Vince Cable, the Business Secretary, has another proposed quick fix to help the economy recover.
He has been looking at the 1930s and notes that private housebuilding then increased from 130,000 in 1931 to 300,000 three years later. He also notes that construction represents 20% of manufacturing output. (Note: that means it represents sod all of the whole economy.)
The lesson he draws from that is that the government should provide loan guarantees to enable an expansion of social housing provision by Housing Associations.
He also decries the difficulty in private buyers getting access to mortgages. He wants more Building Societies, noting that there were more than 1,000 in the 1930s. Apparently their “destruction” was
a great act of economic vandalism.
So let’s get this clear. Uncle Vince wants more borrowing for private house purchase. And he wants more government debt, this time to finance social housing provision. But he wants it kept off-balance-sheet by having the Housing Associations borrow the money, with government guarantees.
Housing Associations are funny beasts. They are not quite public sector, because they are not accountable to the government. They are not quite private sector either, however, because their ownership is not defined.
I remember back in the 1980s, during the big expansion of Housing Associations, a Housing Association representative came to give a talk to the local Conservative policy forum (of which I was a member back in those heady days).
I asked her who owned the Housing Association. Blank look in response. I tried again. If the Association were to be wound down, who would own its assets, principally the houses it had built? Er, she didn’t really know. Interesting question. She had never been asked it before.
The truth is that Housing Associations are quangoes. Giving them government guarantees to expand housebuilding is just a way to borrow money without it appearing on balance sheets.
Good old Uncle Vince. He still thinks the problem in our society is not enough debt!
He wants more private borrowing, to get private housebuilding going. And he wants more public sector borrowing, to get social housebuilding going.
Like Socialists everywhere, he thinks there is a mystical pot of money somewhere that the nasty capitalists are sitting on. If only we could get our hands on it, everything would be fine. Politicians like him got Greece into the mess it is in now.