Murnaghan 18.05.14 Interview with Kitty Usher, economist and David Ruffley MP with views on the Mark Carney interview
ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS
DERMOT MURNAGHAN: As we just heard before the break in an exclusive interview with this programme, the Bank of England Governor Mark Carney has said that the housing market in the UK has deep, deep structural problems so what can be done? Well I am joined now by the economist and former Labour Treasury Minister, Kitty Usher, she’s now the Managing Director at Tooley Street Research and the Conservative MP for Bury St. Edmunds, David Ruffley, he sits on the on the influential House of Commons Treasury Select Committee which has done lots of work looking into the housing market so good to have you both here. Well deep, deep structural problems, the Governor was talking about, as a lot of people do Kitty Usher, the lack of new house building in this country so simple answer, build more houses. Hard to do though.
KITTY USHER: Indeed and he made it clear it wasn’t his job to do it, giving a categorical assurance that the Bank of England will not be building any houses at all. What I thought came out of the interview is that he understood what he was able to do to address the issue of very high demand and so you’ve got a situation where loads of people want a mortgage and he is just going to make absolutely clear that no one gets a mortgage if they can’t afford to pay it back and that is absolutely learning from the financial crisis where particularly in the US people were taking on mortgages without enough income checks and so this bad debt thing got sent all the way round the global economy which caused problems everywhere, so he’s determined to make sure that that won’t originate in …
DM: So in effect, what you’ll have to say to some people, David Ruffley, is that although you want to get on the housing ladder so to speak, you are going to be disappointed for the good of the country.
DAVID RUFFLEY: We aren’t in housing boom territory yet but …
DM: Well we are in London.
DAVID RUFFLEY: But outside of London the Help to Buy programme is sustainable and it is giving people the opportunity for home ownership. What’s important here is we’ve got a guy who in a very impressive interview has made clear he has the weapons to stop an unsustainable boom taking place. He can put caps on loans to value and loan to income so yes, people might be denied further down the road. What we’ve got to do and what he’s saying is that we need to build more houses, 133,000 houses last year in Britain, slightly above the last Labour government but not enough and we’ve got to make sure councils use the powers that this government has put in to fast track planning permissions and get on with planning controls lifted where houses need to be built.
DM: But on that, Ed Miliband has gone further, hasn’t he, he’s saying right these land banks that some new developers are holding, right we’ll have those and we’re going to start building on them, Kitty Usher.
KITTY USHER: And David’s right, all of this is good but I think we also need in Britain to take account of the regional question because people want to live, you know, demand is greater in some parts of the country than others and there are some relatively cheap houses in some great parts of the country that have less housing demand and so simply to say build more houses as a kind of blanket statement doesn’t really get underneath that but the Governor was also very clear that in a sense more radical solutions to that problem are completely above his pay grade and not part of his …
DM: Beyond his control but what about something that is beyond his control as well, he touched upon it and as you said there, David Ruffley, I think very diplomatically about Help to Buy, he is concerned about that particularly if it is expanding. Don’t you think that is fuelling the elements of the housing boom that you might … ?
DAVID RUFFLEY: I think the data shows in the North of England and the Midlands, it is not fuelling anything, it’s very sustainable.
DM: London and the south east is not the whole of the country but it is a vast, vast amount of the housing market.
DAVID RUFFLEY: Help to Buy is doing good work outside the south-east of England, what we need to see is yes, a Governor calling time on Help to Buy, absolutely, if he thinks it is unsustainable so that the £600,000 limit, there is talk that it might be cut to £400,000, so to rein back the extent of Help to Buy.
DM: Do you think the time is now?
DAVID RUFFLEY: I don't know, he will decide when the time is but the great think about this new system with the Bank of England, you referred to it in your interview with him, he now has powers that he didn’t have before and that is down to the coalition giving him the powers to say very publicly that we do or we don’t think Help to Buy is working, that’s good.
DM: What do you think about Help to Buy, Kitty Usher? Is it making incipient problems worse?
KITTY USHER: I haven’t done the maths but what the Governor is saying quite clearly is that it seemed to have quite a limited effect at the moment but the point, the crucial point here is if it is encouraging people to take on debt that they can’t afford to pay back it is a really big problem, particularly if it is scaled up and if it’s supporting people on the first step of a journey to take on debt that is completely manageable, that’s absolutely great and we need to make sure that people are not taking on debt that they cannot afford to pay back because otherwise, come the downturn, that’s going to lead to a system problem if it’s widespread and the Governor seems to understand that.
DM: I must end it there …
DAVID RUFFLEY: It’s sustainable at the moment.
DM: Right, thank you very much for your take on all that.