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01 October 2012


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I agree with you that in the good times, governments should not borrow for expenditure. I also agree that house prices should be left to fall. In fact the only borrowing should be for reasonable investment. Reasonable includes productive investment with a guaranteed sufficient income OR something the government has to provide (e.g schools at a reasonable cost- NOT replacing all schools with designer schools). However, for balance, you could mention that the Conservatives public position was support of the govt spending plans right until the charabanc was already over the cliff in 2008.

In addition, Balls plan to build housing does not seem unreasonable provided the future return (whether rental income or sale price) will pay for the borrowing. However I dont see why the private sector cant be kicked (with new laws if necessary) into building more by the threat of removing planning permission from their land banks.

Mary McFarlane

Balls by name, balls by nature, I know I'm not the first to point that out, but really!

David Hutchison

It is totally amazing and mind boggling that Labour should even be considerd as a government having made a complete mess of the economy only a few years ago.
Not only did they wreck the economy but they wrecked the UK banking system by their scrapping of Bank of England regulation of our banks.
Surely the British public can't have such short memories?
Labour should not be trusted with the economy until they have learnt their lesson.
Ed Balls of all people (Gordon Brown's bag man) should never ever be let anywhere near our economy!

Adrian Fisher

Presumably if there was a sudden "demand" on the revenues of the Balls National Household, such as an unfunded War (instead of a 4G "windfall" crying out to be spent), then Ed Balls would immediately cut public spending in other areas to pay for that unfunded War. NOT!

Morally, this would be the other side of the coin, of suddenly spending as soon as a windfall comes along, regardless of how dire your overall circumstances are.

If this is the calibre of moral compass of those aspiring to get their hands on the nation's public coffers, I despair.


How to make houses more affordable? Ensure that supply exceeds demand, and keep demand down. The 64 dollar question,though, is where would these one hundred thousand houses be built?

Neil Jennison

Ed Balls is a hypocrite? That's not exactly new.

Ed Balls is economically illiterate? That's not new either.

J Wise

Seems that labour have learnt nothing and Ed Balls is already planning ways of spending the 4G cash before it arrives.


Referring to the incompetence of Ed Balls and Labour generally, with people living below the poverty line and needing to rely on food banks, I note the first food bank was started in 2000. Who was in power in the boom years?



To accuse Ed Balls of any competence outside of rhetoric and bluster would be a grossly inaccurate description.

How in the name of anything that's right, worthwhile and decent, this loud mouthed individual can know anything about the wartime spirit he urges us to have, defies belief.

Someone really should tell him that in those days, the people running the country put the country's interests ahead of their own. A concept and proposition that is entirely alien to Ed Balls.


How can the opposition, hoping to gain election, possibly retain a discredited person, Ed Balls, as the architect / guru of their economic policy?

The answer is that, irrespective of the real world, most people will vote for a party which offers them an easy way out. Labour offers much sympathy to the broad populace and their hardship.

The real shame is that Cameron's coalition has such little credibility , Labour appears far more attractive to the swing voters who will make the difference at election time.


First of all Terry, thanks for the blog. It's comforting to know there are still rational voices somewhere out there, because they aren't coming from our political classes.

I suspect a significant reason for sustaining the current levels of house prices is that many people, often quite innocently, bought their properties near the top of the boom. If house prices were to return to a reasonable level by dropping 40% or so, then tens of thousands would find themselves deep into negative equity. For those people it would take years to clear the negative equity portion of their mortgage before being able to save for a deposit for a new property should they wish to move. This is the legacy of Labour's house price boom and Balls' proposals do nothing but try to stoke a new housing boom.


Or salaries need to rise, something that can only happen if productivity increases considerably.

Joun B Sears

Perceived wealth is one thing, 'crystallised' wealth quite another.
As the markets move up or down the only real effect of the economic situation is borne by those who either choose to or have to sell.
When the taxes and fuel costs rise to the extent that a sufficient number of people elect to 'downsize' simultaneously, THEN the housing market will implode and a serious re-adjustment will occur of somewhere between -20 & -40%, depending upon sector. Likely mid-2013 to 2014

Peter  Stephens

Without high house prices there would not be large mortgages : lack of large mortgages would be bad for the finance industry : lack of large mortgage debts would mean that fewer people would have to stay in employment in order to repay their large debts.
Ergo : high house prices are good for The Economy and furthermore the needed means of keeping the worker at work and thereby serving The Economy.

The strategy for living is to win one's own Freedom by gaining economic freedom.


Surely if 100,000 houses are added to the market, then houses become less rare and their price falls?

What am I missing here?


I acknowledge that my comment is off-topic but I can't see where else to put it. The Guardian (yes, the Guardian) seems to be one of the few commentators who have questioned Ed Milliband's high profile comment to Andrew Marr last weekend and since repeated ad nauseam that the government was effectively writing a cheque for £40000 to every millionaire in the country (annually apparently).

What he meant, of course, was to all those earning at least £1M per annum.

Two comments: Are politicians really so desperate to create a slogan that they make such an obviously incorrect statement?

What does it say about our national media that this seemed to escape much of a challenge?

I despair.

Come on Terry, this is merits one of your excellent blogs.


Terry Smith

Roger: building 100,000 houses should make prices fall but there are then problems: a) the building is to be funded with public money. In case it has been overlooked, we don’t have any spare public funds, partly thanks to Mr Balls; and b) Ed Balls is not proposing to build 100,000 houses because of his grasp of the laws of supply and demand but because he is a spender-of other peoples money. For him all problems can be solved by spending more. His other suggestion-a Stamp Duty holiday-would increase demand for housing and so tend to push prices up. Like all the politicians I have encountered from all parties he does not subscribe to the simple, obvious and correct view that to make houses affordable you need to abandon all measures to support the housing market.

Philip Hutchinson


Largely agree with you, but can I take it that you disagree with your colleague Dr Tim Morgan's view in his recent research piece that a national housebuilding programme would be a net positive (because - to paraphrase grotesquely - there is a housing shortage in the UK and consequently government investment in housing would have a positive NPV, in addition - unlike other 'stimulus' measures - to not simply flowing out of the country to the benefit of foreigners)? On this basis, it is a sensible project for the government to undertake, and one that they could afford to do (unlike a lot of the make-work nonsense the political class constantly spews up).

His paper on this topic persuaded me that a housebuilding programme is a good idea.

The reality on housing is that the political class want to have their cake and eat it: they want house prices to be high (so people feel rich, and the banks' balance sheets are massaged so we can continue to pretend that they are solvent) but they also want it to be affordable for the younger generation. 2 + 2 = 69 in their world, it seems!


Terry Smith

To Stuart: Thank you for pointing this out. Unfortunately I was out of the office yesterday and Miliband’s gaff in confusing a millionaire with someone earning £1m p.a. has now been picked up in the mainstream media such as the Mail and Telegraph. However, it is perhaps even more important to highlight two other aspects of what he said: 1. He talks about the government handing a cheque for £40,000 to each millionaire-he doesn’t get that this is the individual’s money which the government is taking away through taxation rather than the government’s own money which it is handing out; and 2. His gaff in using millionaire as the descriptive term has got him into a spot of bother as he is a millionaire, which of course he has sought to avoid confirming when questioned by the media.

Terry Smith

Philip Hutchinson: I’m a firm believer in independent research and have worked with Tim Morgan at three firms and over 20 years. I think it’s important that he published his analysis and views whether I agree with them or not. A house building programme has some merit. As you say, it could ease the shortage of housing and so help to lower prices and any useful capital expenditure is likely to be more useful than the current account spending. However, the primary problem with it is that we should be trying to cut public spending, not increase it. I know you could argue that such a programme could be funded by cuts elsewhere but the politicians are so reluctant to cut that I do not feel it is safe to give them any opportunity for additional spending.



Many thanks for your reply. I was not trying to suggest that you were out of step with the Tullett Prebon 'party line' (I hope and expect that there is no such thing) or that this somehow made you a hypocrite! I fully agree with your stance on independent research and am grateful for Dr Morgan's work (though of course I too do not always agree with it). It is frankly childish and emblematic of their lack of intellectual honesty that the media and political class cannot seem to grasp the concept that intelligent people within the same organization or movement can disagree on an issue without that being some kind of scandal.

I do sympathise with your point that one should not seek to give the whitehall machine any more money, ever, on the basis that it finds it impossible to do anything other than spend more and spend badly. My take on the housing situation is that a significant reduction in the tyrannical planning regime (and widespread deregulation) would be the best solution given the fiscal constraints. Imagine the howls of derision, though, from the NIMBYs (with politicians pleading special interest cases at the front of the queue)!


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