The Tories must be in panic mode. Cameron promises a land of opportunity after the election, but Osborne condemns the country to 12 years of austerity up to 2020 (and will even that date be shifted rightwards like so many previous forecasts of the end to austerity?). Osborne says he’s laying the foundations for sustainable growth, but then brings forward the £12bn stage two of his notorious Help to Buy scheme which even his Tory supporters believe will throw oil on the fire of the already overheated surge in house prices. Do the Tories really believe that they can win an election promising to cut the budget deficit, which has stalled for 3 years, by £35bn by 2015, £42bn by 2017-8, and by another £43bn by 2020 to produce a budget surplus? How can Osborne promise ‘improved living standards for this generation and the next’ when wages have been cut by 9% in real terms and are still falling, when wage increases can only be earned by higher investment and higher productivity (both of which are depressingly flat), and when higher incomes would simply suck in even more imports (with imports already exceeding exports by over £100bn a year) which would force the economy to be deflated before growth and higher living standards had taken hold?
The real culprit in all this is the £130bn Help to Buy scheme – where does that sort of money come from when the public accounts are under extreme pressure to make enormous cuts? State-subsidised mortgages for the well-off (houses valued at up to £600,000) seems, even for Osborne, a strange decision when some of the poorest tenants in the country are at the same time being expelled from their homes by the bedroom tax. It can only be explained by Osborne panicking at the time of the March budget this year that the economy showed no sign of recovery in time for the 2015 election, made worse by his mistaken increase in VAT and big cuts in capital spending. He chose a big artificial stimulus of the mortgage market to kickstart the moribund economy, repeating the mistake of every previous boom triggered by consumer borrowing and a pumped-up housing market, an inevitable forerunner eventually of yet another round of boom and bust.
Even Osborne has been forced to admit that he’s gone over the top with Help to Buy because he’s had to give the Bank of England, and his protege’ Mark Carney, an annual veto if it looks like getting out of hand. But he’s destroyed the value of this safeguard by postponing the first BoE check till next September which is likely to be far too late to take effective precautionary action. All in all, Osborne’s created a huge mess, all because his Plan A failed to bring about a recovery in time and he resorted to the worst possible tactics to compensate for that failure.