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Falling off the catwalk

Inside Politics – The Policy Exchange newsletter (London), 16 May 2008

On Tuesday, Housing Minister Caroline Flint was apparently oblivious to the cameras focusing on her cabinet briefing notes. Even though they revealed the Government’s fears over house prices, she seemed distracted enough for the Daily Mail to suggest that she was using Britain’s most famous street as her own catwalk. Blogger Guido Fawkes wondered if she may now be prosecuted under the Official Secrets Act for failing to take reasonable care of government documents.

Perhaps Ms Flint considered the contents of the paper no big secret. That house prices may fall by up to 10 per cent this year is not news to those who have followed the property market recently. Frankly, it would have been more surprising if such forecasts had not been discussed at a cabinet meeting.

More disturbing is the lack of vision in the Government’s housing policy. Only last summer Gordon Brown began his premiership with a bold commitment to build 3 million homes by 2020, albeit not single-handedly. Then the credit crunch unfolded, house prices started to fall, and getting a mortgage became ever more difficult for homeowners.

Hence, the Government has a dilemma, only too visible in the draft Queen’s speech. On the one hand, Gordon Brown is still promising to stick by his 3 million target even though it will almost certainly be missed. Last year, construction was begun on only 156,000 houses – 18 per cent fewer than in 2005/6.

At the same time, the Government and the Bank of England are trying to support property prices by releasing £50bn of extra liquidity for the banks and by making £200m available to buy unsold new homes from developers – as if it were the government’s task to bail out developers when prices fall.

So we have a schizophrenic housing policy: the government trying to increase the housing supply while also attempting to prevent house price falls. First-year economics students could explain why the two objectives are incompatible.

Let there be no doubt: a much stronger housing supply is needed to deal with the huge backlog in demand. If you are serious about this you have to accept that house prices could stabilise and even drop. No wonder the Government’s housing policy is falling off the catwalk.

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