a borrower defaults on a loan, the taxpayer will be liable for a proportion of the losses. Numerous critics of George Osborne's scheme range from the IMF to the outgoing Bank of England Governor Mervyn King, who said "We do not want what the US has, which is a government-guaranteed mortgage market, and they are desperately trying to find a way out of that position."

…What makes me genuinely really angry is that burdening our children with more debt (on top of their student loans) to buy ridiculously expensive houses is seen as a solution to the problem of excessively expensive housing. I would have thought the lack of purchasing power should contribute to house prices declining or stagnating (relative to incomes), hence becoming affordable once again…

Why are houses too expensive in the UK? Too much debt. So what is George Osborne's solution for first time buyers unable to afford housing? Why, arrange for a government guaranteed scheme to burden our young people with even more debt! Why don't we call this policy by the name it really is, namely the indentured servitude of our young people…

I don’t think Andrew Bridgen at Fathom Consulting was strong enough when he described George Osborne’s scheme as “reckless”. I believe it truly is a moronic policy that stands head and shoulders above most of the stupid economic policies I have seen implemented during my 30 years in this business. It ranks above some of Alan Greenspan’s very worst blunders. And when so many highly regarded commentators speak out against it, only to be totally ignored by George ‘I know better’ Osborne, he may really deserve to be called a moron.

Hell hath no fury like a strategist scorned.

The debate around Help to Buy appears to be settling, and the consensus coming out of it hews close to Edwards' conclusion: Help to Buy will help people who want to own a new house buy one (including as a second home, although thankfully, even Osborn was warned off extending the scheme to buy-to-let landlords). But it will do so by putting the government balance sheet to work, increasing house prices without meaningfully changing the number of houses being built.

Housing supply, particularly in the South East and London, where the largest effects of the policy will be felt, is constrained by land, planning rules and construction times; overheating demand will do little to solve that.

So prices rise, household debt rises, and government debt rises – off-balance-sheet, of course. The question which remains is whether this is malice or incompetence. Was the plan genuinely, if ineptly, aimed at increasing the quantity of housing? Or was it designed to prop up house prices for another five years, keeping homeowners onside into the next election at the expense of the young and the poor?

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Why Barack Obama was right to release Chelsea Manning

A Presidential act of mercy is good for Manning, but also for the US.

In early 2010, a young US military intelligence analyst on an army base near Baghdad slipped a Lady Gaga CD into a computer and sang along to the music. In fact, the soldier's apparently upbeat mood hid two facts. 

First, the soldier later known as Chelsea Manning was completely alienated from army culture, and the callous way she believed it treated civilians in Iraq. And second, she was quietly erasing the music on her CDs and replacing it with files holding explosive military data, which she would release to the world via Wikileaks. 

To some, Manning is a free speech hero. To others, she is a traitor. President Barack Obama’s decision to commute her 35-year sentence before leaving office has been blasted as “outrageous” by leading Republican Paul Ryan. Other Republican critics argue Obama is rewarding an act that endangered the lives of soldiers and intelligence operatives while giving ammunition to Russia. 

They have a point. Liberals banging the drum against Russia’s leak offensive during the US election cannot simultaneously argue leaks are inherently good. 

But even if you think Manning was deeply misguided in her use of Lady Gaga CDs, there are strong reasons why we should celebrate her release. 

1. She was not judged on the public interest

Manning was motivated by what she believed to be human rights abuses in Iraq, but her public interest defence has never been tested. 

The leaks were undoubtedly of public interest. As Manning said in the podcast she recorded with Amnesty International: “When we made mistakes, planning operations, innocent people died.” 

Thanks to Manning’s leak, we also know about the Vatican hiding sex abuse scandals in Ireland, plus the UK promising to protect US interests during the Chilcot Inquiry. 

In countries such as Germany, Canada and Denmark, whistle blowers in sensitive areas can use a public interest defence. In the US, however, such a defence does not exist – meaning it is impossible for Manning to legally argue her actions were in the public good. 

2. She was deemed worse than rapists and murderers

Her sentence was out of proportion to her crime. Compare her 35-year sentence to that received by William Millay, a young police officer, also in 2013. Caught in the act of trying to sell classified documents to someone he believed was a Russian intelligence officer, he was given 16 years

According to Amnesty International: “Manning’s sentence was much longer than other members of the military convicted of charges such as murder, rape and war crimes, as well as any others who were convicted of leaking classified materials to the public.”

3. Her time in jail was particularly miserable 

Manning’s conditions in jail do nothing to dispel the idea she has been treated extraordinarily harshly. When initially placed in solitary confinement, she needed permission to do anything in her cell, even walking around to exercise. 

When she requested treatment for her gender dysphoria, the military prison’s initial response was a blanket refusal – despite the fact many civilian prisons accept the idea that trans inmates are entitled to hormones. Manning has attempted suicide several times. She finally received permission to receive gender transition surgery in 2016 after a hunger strike

4. Julian Assange can stop acting like a martyr

Internationally, Manning’s continued incarceration was likely to do more harm than good. She has said she is sorry “for hurting the US”. Her worldwide following has turned her into an icon of US hypocrisy on free speech.

Then there's the fact Wikileaks said its founder Julian Assange would agree to be extradited to the US if Manning was released. Now that Manning is months away from freedom, his excuses for staying in the Equadorian London Embassy to avoid Swedish rape allegations are somewhat feebler.  

As for the President - under whose watch Manning was prosecuted - he may be leaving his office with his legacy in peril, but with one stroke of his pen, he has changed a life. Manning, now 29, could have expected to leave prison in her late 50s. Instead, she'll be free before her 30th birthday. And perhaps the Equadorian ambassador will finally get his room back. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.