It’s fair to say that the Government’s latest package of support measures for the ailing housing market hasn’t quite had the desired effect. Commentators have almost universally condemned the package as too little, too late (and that’s just the polite ones) – while the latest prediction from the Organisation for Economic Co-operation and Development that the UK is going to suffer more than everyone else in the world doesn’t exactly strengthen Gordon Brown’s credentials…
In fact, the OECD’s latest figures were just about the last thing the beleaguered PM needed to see yesterday. It now reckons that the UK economy will contract by 0.3% in the third quarter, and 0.4% in the fourth – while the other big economies will either see modest or flat growth. So admittedly we’re not much worse off – but it rather gives the lie to Brown’s claims that the UK is better positioned than most to cope with what is essentially an international problem. The OECD is now saying that the UK economy will grow by 1.2% over the full year – that’s lower than its earlier forecast, lower than the IMF forecast, and less than half the figure Alistair Darling put forward in the last Budget (though we're guessing his changed his mind now).
The OECD reckons the housing market remains the big problem for the UK, as with all the Western economies. And nobody seems to think that these latest support measures will help. The Government says its stamp duty holiday will help 10,000 first-time buyers, at a cost of £600m. But The Royal Institute of Chartered Surveyors believes (on the basis of figures from the Council of Mortgage Lenders) that the Treasury has been wildly optimistic about the number of transactions in the affected price band – it predicts the actual cost will only be about £170m. And given the size of the housing market, this is pretty minuscule as cash injections go.
The Government is also refusing to say where it’s getting this money from. So it’s no wonder that the Tories are arguing that this isn’t a very well thought-out response to a very big problem: Shadow Chancellor George Osborne called it ‘a short-term survival plan for the prime minister, not a long-term recovery plan for the economy’. And with his hard-fought reputation for economic competence gradually dissolving, this task is getting more difficult by the day for Gordon...
In today's bulletin:
Punch pulls final dividend
OECD takes wind out of Gordon's sails
Small business banking like pulling teeth
Brand that's Virgin on the tarnished?
Entrepreneur Weekly: My Week, by James Caan