George Osborne is selling the Conservative Party as saviour of the British economy. And yet, his swansong as Chancellor of the Exchequer was a catalogue of disasters that smooth the way for the Crash of 2019.
In his budget speech on March 18, Osborne made sweeping claims. Every one of them will be falsified over the next five years if the Tories are returned to power at the general election on May 6.
He claimed that “we choose responsibility”, and warned that there would be “no short-term giveaways”. In fact, his budget was a catalogue of irresponsible giveaways (AKA bribes) – most of them designed to boost property prices. These include:
- taxpayer funded subsidies to first-time buyers of houses: this will give a further upward twist in house prices, because there is no way for supply to catch up with demand;
- 20 new “housing zones”: state intervention will be capitalised into higher land prices;
- the creation of eight enterprise zones: we know from the Thatcher years that this will jack up the price of land rents within the privileged areas, without creating many jobs; and
- corporation tax cut to 20%: this will boost the value of rent-yielding assets, further distorting the investment market in favour of speculation.
If implemented, these initiatives would drive the property market into a frenzy in the run-up to the mid-cycle crash of 2019. And yet, Osborne has the cheek to announce that, under his stewardship, the economy would not return to “the chaos of the past”. This echoes Gordon Brown’s mantra in the run-up to the Crash of 2010: No More Booms and Busts!
Osborne claims to have created a “fairer tax system”. Reality? The whole thrust of his programme at the UK Treasury has been to fine-tune fiscal policy in favour of rent-seekers. One of his most dangerous initiatives is amendments to pension funds rules. From next month, savers will be able to access their savings to spend on current consumption rather than provide for their late years. One prospect: the drawdown of funds for investment in buy-to-rent properties – driving house prices even further beyond the reach of young adults wanting to marry and start families.
And what of Osborne’s claim that the UK has the potential to overtake the German economy by 2030? Productivity in the UK is pitiful. British employees take five days to produce what French workers produce in four days. That productivity gap will grow ever larger under Osborne, because his whole strategy diverts resources into sterile property speculation rather than into value-adding enterprises.
The austerity cuts to public spending in the years up to 2018 will further weaken the economy, making the Crash of 2019 even more difficult to weather for millions of families.
The foregoing analysis does not feature in political debates in the run-up to the election. Osborne appears to have a clear run at launching the UK onto his Housing Ladder of Despair.