He talks big. He is “the builder”. He tells the rest of us to “live within our means”. And he wants to be the next Prime Minister of the United Kingdom. But George Osborne is clueless, when it comes to macro-economics. True, he sounds convincing when he reads a good script. But strip out the double-speak, and it becomes clear that the Chancellor of the Exchequer is softening up the UK for the next cyclical recession.
The next recession arrives in 2019. That’s just 12 months before the General Election. Not a happy event for Osborne, who is even now dreaming about moving from No 11 to No 10.
His wrecking powers were on display in today’s Spending Review. Strip out the white noise, and we are left with his blueprint for action. His agenda is to pour a further £6.9 billion into the private housing sector.
He promises 400,000 new and affordable homes by the end of this parliament. What we are actually getting is a further featherbedding of the building industry. Investors were quick to sniff that one out: the price of shares in construction companies rocketed before the chancellor got to his feet.
The supply of housing from the public sector is being reduced in favour of subsidising private building companies. Those companies have already declared profits of 40%. And they are turning out a record low number of dwellings.
Each of those dwellings is smaller than anything being built in Europe. Why? Because the more units that can be crammed onto one acre, the greater the profit from the deals in land.
So the building companies are happy: their primary function is that of land bankers. They blame the town planners for not granting enough permissions to build – but, meanwhile, curb output to levels that maximise their capital gains from land.
Meanwhile, the skills shortage – tens of thousands of brick layers and roofers were driven out of the trade during the depression – means that the sector cannot turn out more houses, even if it wanted to.
So what’s it all about? Building the image of George Osborne. The internal mechanism that drives the market economy remains a mystery to him. True, he is good at delivering a plausible script. The big question remains: are we gullible enough to believe him?
What do you make of the announcement to allow local councils to keep a larger proportion of business rate revenue? Initially I was in favour but read today that they won’t be able to raise rates only lower them which suggests the Tories haven’t learned the lessons of Thatcher’s Enterprise Zones.
Looking forward to reading your new book.
Osborne’s strategy – conscious or otherwise – is to strengthen the property market; which, consequently, means fracturing civil society. High-value areas with low welfare needs will cut the property tax; low-value areas with high welfare needs need to raise more money from the Council Tax…outcomes: further upward twist in land values in the favoured locations, and downward pressure on property prices in locations that are disadvantaged. Ergo, the increase in the social divide – what I call the economics of apartheid. Enterprise zones are another example of the brainless political approach to public policy.