A budget calling for higher inflation and lower wages

2:10 pm - March 20th 2013

by Sunny Hundal    

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If you’re squeezed by zero growth and higher borrowing on the other end, how could you off-load debt easier?

One way is to inflate away your debts. Higher inflation erodes the value of debt and makes it worth less.

While most of the media will focus on the small wheezes and mini tax-cuts, the plan to allow the Bank of England to have higher inflation targets is likely to have much bigger impact on our economy.

George Osborne said this in his budget – he plans to let the new Governor of the Bank of England to basically ignore low inflation targets.

Some others picked this up on Twitter too.

To summarise George Osborne’s, he wants to cut disposable incomes through inflation, benefit cuts and freezing wage rises for public sector workers.

And yet, miraculously, he thinks this will boost the economy.

Update: James Kirkup at the Telegraph also picks this up:

Since the Bank of England was given its independence over interest rates by Labour, it has operated under a clear remit: keep inflation at or around a certain level, currently 2 per cent CPI. It’s consistently missed that target for years, while politicians have turned a blind eye.

Mr Osborne wants to change that, and come clean about the relaxation of inflation targeting. Low inflation, he says is “necessary but not sufficient” for a strong economy. So the Bank will be given more latitude about hitting that target. It may be also be able to tell markets about its likely moves on inflation in the months and years ahead, which might even make it easier to plan your mortgage costs (if you can get one, of course).

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About the author
Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments

We’re still pretending that Osborne and the rest of the Tories actually give a fuck about the economy then?
Now if their actual aim was to rebalance power dramatically toward the haves, the ruling classes, then well, this budget achieves that in spades. A strong economy benefits workers and gives them stronger bargaining power, a weak economy takes that away from them, so don’t be fooled into thinking that Osborne actually needs the economy to be strong to succeed in his goals.

It should also be noted that the fabulously wealthy people who helped bring about the 2008 crash remain fabulously wealthy, and will continue do so throughout austerity.

For most of the Brown years CPI/RPI was also well above the target….how is this different from when it is the Tories in power?

3. Shinsei1967

Oddly enough many of LC’s favourite economists actually recommend higher inflation to inflate away debts. I had a Twitter argument with Danny Blanchflower recently on exactly this issue. He favours higher inflation.

Here’s what he wrote in 2010 (but same applies today)

“I don’t mean barrow loads full as in Germany in the 1930s or recently in Zimbabwe, but 4 or 5 percent a year for a few years would work just fine and would really help us to get out of this mess.”


I find myself, very unusually, agreeing with Sunny on this. High inflation hurts those on low wages and fixed incomes far more than anyone else. A 300k banker or lawyer can easily get a 5% pay rise. Much more difficult for a cleaner or school dinner lady.

4. Shinsei1967

I also don’t think that it is actually a government proposal to inflate away debt.

The trouble is that one third of government debt is now index linked. You can’t inflate that away.

Plus there are however many millions of retired voters. They are the demographic most impacted by higher inflation. And also the demographic most likely to vote. A government that deliberately targeted higher runs the risk of alienating these voters.

This is a very different situation from the 1970s when double digit inflation wiped out much debt.

5. Luis Enrique

Giving the bank a higher inflation target does not mean somehow asking the back to let prices rise without wages rising too. Higher inflation does not necessarily mean changing relative prices (i.e. the real wage, wages/prices) it can just mean nominal wages and prices both increase at a higher rate.

If the government’s goal is to inflate away debt, that will happen if wages and prices rise together, it does not require prices to rise more quickly than wages (in fact, because the mechanism works via nominal tax revenues rising more quickly whilst nominal debts are fixed, and because wage related taxes are a big part of tax revenues, “inflating away debts” works better when nominal wages rise).

How does monetary policy affect inflation? Most answers to that question would suggest that prices and wages rise in response to looser monetary policy. So you have to add something to the story to explain why loose monetary policy would cause prices to rise faster than wages.

Some of the things that cause prices to rise faster than wages include, for example, wage inflation in China or rising energy prices, which are outside the control of the BoE. A recent post by Duncan W showed stagnant median incomes over the last decade, which could partially be explained by negative terms-of-trade trends.

Now there are potential arguments why prices might rise before wages do, and I do not mean to dismiss that fear. But the link to monetary policy is not obvious, to me at least. For example, why do firms raise prices when monetary policy is loose, if demand hasn’t risen? If demand does rise, isn’t that what we want to achieve, and won’t that also help the labour market strengthen? Arguments like these are why monetary stimulus is not just a right wing policy (in fact it’s more usually right wingers that crap on about “debasing the currency” like Tea Party Republican Paul Ryan) and is why ideas like NGDP targeting are supported by plenty of left-wingers.

more reading:
Martin Wolf: A case to reset basis of monetary policy
Giles Wilke: Credit where it’s due (see p68 for NGDP targeting recommendation)

An ideological budget from a dishonest ideological chancellor. He has used the deficit to push trough ideological policies he wanted to do anyway. After 3 years he has not made a scratch on the deficit, but he has slashed tax for his millionaire chums.

Today he reduces corporation tax down to 20% Which means the vast majority of UK workers earning less than £30000 a year pay the same tax rate as billion pound corporations.

At a time when according to Osborne the deficit is key he has managed to find more tax payers money to bail out middle class equity life holders (mostly tory voters) who made a poor investment in a company guaranteeing a certain return. (No such thing as guaranteed return) But in this new world of socialism for the rich another bail out is given to people who made bad investment choices.

The other interesting point is the huge effort now under way to prop up the overpriced housing market. As the 1% rape and pillage the working class across the world the only real asset many middle class people have left is their overvalued houses. So Osborne has come up with a number of ways of allowing middle class people to keep the lucky gains from house prices. So he is going to pour money into allowing people to buy shared equity schemes. (A classic admission that prices are too high for most people if they can’t buy a whole house.) And money to help people move up the ladder. HOWS THAT FREE MARKET WORKING FOR YOU HEY? But the puppets of the elites dare not let house prices collapse as it’s all the average tory voter has left.

Osborne has also come up with this bizarre idea that millionaires and billionaires living in million £ houses should only have to pay a fraction of their house wealth to fund their care home fees. Once again a massive steal from the rich as the poor have to subsidise the wealthy through their taxes. This means Osbourne’s sprogs will get to inherit their dads wealth while everybody else pays for Georges nursing home costs. Effectively taking money away from other public services like health and education that the rich don’t need.

And after this 3 years of blatant class war he predicts a growth rate for the next year lower than the growth rate he inherited from the previous govt. I’m so glad the dumb Lib dems are happy with this. Seeing as almost all of it is the opposite of what they campaigned on. But then as we have seen most lib dems are compulsive liars.

“Today he reduces corporation tax down to 20% Which means the vast majority of UK workers earning less than £30000 a year pay the same tax rate as billion pound corporations.”

I would love to only pay tax on the difference between my income and expenditure.

I’m sure I’ve seen a lot of left-wingers wanting the government to inflate its debts away.


Inflation can certainly be a useful tool in managing debt, and I would have no problem with the BoE explicitly adopting a target rate of 3% (even 4% can be argued).

However, it shouldn’t be done in isolation. The Tories have done nothing to address growth, and they are engaging in policies that are actively harmful to the poorest in society, while somehow managing to find room in the budget for yet more tax cuts for groups that don’t need it, and that won’t benefit wider society.

It’s the combination of these factors that is problematic, not inflation on its own.

10. Kismet Hardy

I know jack about economics but I feel as qualified as the average rich tory prick, so here’s my tuppence (cos I can’t afford any more). Heard the one about dealing with benefit cap by cutting out ‘Sky TV, cigarettes, bingo, drinks and other non-essentials?’ They wish they could say DRUGS because, well, we all know that’s what the poor really spend all that extra money on and not keeping owners of greasy spoons, old men’s pubs and stall holders from joining their ranks. But this is where rich people don’t realise their stupidity. Making poor people poorer won’t make them richer. In fact, the opposite. If all the poor layabouts threw away their luxury satellite dishes, Sky will have to increase their subscriptions price which you have to pay won’t you, you rich tory prick?

11. Dislecksick

Actually started agreeing with some of these posts until the same sh1t starts to come out “rich Tory pricks”, “class warfare”, “Ideological budget”

For god’s sake guys, this is perhaps one, or possibly two sheets of paper away from what Labour would have had to do.

Since the coallition were in power, pensions (my own field of expertise) have had a maximum annual contribution which is tax relievable from £255,000 (Labour achitecture) to £50,000. That’s a massive drop, the previous high level only benefiting the extremely wealthy. Now, that’s dropped to £40K. The lifetime allowance would have been £2M today, meaning individuals could contribute up to this level and get full higher rate relief in their lifetime, and now that has been cut to £1.25M. That’s still high, but virtually every GP will be near this level, and we all know how sacred GPs are.

I wonder what was the ideology behind the massive cut for the perk for the super wealthy? I am struggling to understand Labour’s motivation for setting the limits so high?….and even if you don’t support Labour, surely if the Toris were hell bent on supporting their rich buddies, they wouldn’t have scrapped this huge perk?

I know it’s difficult to shake off what you read in the Mirror and Guardian, but you might wish to, for one moment, step outside the groupthink for a second and make some of your own value judgements……it’s very difficult I know, tribal warfare is hard to put down, especially when those middle class tory daily mail reading racist xenophobes keep discriminating against you….and you have such a fine grass roots working class man in Ed Milliband (who to me sounds far posher than DC).


You can debate to what extent Labour’s policies would actually differ in practice, but in terms of what Labour would have *had* to do, I completely disagree.

The Tories have wasted the last few years fixating on deficit reduction through cuts, and ignored the opportunity to do it through growth (it’s worth noting that more than two-thirds of the deficit is tied to the financial crisis, rather than anything structural). They should have delayed the cuts (which would in turn have been much smaller) and invested in infrastructure (properly, not piecemeal) until solid growth returned.

Also of note, while cutting public sector spending, freezing public sector pay while simultaneously reducing the value of pensions *and* requiring higher contributions *and* limiting any pay rise that does happen to 1%, they still managed to find a way to afford a cut in the top rate of income tax, and have now reduced corporation tax for the third time I believe. How have the Tories actions been anything other than ideological (not just this budget, the entire term)?

13. gastro george

Isn’t all this talk of targets rather beside the point? You can target what you like, but what actually changes things is policy. So what new policies are being suggested? Not a lot really.

14. Luis Enrique


one policy change would be a change to when the BoE starts to raise interest rates

depends how important you think the expectations channel is, but if you expect interest rates to remain lower for longer, that could affect your behaviour today.

15. gastro george

@Luis Enrique

Sure. But it’s not overly impressive when the only policy amounts to managing the expectation of future policy.

16. Luis Enrique


I don’t know – the Fed’s announcement that it was going to keep rates low until employment hit a certain target was generally regarded as a big move.

after all, once interest rates are at zero, the only (conventional) instrument left is how long they are going to stay there

‘course there are still unconventional instruments like helicopter money / money financed govt spending

17. Dislecksick

@ Andy C

You still haven’t answered my point with the anti-elite pensions restructure. You need to balance this against the other measures to benefit high earners. The pensions changes have hit the super rich particularly hard, and I have no doubt if Labour were to do this it would have been seen as an ideologically left-wing thing to do. This all gets forgotten in the tribal “They’re all bastards” rhetoric and needs to be balanced against the points you have made.

Re continuing the spending, we heard for years about “investing” in the economy for the payoff in the future. Tax cuts are just a different way to boost the economy (and no, it’s not about giving breaks to rich corporations – it creates jobs and prosperity). What the left want is for any stimulus to come through the public sector rather than through tax cuts, and that, my friend, is ideological on both sides. Otherwise you are suggesting that conventional logic and wisdom suggest that stimulating via public spending is the agreed best method – which it isn’t – in fact it has been the most hotly debated topic of the 20th century. Personally, I would rather the prosperity given by the monetarists through the 1980s rather than the prosperity given by the Soviet Union through infrastructure spending….in my mind that matter is settled, but it is always a matter of opinion, and to claim one is ideological and one isn’t is misleading and disingenuous.

Regarding the pay freeze, there are many, many extremely wealthy people in the public sector. When you include the final salary pension (and I am a professional in this field so I fully understand the value of this benefit, despite the lies and propoganda trotted out by the protection mob, sorry, unions) PS workers have it absolutely dandy throughout this recession, whilst the REAL poor are either out of work, or struggling to make ends meet whilst paying their fair share so PS workers can keep their pensions and pay.

Since the private sector have had a pay cut, the fairest way would be to trim PS pay to fit tax receipts, but the truly ideological could never accept the PS cartel’s workers having to bear the pain those paying for them, so a poor 1% will be the maximum.

Let’s just be clear and realise that we are all individuals persuing our private interests, and that some want the PS to be better off (for either ideologiical reasons or because they work there), and others wish the private sector to be better off (for ideological reasons or because they work there). Nothing irritates me more than those who are the most ideological of all, those who would completely change the face of a country to fulfil their marxist principles, those who would refuse a higher tax take if it meant their “enemy” would also benefit, those who set up a tax credit system instead of universal allowance raises specifically to ensure that the rich do not benefit too (while expanding the PS to garner more PS advocates) can call the other side ideological – on balance, I can see who’s position comes more from a doctrine than practicality.

18. Shinsei1967

@ Dislecksick

And there’s also the hiking of Capital Gains Tax to 28%. A tax which, almost by definition, only the rich pay.

And the raising of stamp duty on houses above £2m to 7%. Again a tax rate that only the rich pay.

19. Charlieman

@13. gastro george: “Isn’t all this talk of targets rather beside the point? You can target what you like, but what actually changes things is policy. So what new policies are being suggested? Not a lot really.”

Isn’t it all about what people feel? If people feel that times will be better next month, they’ll loosen their belts and spend money (assuming they have any).

Policies may be incidental to belt loosening, because happenchance is always with us. Births and marriages increase happiness, and people spend when they are happy. People (some artists excepted) are more creative when they are happy. Government can’t create happiness policies but it can try to minimise misery.

(This year’s budget is without feeling to me.)

I’m not sure why “ideological” has come to have such a negative meaning on this site. In my view, we could with rather more of it from our major parties.

The Big Three come across as mostly reactive, swaying in the competing breezes of public opinion, world events, economic news, Hugh Grant etc etc.

If our Glorious Leaders knew what they’d like the UK to develop into, they would be able to formulate ways of getting there.

Better still, at election time we’d know what we were voting for. Many who have re-joined Labour face pretty steep disappointment should they win in 2015, regardless of whether it gets pinned on Liam Byrne or not.

An ideological party might tell you that they will, a) reduce the public sector to 25%, b) introduce school and health vouchers, c) whatever. You may then say “No Thanks”.

The modern style is simply to say that, a) hard-wrking-famliss, b) aspiration, c) on-yr-side, d) wrking-closely-with, e) blah blah blah.

21. gastro george


“Isn’t it all about what people feel?”

I agree that sentiment can have some influence, but many also talk about the “confidence fairy”.

But I ask you, is any punter on the street really following the minutiae of what the BoE monetary committee targets are? Especially when their musings are limited to managing the expectations of what might happen in the future. Rather than the headlines in the paper or the reality of reduced living standards year-on-year and the threat of un- or under-employment?

22. Shinsei1967

“But I ask you, is any punter on the street really following the minutiae of what the BoE monetary committee targets are?”

Nope. But the banks are. And if the BoE is getting bullish about the future then that trickles down to RBS and Lloyds senior management and they then loosen their lending criteria and before you know it your local High St bank is falling over itself to get you to take out a loan to buy a new kitchen or car.

23. gastro george

If the banks’ senior management have any brains at all, then they should know already that, unless the government is mad, interest rates are going nowhere for the foreseeable future.

The problem of lending is one of demand and risk. Demand is going nowhere either. If this means that banks should be taking on more risky lending – well, we know where that ended up last time, don’t we.

24. Charlieman

@23. gastro george: “If this means that banks should be taking on more risky lending…”

* Banks are required to hold more funds — more investor money, more consumer money.

* Banks are being asked to lend more money.

* Banks are expected to lend money more cautiously.

How does a bank meet the above and still lend money to a startup business?

25. gastro george


Oh, I know, the banks are between a rock and a hard place on this – they have conflicting requirements, none of which is clarified or helped by the governments policies.

I was just responding to Shinsei’s “that trickles down to RBS and Lloyds senior management and they then loosen their lending criteria”. That may be Osborne’s rhetorical stance wrt BoE policy. Osborne is rhetorically in favour of more bank lending. But banks won’t lend on what they perceive to be too risky criteria and, as you say, they have to consider risk more carefully these days.

It’s the usual not-joined-up thinking.

26. Dislecksick

@Shinsea 1967 – very good points. So, they’ve raised the rate of taxes for millionaires, pulled thousands of people out of paying tax by raising the threshold, reduced the amount top earners can claim relief on by a vast amount. The only thing they haven’t done is expanded the PS further….the utter, utter bastards.

This is why I hate tribalism in politics. the Conservatives could lead us into a socialist utopia and the BBC website would immediately post “Milliband slams Conservative plan as not fair or workable”.

@Jack C, Everyone has an ideology. I would be worried if a politician didn’t. What irritates me is they come out with a progressive set of tax changes through this term, and these are ignored and anything which can be siezed upon is immediately held up as “ideological”, by which is meant “a sinister agenda not in the best interests of the country”. It’s all total crap.

Personally, the only agenda politicians should have is “How may I best minimize my role and allow the productive forces of my people flourish”. Very, very few human advances came at the order of a beurocrat, and we do not need leaders and visionairies. Tried that, doesn’t work. if the state couldn’t put our children in bondage, they couldn’t bail out the banks.

27. Shinsei1967

When I said BoE decisions trickle down to consumers via banks’ lending decisions I was referring to it in a general sense. ie describing the mechanism, not stating that this was happening at the moment. Sorry for any confusion.

But yes banks are between a rock and a hard place. And it’s not even particularly government policy as most of the more rigorous bank capital adequacy rules are international ones (Basle 3 etc). I’m not sure how the UK government could circumvent these rules.

And it is a peculiarity of the sytem that the risk weighting of loans to small businesses is much higher than a mortgage loan. Hence the reason we hear more complaints from SMEs than people wanting mortgages about having loans restricted.

Of course it would help the banks if they had more capital. As that would mean they could lend more (without increasing risks). However for the likes of RBS that would involve a further injection of capital from the UK tax payer. Is that politically acceptable ?

Or the bank levy, which raises £2-3bn, could be scrapped in order to increase capital but that wouldn’t be politically popular either.

Of course they could also pay lower salaries and bonuses too (!).

Otherwise it’s a question of patience. Banks are making decent operating profits now and these will gradually build up capital buffers.

28. Shinsei1967


“This is why I hate tribalism in politics.”

Indeed. And just seen Ed Balls talking to Emily Maitlis doing a brilliant demonstration of just this.

He’s trying to portray the mortgage scheme announced in the Budget as a “subsidy for millionaires to buy spare homes.”

It so clearly isn’t that. The tribal hyperbole just puts most people off surely ?

The sensible attack would be:

“Labour would build more houses, especially social housing for people who will always struggle to get on housing ladder, not just guarantee mortgages.”

Or even just attack the rather cobbled together at last minute feel about the policy.

But to portray it as specifically designed to allow millionaire bankers to buy more weekend cottages at the tax payers expense in Cornwall is just silly.

29. Gallbladder

” hiking of Capital Gains Tax to 28%. A tax which, almost by definition, only the rich pay.”

Nominally. If you find out the actual tax incidence (who does it hurt?) then the story is different.

30. gastro george

Agreed, Shinsei. It makes the government’s policy even more laughable, i.e. the only policy amounts to managing the expectation of future policy, and the mechanism of which is impossible given the banks’ current state and regulation.

31. Chaise Guevara

@ Shinsei

Agreed – the problem with the housing policy is that it’ll push prices up. Building more homes would have the opposite effect and would still help people get on the housing ladder.

32. gastro george


IIRC, Evan Davis was pushing Osborne on this on the Today programme this morning – that the govt guarantee could just end up as a guarantee of the rise in price and no new housing would be built. Osborne had no real answer, of course. One of the few times that Davis has been impressive recently, IMHO.

For a non-tribal assessment of Osborne’s proposals in his Budget for government help to house-buyers to get a mortgage, try this:

House price bubble fears as 600,000 homeowners to benefit from George Osborne’s mortgage support
House prices could be set to surge again across the country after Chancellor George Osborne unveiled billions of pounds of public money to help hundreds of thousands of people buy new homes.


> The pensions changes have hit the super rich particularly
> hard

You must have a strange definition of “super rich”, because the changes you describe would appear to be an irrelevance for the super-rich, because most of their income didn’t qualify under the previous terms anyway.

> Tax cuts are just a different way to boost the economy

If by “different”, you actually mean “ineffective”. Corporate Britain is sat on a mountain of cash that it isn’t using, it doesn’t need any more of it.

> Otherwise you are suggesting that conventional logic
> and wisdom suggest that stimulating via public spending
> is the agreed best method – which it isn’t…

Tell that to the IMF. Demand side problems in liquidity trap conditions with interest rates up against a lower bound require Government’s to step in. Austerity is the worst possible action at this time, and years of failed Europe-wide austerity policy are a clear demonstration of this. How many times do the Tories have to be wrong about growth and the deficit before they actually change course (rhetorical of course, because they’re being ideological, not evidence-based).

> but it is always a matter of opinion

No, it isn’t, it’s a matter of evidence. Infrastructure spending has strong multipliers, especially right now, and provides long term gains (do we not need better energy infrastructure, better transport networks, better drains and sewers? Why not start building it now, when we have unused capacity?

> PS workers have it absolutely dandy…

What universe are you living in? My father happens to be a civil servant due to retire in a few months. I’m familiar with what has happened to his pension over the last few years (despite his contributions going up, while his pay remains unchanged), and it’s not “absolutely dandy”, it’s a disgrace.

> Since the private sector have had a pay cut…

Hmmm, the ONS would seem to disagree, since the pay gap has increased since 2008, not decreased.

On a wider note, you can’t really bemoan ideology and then starting throwing around “Soviet Union” and “marxist”.


> And there’s also the hiking of Capital Gains Tax to 28%.

This was Lib Dem policy, not Conservative. It only happended as a concession the Tories made to get the coalition deal with the Lib Dems, that’s hardly a good example of the Tories not being ideological. Do you believe this would have happened had they not needed the Lib Dems back in 2010?

Try the IFS assessment of the Budget:

Households and businesses should brace for painful tax rises after the next election to fill a £9bn hole in public finances, a leading economic think-tank warned today.

37. Dislecksick

@ Andy C

Depends on your definition of super rich. I would count doctors and consultants in this bracket, where the salaries start at £100Kish and head north. Yet to meet an NHS consultant over 40 who isn’t a multi-millionaire. If you think the super rich are composed soley of Lord Ashcroft, fine, but on my wages, anyone earning in excess of £100K is super rich, and if you asked most members of the proleteriat, they would agree.

Everything you have said is still “fact based on your opinion”. Why don’t Greece start a huge infrastructure spend to use up their unused capacity? Oh yes, that’s right, because the country (like ours) already had a load of f***ing idiots waste every penny they had on pointless spends already and now the whole country are now a slave nation to those who funded them.

Do we need new infrastructure? Find me a time when we don’t. The ideological socialists will always find something to spend other peoples money on, and will always find a reason to do it. Hence despite the vast amount of borrowing getting us in to this mess, they will still say it because we didn’t borrow enough. War is peace etc.

It doesn’t surprise me that your father is a civil servant to be honest, which kind proved my point above that those who want more borrowing have some personal links to a the public sector. You should have declared an interest.

Still got his job has he? Great. He will still be, on average, far better off than his private sector counterpart. You can’t bullshit me about the CS pension scheme, increase or no increase, still part of Pensions Aparthiede and the f****ng cheek to bring that up when most private sector workers get the square root of F all, and pay high taxes to support those with the cartels retirement scheme.

SO, still in work with one of the finest schemes in the land, which has had a small increase in member contributions to reduce the huge subsidy the poor are paying in via tax. My heart bleeds.


We are not Greece. Greece does not have its own currency. Britain’s financial crisis was not caused by public sector debt. The wrong people are paying for the recklessness of banks.

Cuts are failing to reduce the deficit, and failing to deliver growth. I want more borrowing now (note, not “always and forever”) to pay for infrastructure spending (not quite sure how my soon to be retired father is going to get his hands on this extra money, and of course, you failed to consider the fact that my mother, brother, and myself all work in the private sector, so your ridiculous personal interest case doesn’t look like a very strong one).

By the way, if you are super rich at 100k, what exactly is “rich”?!

I won’t say any more, as it is pretty clear that debating with someone who thinks all evidence is opinion will be an exercise in futility, much like the Conservative approach to lowering the deficit has been since they came to power (hint: that’s a fact, not an opinion).

The Housing policy may, or may not, yield some benefit, but it seems clear that Osborne doesn’t understand the root problem.

Support will be provided in two main ways:

1) Government will provide a loan equal to 20% of the value. The buyer then chips in 5%, to achieve a 25% deposit. We know this isn’t the answer because, a) a 5% deposit is plenty and always has been, and, b) it’s still a loan.

2) The government loan will be zero-interest for 3 years. Mortgages interest rates are already very low, so this can’t be the answer either. (It’s also Subprime 2.0).

Clearly, the problem is that prices are too high. This has been the case since 2003 (at the latest) when owner-occupation started to fall.

That’s 10 years ago!

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