Bring on the Fourth Reich

There's an annoying song that they bellow out in the pubs of Kilkenny, Kildare and Kilburn on a Saturday night: "When Irish Eyes Are Smiling". They're not smiling now. Ireland (the Celtic Tiger, sorry, Hamster) has joined Greece and Portugal in the EU's relegation zone.

So serious is the crisis that I had to persuade Dave and Ozzie to lend the Paddies seven of our very own billions. Initially, they were sceptical. Surely we hadn't stayed out of the euro in order to participate in such bailouts? Isn't it time, they said, that the gigantic and shadowy interests who invest in unsound banks are forced to take a loss alongside the taxpayers? Speaking as a gigantic and shadowy interest, the answer is obviously no. So the good news is that my personal investment in Ireland - £7bn - is secure.

Even better, the collapse of the Irish property market has enabled me to snap up huge tracts of prime Dublin real estate. Many of the wealthiest Irish have been forced to sell at bargain-basement prices. Even Bono and the rest of U2 have not been exempt. Thus I have managed to negotiate a socially beneficial spin-off, namely a ten-year moratorium on U2 albums.

However, until the next fiscal bankrupt identifies itself - step forward Spain; after you, Italy - I feel it is my duty as a statesman, indeed as the New Statesman (all rights reserved), to ask the unaskable. Else why be in politics?

Admittedly, sometimes it is unwise to ask the unaskable, as I discovered last week in Harvey Nichols when I bumped into Catherine Middleton. "I suppose a quick one's out of the question?" I quipped. I honestly didn't notice the bodyguards.

But the real unaskable question I need to ask is: "What is the EU for?" We all know why the common market was established: to shackle Germany and prevent another war. As Germany recovered and boomed, it suited lesser nations, such as France, to exploit German war guilt to their advantage.

Likewise, the euro was established so that said lesser nations could benefit from German financial prudence. The puzzle is - what's in it
for the Krauts?

For 50 years, the Germans distracted themselves from this question. First, there was said war guilt, then the cold war and, after that, the disruption and cost of German reunification. Now, the intrinsic pointlessness of monetary and political union is undeniable. Your average German in the Straße knows that if the Fatherland were rid of the euro, France and other hangers-on, Germany would be stronger than it has ever been.

When that day dawns - I predict it will be soon - we must hope the Germans are happy to restrict their aggressive instincts to the sports field and the sunbed. Although I am concerned to see that Angela Merkel seems to be growing a toothbrush moustache.

As told to Marks and Gran

This article first appeared in the 29 November 2010 issue of the New Statesman, Congo

Photo: Getty Images
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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.