I'm the Hen Ferchetan. This is my take on the world through the eyes of Wales. While mostly about Welsh politics (that most famous of dour topics!) I try to scatter some humour around, but I doubt anyone but me will find it funny! Have a read, and if it bores you then feel free to never come back!

Tuesday, 2 September 2008

Deja Vu?

So Gordon Brown has announced "free loans" to first time buyers in England to help them purchase properties. After five years the owner would pay a "fee" back to the scheme instead of repaying the loan.

I'm looking forward to hearing Welsh Labour flood the airwaves to tell Gordon that they were not convinced that such a move " would not simply cause a dangerous wholesale inflationary increase in prices"? after all, that's what they told us would happen when Plaid Cymru made a similar election pledge last year.

And this isn't the only new policy today that has "Made in Wales" stamped all over it. The Scottish Government have followed ours in announcing the scrapping of NHS Car parking Charges while Darling has also copied the Welsh Assembly's proposals to allow struggling mortgage payers to sell their house to the Council and stay there as tenants.

So three major proposals and policies of the Welsh Government and Welsh parties are being adopted in other parts of the UK. Maybe people shouldn't be so quick to deride the Assembly politicians as inferior talking heads.


Peter Black said...

The Plaid election pledge was for grants not loans. There is a big difference in terms of the efficacy of each measure.

Hen Ferchetan said...

True Peter, but the argument against the grant was that making it "cheaper" for first time buyers would be dangerous and inflationary. The policy is different but the effect is the same.

The Welsh Lib Dem position on the grants was that it would be a "lawyers charter" because it would be nigh on impossible to define a first time buyer. I take it that position remains the same for this proposal?

Peter Black said...

No the Lib Dem position was that it would skew the market. That is not the case for loans because they are repayable. All the government is doing is making credit more readily available to compensate for a disfunctional market. Interesting that now Plaid are in government they have dropped the grants idea.

Anonymous said...

A disappointing post from you, Hen.

When Plaid made their pledge (and Labour criticised it) house prices were rising at around 11% per annum. They are now falling by about 11% per annum.

Surely you can see the difference in the broader economic context, and in the inflationary effect these measures would/will have?

Hen Ferchetan said...

Peter - "A spokesperson for the Welsh Liberal Democrat described the proposals as "an interesting contribution to the debate".

However they suggested that the plans "sound simplistic, half thought through and something of a lawyers charter. For example - how do you define a first time buyer?" "

As for Plaid dropping the idea once they got into government they'll have t tell you themselves why - but at a guess I'd say it would probably have something to do with the fact that it wasn't included in the One Wales Agreement due to labour not agreeing with them.

Anon - a fair point, however we are still in a position where inflation is a huge risk (we REALLY don't want stagflation). Now I personally disagree with the idea that either proposal would have caused inflation, but I struggle to see how one would do so and the other wouldn't.

Anonymous said...

I struggle to see how one would [cause inflation] and the other wouldn't.

It's quite simple; the state introducing equity share into a market where house prices were rising at more than five times greater than the rate of inflation was likely to fuel further inflation, as Labour suggested.

The state doing the same where prices are falling while inflation is rising will have a much, much reduced inflationary effect by comparison. Crucually, the volume of house sales is far, far lower than May 2007, so the inflationary effect will be lower still.

Plaid's policy was about making housing affordable for first time buyers during a time of rampant house price inflation. This policy is about helping people who can afford housing during a period of rapid house price deflation, but cannot get a mortgage due to the credit crunch.

As Keynes said "When the facts change, I change my mind. What do you do, sir?"

Hen Ferchetan said...

I love it when someone starts with "It's quite simple" and then talks like an economist ;-) I'll defer to you on most of it for the good old fashioned reasoning of "you sound like you know what you're talking about", but I would still take issue with the suggestion that grants would cause damaging inflation.

I'm not going to debate the point too much because 1. Im no economist, and 2. As Peter pointed out the grant policy is dead in the water now anyway, but the grant policy would give a reletively small (was it £5000?) boost to a minority of purchasers. It could only be obtained if you'd saved an equal amount over some period of time (3 years?). It would only be used in a small part of the economic area (i.e. only in Wales). While there could be some nominal inflationary change in certain localitities it would have prettu much no effect.

Whether it was a good policy in actually achieving it's goal of helping first time buyers, and whether it would be cost effective in doing so is a whole different question which i'm not convinced on.

Anonymous said...

Peter how has Plaid dropped the idea. Theirs is a programme of Government for a full Assembly term. I'm not saying they will or will not do it but are you seriously saying that every policy needs to be implimented in the first term or else it must have been dropped? Are you really that politically unaware?

Peter Black said...

Well even Plaid's Deputy Housing Minister is talking about an amended version of the policy and it has not featured at all in any of her plans so far. From discussions I have had it seems more than likely that the grants idea will be quietly dropped.

Hen, do you have a link to the quote from the Welsh Liberal Democrat Spokesperson?

Hen Ferchetan said...

It's the link in the original post Peter.

I wouldn't be surprised if Plaid have quietly dropped it. As I said before while I totally disagree that it would have an inflationary effect of any significance I'm not convinced that it was the best way to utulise money to help first time buyers. Plaid have a habit of dropping things on the quiet by just not mentioning them for a while and then eventually say that it's long been discarded.