UK Government launches sub-prime mortgage scheme

   How will using taxpayer's money to subsidise inflated house prices make home ownership more affordable?  The UK housing minister, Grant Shapps has announced a "get Britain building" programme (inspired I fear by similar moves in Scotland)  in which the state will lend most of the deposit on first time home buyers' mortgages.  They say this is to help first time buyers, whose average age,  according to the BBC, is now 43 years.  It won't - this is just a sop to the construction industry which is tanking again because of the euro-debt crisis. The money will go straight to the builders of the over-priced doll's houses that are too small for family life.

    There's a very good reason why building societies and banks are asking for deposits:  because house prices are falling.   Houses are still far too expensive in Britain, compared with continental Europe or America, and subsidising the sale of them will only keep prices unaffordable a bit longer.  What first time buyers need are houses that they can afford, not yet more debt.  Those lured into this scheme are likely to find, in future years, that they have taken on negative equity.   Anyone who seriously believes that house prices are going to rise during a double dip recession needs to be saved from themselves.  


 The government  also intends to increase the discount on the sale of council houses  so that people will be able to pick them up for half of what they are worth.  This is an unwarranted extension of the policy that has virtually destroyed social housing in Britain.  Selling council houses for a fifty percent discount to the market rate is immoral and should be illegal.  It is the taxpayer who paid for the construction of these houses and it is unforgivable to hand the capital gain to private home owners, many of whom will sell to buy-to-let landlords.  These houses will then be let at rents that can't be afforded by most working people, let alone the unemployed or low paid.  The inflated private rents will be paid by the government, the taxpayer, through housing benefit.  This amounts to a systematic asset stripping of public assets.  


   But the worst thing about both these policies is that it is all about trying to solve a debt crisis by yet more debt.  You would have thought after the last three torrid years that we had learned something about the dynamics of the debt economy, but apparently not.  All we need now is for the newly privatised Northern Rock (or rather the profitable bit, since the £50bn in dud NR mortgages has been retained on the state's books) to start offering 95% mortgages and the cycle will be complete.   If the government wants to help young people it should be taxing the profits and bonuses of UK banks who owe their existence to the tax-payer.   It should restore the cheapest and most effective means of building affordable homes, which is council housing.  And it should tax the speculators who sit on building land and make unjustifiable profits out of the housing shortage.  Ultimately, the UK housing crisis cannot be addressed without some form of site value taxation.