Westminster blog

Gordon Brown’s economic recovery package is proving one of the worst relaunches since Sidani, the ill-fated bottled water brand owned by Coca-Cola.

There are three elements:

This week:

1] THE HOUSING MARKET

Tuesday’s measures included a new shared equity scheme (ethically dubious), a temporary stamp duty holiday (wrongly-costed, unlikely to stimulate the market, ethically dubious) and some money (NOT new money) for social housing. And an extension to the “ISMI” scheme which protects mortgage-owners who lose their jobs; but only from April next year.

Next week

2] FUEL POVERTY 

Alex Barker pointed out on Wednesday that the government is not going to be able to fiddle with the European ETS (emissions trading scheme) after all. Instead ministers now want companies to commit more cash to the CERTS (carbon emissions reductions target scheme).  

In plain English, this means money for home insulation and more efficient lightbulbs. And NOT a big cheque for millions of low-income households, as had been planned. Negotiations are not going very well.

A few week’s time 

3] MORTGAGE MEASURES

Downing Street said this week that there would be more on housing to come, to co-incide with the final report from Sir James Crosby, former head of HBOS. Only problem is, Sir James’s interim report offered no solution to the gridlock in the mortgage market (THE factor causing the housing crash).

Instead, Sir James – you may remember – suggested that the seizure would carry on for at least three more years. And he said banks would need a fresh £40bn a year to refinance existing mortgages – let alone issue new ones.

In fact he admitted that even the two main remedies he analysed – extending the Bank of England’s existing special liquidity scheme to new loans, or a new government guarantee for all mortgage bonds – could be problematic. Even if they worked, they would carry moral hazard and could leave the taxpayer out of pocket.

Since then, Mervyn King, governor of the Bank of England, has cautioned against both ideas: “It would be a very dangerous move to move to a situation where the Government saw its major role as guaranteeing lending,” he said last month.

Perhaps Mr Brown could have listened to Mr King’s further comment that: “Pretending there’s a magic solution is not the answer.”