A few years ago, Anthony King and Ivor Crewe published The Blunders of our Governments, a book cataloguing costly policy misjudgements ranging from the Suez Crisis to the poll tax. If ever a new edition of their book is written, then surely Liz Truss and Kwasi Kwarteng’s fiscal experiment on 23 September, which crashed the UK economy overnight, will deserve more than a whole chapter to itself.
Their attempt to cut taxes for the richest, reverse corporation tax and national insurance increases, and throw extra cash at bankers – all of it uncosted – sent the pound into freefall, leaving it, at one point, at the lowest level against the dollar in history. The Bank of England says £1tn could have been erased from UK pension funds’ investments if it had not stepped in. As the world looked on, the government’s economic programme unravelled faster than an old woolly cardigan.
Billed as a plan for growth, it was instead a plan for chaos on the foreign exchanges, uncertainty in the housing market, and political turmoil which ultimately cost the prime minister and chancellor their jobs. The Daily Mail claimed the mini-budget would “jolt Tories into life”; instead it administered a lethal dose of reality, destroying whatever vestige of a claim to economic competence the Conservative party had. From now on, the Conservatives cannot be seen as anything but the party of economic illiteracy and instability; it is Labour who will have to clear up the mess they’ve left behind.
Truss’s resignation will be cold comfort for those who have or are trying to get a mortgage. Figures from the Resolution Foundation, and Labour’s own research, show that five million people will face a £5000 annual increase in their mortgage payments. Many lenders have redrawn products, making it harder to even get onto the ladder. Labour’s analysis shows customers refinancing a two-year fixed mortgage will be paying £580 more per month on average, and up to £900 a month more in London. Make no mistake: homeowners are paying a Tory premium on mortgages, made in Downing Street by the Truss-Kwarteng mini-budget.
It is vital to remember that the people stuck in this mortgage misery are ordinary families up and down the country. Nearly two-thirds of households in the UK own their own flats or houses, with the majority paying a mortgage. Rising interest rates, flatlining wages, and increased gas bills were hammering hard-pressed homeowners even before the mini-budget. For millions the monthly mortgage payment is now a looming cloud on the horizon.
The legacy of Britain’s shortest-lived premier is misery for millions, with indebtedness, poverty, and the real prospect of home repossessions. The party which once claimed to be the party of homeownership is today the party of eviction, debt, and shattered dreams.
There is a solution to this mess, but you won’t hear it from the Conservatives, no matter how often they swap the people at the top. The next Labour government will fix the imbalance between supply and demand by building more homes for sale and rent. Labour will also make it easier for first-time buyers to overcome the hurdle of colossal deposit demands through a mortgage guarantee scheme, and give them first dibs on new-build properties. We will raise stamp duty on overseas investors, who frequently buy whole blocks of new flats in constituencies like mine only to leave them empty. And, as Lisa Nandy has announced, Labour will invest in council properties to rent, drive out rogue landlords, and tackle the backlog of repairs in the rental sector. Labour’s target is for 70 per cent of the population to be homeowners by the end of our first term.
This will be possible against the backdrop of a stable economy, investment in jobs, skills and infrastructure projects, and a more reasonable balance between wages and house prices through increased supply, so that home ownership becomes an entirely achievable ambition for the vast majority of people in the UK.
The Tories have shown what happens when ideology trumps common sense. When markets fail, the proper response is not to double down and wait for the invisible hand to fix things. It is to construct a public policy which works, is reasonable, makes sense, and has public support. Saving Britain’s mortgage-payers from misery will be core business for the next Labour government.
Image credit: House for sale by Andrew Abbott, CC BY-SA 2.0 via Wikimedia Commons