I missed my chance to get really upset at the Coalition yesterday with its idiotic new housing policy. Still finding myself angry today (a long conversation with Bill Quango MP not helping at all with calming me down), I feel compelled to write; although I shall resist the urge to post this in green for effect.
Grant Shapps, one of the Government's brighter minds generally, found himself yesterday trying to defend the latest subsidy to housebuilders and Middle England. 95% mortgages are to be made available to help Wimpey sell more homes.
Now of course we need more homes - this is easy to see, prices are astronomical as demand outsrips supply in many areas. So nothing wrong with creating market incentives to remedy this. Only now the Government has desided to buy into high risk of mortgage loans - higher than the market thinks sensible. I recall in the financial bubble there were companies offering these sorts of rates and higher, Northern Rock, HBOS, Bradford and Bingley - I wonder what happened to them in the dim and distant past of just a few years ago. Oh yes, they all went tits up when the market fell. Markets rise and fall, in the long-term we have a housing shortage - but markets can be irrational and rising rates in the near future are unlikely to be allied with a big jump in house prices. Moreover, the short-term boost to prices of this policy could well lead to a spike in new build prices, then with no subsidy for on-sell a baked in negative equity position for buyers. The risk here is a Government creating negative equity and then being forced into enforcing on people it has lent to - a PR disaster in the making!
Not only is there this risk, but this policy means the Government has to work with lends, housebuilders and sundry advisers to get this daft idea going - all of which is time consuming and expensive.
When, but of course, there are far simpler tools available. Rather than lend more money, the Government could exclude new builds from stamp duty. This would lower the funds needed for a deposit and has the ease of use of already having been in place recently as a policy for properties up to £250,000.
However the Coalition seems to love Gordon Brown's tinkering mantra of making things complicated to appease special interests rather than taking a common sense view.
The ludicrous wealth tax which I wrote about last week is another. People can't pay taxes out of illiquid investments, if you must tax them to pay for redistribution, then ask them to pay when they have the money - i.e. when they sell the property or die. Put capital gains on own properties at say 10% or increase death duties. Thus money is payable when it is in cash form - not demanded when capital is tied up with no realised gains.
None of this is very hard, it requires a few minutes thinking time and yet the Government has hundreds of advisors at work. But it doesn't work a left wing Lib Dem party and confused Conservative party are unable to articulate simple ideas, we are left with the 'Big Society' and ill-defined NHS reforms - and, of course, tax rises to pay for all the confusion.
Where is the David Cameron from the video above - the one who saw the craziness of over-regulation and spotted the desire for people to create business and work more free from Government control? Instead of following its simplification agenda as promised, the Government is tied up with tax tinkering and trying to find new ways of raising money via some form of class war. New Labour's legacy of divide and rule lives on.