Week 47 2011 29.11.2011

Tendring Topics……on line

'What goes around, comes around'

            There was a time – I remember it well – when the maximum loan for house purchase that Building Society and Bank Managers would approve for house purchase depended upon the income of the main wage earner in the applicant’s family.  That was in the days before it was assumed that both members of the marriage or other partnership would continue in full-time work even after a baby or babies arrived.   Then, provided one of the couple, usually the male, had a steady job they could buy their new home with a twenty or twenty-five years mortgage and a deposit of ten percent of the total cost.  If the local authority were prepared to act as guarantor and the applicant’s job seemed very secure, then a five percent deposit might be acceptable.

            When, way back it 1956, my wife Heather and I bought our bungalow in Clacton (the one in which I am writing these words) we had thought we could manage the monthly mortgage payments on the kind of home that we needed (I had just been appointed Additional Public Health Inspector by Clacton Urban District Council).  Raising the deposit though was a major obstacle.  We had been married for ten years but during that time Heather had suffered a life-threatening illness and had had a crippling operation.  We had two young children, and a loan to repay on the car I needed for my work.  My pay had been adequate but we had virtually no savings.   The Council was prepared to act as guarantor and we had only to raise five percent of the value of the bungalow.  It seems a totally piffling sum now but we were able to raise it only by selling Heather’s solitaire diamond engagement ring that I had bought eleven years earlier with a considerable proportion of the army back pay I had accumulated as a prisoner of war.

            There came a housing shortage.  It was destined to be made much worse by Mrs Thatcher’s ‘right to buy’ legislation that, within a short space of time, markedly reduced the amount of social housing available for letting.  With rents prohibitively high in the private sector, young couples yearned to get their feet on the first rung of the home ownership ladder.

            It was a time of low unemployment and relative prosperity.  Married women, including young mothers, carried on working, leaving their children in day care.    Banks relaxed their rules and made loans based on the total income of the applicants – not just that of the highest earner.  Many more became eligible for mortgages.  But, of course, there was no commensurate increase in the number of homes available for purchase.  The price of houses began to rise, and rise – and rocket!   The housing boom had begun.  Soon house price inflation soared well above general rise in prices.

             Banks competed with each-other in making tempting offers to would-be buyers.  Ninety-five percent mortgages became commonplace.  Soon there were one hundred percent, and eventually one hundred and ten percent loans to help prospective house buyers with their legal costs and their removal and furnishing expenses!

            It couldn’t, and didn’t last.  The bubble burst.  Home buyers (they had imagined they were ‘home owners’ but they weren’t!) or their partners lost their jobs and half their incomes.  They couldn’t keep up the mortgage payments and either sold their homes at a loss, or were dispossessed by the Bank. House prices plummeted. The homes thus recovered by the Banks were often worth only a fraction of the sums originally loaned on them.  Some Banks would have been declared bankrupt had they not been bailed out by us taxpayers.     

            Right now we have stagnation.  Few new houses are being built.  Skilled and experienced building workers – bricklayers, plumbers, electricians – are unemployed.  Many people are homeless or inadequately housed. There is an acute housing shortage and there is nothing like sufficient social housing available for rent.

            There is, of course, an obvious solution – repeal the ‘right to buy’ legislation and encourage local authorities and Housing Associations to build housing for letting, fund them adequately and leave them to solve the housing problem in their own areas – as they did successfully for a century before the advent of Mrs Thatcher’s Conservatism and its pale-pink New Labour shadow.  That would have been true ‘localism’.

            Is that what the Coalition Government is going to do?   Not likely; they are going to encourage remaining council tenants to buy their own homes with discounts as high as 50 percent (well, it isn’t their money they’re giving away!) and guarantee,  with taxpayers’ money, part of the mortgage on  homes newly built for sale at affordable prices.    This, it is hoped, will encourage Banks to reduce the level of that difficult deposit and bring home-purchase within the scope of ordinary people again. This, so they declare, will stimulate the building trade and thus get the general economy moving.  I hope that it will!  It seems to me though to be offering to bail out the banks before they are even in trouble, and bringing us back to a situation similar to that at the beginning of the house price boom.

‘Ere the winter storms begin’

          The harvest hymn tells us that, ‘All is safely gathered in, ere the winter storms begin’.   And so it should be – but those of us who live in towns know that bringing in the harvest is not the only task that needs to be performed before the winter storms, the ice and perhaps the snow are with us again. Among them are repair of the damage done to our roads and footpaths by the last two hard winters.

Well, here are a couple of local examples of road and footpath disrepair that need urgent attention.  They are by no means the only examples of highway neglect in Clacton and they are almost certainly not the worst, but they are examples that I see regularly.  The footpath is beside Old Road and is regularly used by pedestrians (and mobility scooterists) on their way to Morrison’ supermarket.  It is a positive danger to those unsteady on their feet or with impaired sight, and a source of bone-shaking discomfort to scooterists.  I speak from personal experience!

            The pothole is in Beaconsfield Road, near its junction with Skelmersdale Road.  If it doesn’t receive attention it will get much worse, and more dangerous, in the coming winter.  Unspectacular work like this is far more worth-while than, for instance, the wholesale reconstruction of the seaward end of Pier Avenue last winter – when the dust had scarcely settled on the precious reconstruction!

The ever widening incomes gap!

          At last – the gaping chasm between the incomes of the poorest and the wealthiest of us has received the attention of an official investigation and is being brought to the attention of the government.  It seems that the average income of the staff of a top FTSE100 company is £20,000 a year (for many people even that is wealth beyond the dreams of avarice!) while the incomes of Directors and Chief Executives of these companies is – wait for it! – more than three and a half million pounds a year.

            A CBI spokesman explained to us on TV this morning why nothing could – or should – be done about this.  It’s all because of that wonderful Global Market. Profit-making enterprises throughout the world need the very best brains to make them even more profitable.  They are prepared to pay the best salaries, bonuses and other perks, to get them.   If we lesser mortals were to attempt to limit the number of millions our top people receive (I can’t bring myself to write ‘earn’) they would simply up sticks and move elsewhere.  How very convenient, for some, it is to have an economic system that demands that the pay of workers gets ever lower so that we can be competitive in the global market, while that of their bosses has to get ever higher, for exactly the same reason!

Despite the obvious absurdity of this situation and world wide protests about its manifest unfairness and injustice, the Global Market is welcomed by all three of our main political parties!

Tweedledum and Tweedledee

            The government’s policy of cuts in public services and benefits, and of tax increases (in VAT and similar indirect or ‘stealth’ taxes) that particularly affect the less-well-off are really beginning to bite.  The provident, who have ‘nest eggs’ in savings accounts with banks and building societies are worse hit than the extravagant.  Their savings decrease in value as inflation outstrips the meagre interest that they earn.  Some  have lost their homes, many more have lost their jobs and practically all of us are beginning to lose hope.

            There would be one very simple and straightforward way of restoring our faith in the Coalition Government’s handling of the economic crisis and persuading us that the sacrifices we all (except the seriously wealthy) are having to make, have been worthwhile. Why not – perhaps quarterly or half-yearly – reveal by how many (surely millions) of pounds the deficit has been reduced during that period?  Then we would know whether or not the gain had been worth the pain.  As a former public relations officer I am astonished that this isn’t already happening.  Could it be that there has been no decrease?  Perhaps there has even been  an increase in that worrying deficit; one that even the most accomplished spin doctor would have difficulty in attributing to the previous Labour Government, or to ‘Brussels’, or to whom or whatever is the latest popular scapegoat.   

            That is very possible.  The cynical may see it as a reason why no such disclosure has been made.  A blog reader points out that the government, in formulating its financial strategy must have been expecting the national economy to show modest (perhaps 2 percent) growth.   This would have been expected to bring a reduction in the number of benefit claimants, together with increased revenue from corporation tax, income tax and VAT.  In fact the government’s austerity policy has killed economic growth, increased unemployment and suppressed demand.

            It is an unfortunate fact that we have to rely on their political opponent’s estimates of the effects that their policies, and those of their rivals, would have on the deficit.

            The Conservatives claim that Labour’s policy of reversing ‘the cuts’ to stimulate the economy, would increase the deficit by £85 billion a year by the end of the present Parliament.  They may well be quite right.

            Labour has considered Office for Budget Responsibility forecasts from November 2010 together with the latest estimates from independent forecasters, They predict that the coalition government’s borrowing could rise by £11 billion more than planned this year, £22 billion next year, £34 billion in 2013 – ’14, and £42 billion in 2014-’15.

            Voters at the next election will, it seems, have a clear choice.  Vote Conservative, cut even deeper, and increase the deficit, or Vote Labour, reverse the cuts and – though in a slightly different way – do the same thing!

            Well, it isn’t all that likely that I shall still be around for the next General Election to have to make a decision! 

An Affront – or a Lucky Escape?

          A couple of weeks ago members of Tendring Council, together with the local press, were full of indignation at the fact that Tendring was the one district in Essex through which the Olympic Torch  would not be carried next year as it makes its tortuous journey to the Olympic Stadium at Stratford.

            Now I learn that the passage of the torch through Colchester on July 6^th   is expected to cost the district council £30,000 in road closures, crowd control and street cleaning.  Our omission from the route may have been a blow to our local pride but I reckon that in every other respect it was a lucky escape!