Painful problems and a painfully simple solution

After a few days away from blogging on the North Cornwall coast (not, I hasten to add, to follow the Olympic torch) I had some catching up to do with my reading.  So I was struck by the confluence of four different bits of information from the last week.

First, our esteemed Housing Minister Grant Shapps said something that I agreed with!  He pointed out that, with 245,000 additional households being formed each year, we will continue to build well below the number of homes that are needed.  He should of course have gone on to say that his policies mean that the number of starts is falling and he is making things much worse.

Secondly, the revised figures for GDP (gross domestic product) showed that the double dip recession was worse than was suggested by the preliminary figures.  Within that decline, the fall in construction was even greater than previously estimated and was probably the major contributor to tipping us into recession again.

Thirdly, the IMF report on the UK economy, despite George Osborne’s spin, urged a significant change in policy to promote growth and to cut unemployment.  IMF Chief Christine Legard said “Policies to bolster demand before low growth becomes entrenched are needed.”  The IMF’s report argues that, with inflation well anchored, the UK has room to cut interest rates further and to embark on a further injection of money into the economy by the central bank buying assets (quantitative easing), adding “Budget-neutral infrastructure spending can help the economy recover.”

Finally, the Deputy Prime Minister made a couple of statements, including one to the Financial Times, suggesting that the Government might engage in a ‘massive’ increase in investment in housing and investment.  In practice this would mean putting back some of the investment that it has already cut (housing by over 60% in the first spending review).

Putting all this together, is there anything obvious that should be done?

Would it for example be a good idea to

  • a) target monetary easing by buying housing bonds to enable more homes to be built at borrowing costs that approximate to zero?
  • b) make many of these homes affordable by reinstating some of the capital grant that has been cut?
  • c) put idle resources and skilled people back to work in the hardest-hit sector, enabling companies to make profits and employees to earn wages, generating tax income and getting the Treasury most of its investment back?

Our economic problems are painfully complex, but this is one solution that is painfully simple and obvious.  Can anyone tell me where I’m going wrong?

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2 Responses to Painful problems and a painfully simple solution

  1. Pingback: It’s the politics, stupid. | Red Brick

  2. Pingback: How the LIbDems could show they have real influence in Government | Red Brick

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