Thursday, July 10, 2008

The excellent Mr Cable

My attention has been drawn to a speech delivered this week by the excellent Mr Vincent Cable, who shadows the Chancellor of the Exchequer for the Liberal Democrat party.

Sometime ago I noted that Mr Cable was unjustly dissuaded from aspiring to leadership of this great party in spite of the proven quality of his debating skills and his stature as an aspiring Chancellor.

Recent experience may have led the parties to believe that combining skill in the Exchequer with skill in the greatest ministerial office may not be possible. They may also have come to believe that experience and age are not valued by the public in their leaders. I can assure them that on both counts they are wrong. If the British people retain a fraction of their qualities of some 100 years ago, my own humble experience would suggest the contrary to these current beliefs.

So to Mr Cable who delivered a significant lecture to an organisation named the Institute for Fiscal Studies. In doing so he demonstrated his status as a true Liberal by speaking with deep respect of the work of Mr JS Mill, whose achievements included some profound analysis of the "Bubbles" that afflicted the economy of the industrialised Great Britain.

Of even greater significance are the remedies proposed by Mr Cable, which in many ways seem little more than common sense to anyone with knowledge of the economy and yet, it seems, have been neglected in policy for many decades.

The first is to acknowledge the peculiar nature of the market for housing and its impact on the economy of the nation as a whole. It has been allowed to "boom" without control because our economists and Chancellors have been unable to treat it as any different from the market for soft toys or electronic calculating machines. Yet there are many ways in which it is different, foremost amongst them being that it is based on the supply of land, which should be treated as a scarce and separate part of the economy.

Housing is also a great deal more important for the welfare of the population than the supply of soft toys, which, it appears, is inexhaustible. When housing was predominantly rented or leased the risk to the population was always from landlords and the poverty of tenants deprived of the opportunity to work. Now I understand the significant risk arises from the banks desire to "repossess" properties when loan repayments are not kept up to date. This is a nonsense, which is bound to destabilise the economy and cause widespread misery. Our own dear Queen was always distressed by her occasional inadvertent glimpses of beggars on the streets as I am sure the current occupant of the Throne would also be moved. I would mention that she was also a little impatient of my explanations of measures of relief that might be offered.

If a householder has surplus capital in a property when the value of their loan is deducted it is quite wrong and immoral that they should be required to forfeit that capital for which they have worked and paid because their property must be put up for auction at a time of low prices. Mr Cable therefore proposes that when a householder is unable to make loan repayments, they should agree with the bank to hand over that share of the property which is covered by the outstanding loan. This seems eminently fair and would leave banks with considerable assets to be placed on their balance sheets. The householder in turn would continue to live in their property and benefit from its good maintenance.

However there is little benefit in declaring a good policy if it is only known to an audience of economists. Mr Clegg and Mr Cable should work in tandem to offer hope to a public oppressed by financial woes and alarms.

No comments: