Not much fun as the party games begin

19 April 2010

I trust you are all feeling suitably gripped with election fever. But before you overdose on coverage in the media I thought it would be a good idea to see what each party is planning to do with regard to the housing and financial services sectors.

Let’s start with the current incumbents. Unsurprisingly they are taking much of the credit for steering the country through the financial storm of the past couple of years - without a hint of irony.

But in true knee-jerk fashion Labour plans to take the proverbial sledgehammer to our financial system going forward, which won’t so much prevent bubbles of growth as stamp on them in the incubation stage.

Banks will be compelled to keep higher levels of capital but given that it has cost close to a trillion quid to get us out of the mess we got ourselves into I’m not sure any amount could be high enough.

In true socialist form Labour wants to levy a tax on banks on a global basis. Clearly, any levy on UK banks alone would hit the competitiveness of our financial market, but I suspect this glib statement is going to be impossible to achieve and may push more trade offshore.

I can already see the Swiss banks sticking a metaphorical two fingers up to the idea. And indirectly it would be a tax on us anyway because banks only have one way to recoup their costs - through their customers.

Labour also wants to extend the new and already extensive powers of the Financial Services Authority to include the ability to constrain and quash executive remuneration where the regulator feels it is a source of risk. But exactly when executive pay constitutes a risk will clearly be open to interpretation.

Breaking up large state-controlled banks as well as making it easier for new players to enter the market are also high on the agenda, as is encouraging a larger mutual sector.

On the lending side the government has already made a lot of noise about compelling banks to take a significantly higher level of accountability when assessing the affordability of borrowers.

This has many lenders running scared at the moment and I’m sure it will end up with them building layer upon layer of additional bureaucracy in an attempt to cut out risk in the lending process which, as we all know, is not possible.

The Tories are focussing on rebuilding the housing market with a central pledge to reform the planning system and decentralise the decision-making process. The party wants to extend the Labour-introduced Stamp Duty tax break for first-time buyers by making it permanent rather than only lasting for two years, as is now the case.

It also wants to get rid of the much-maligned but stubbornly retained Home Information Packs which have been like a white elephant in the room for most of us in recent years. And it wants to encourage more shared ownership.

The Tories want to build on Right to Buy legislation that arguably encouraged the boom and bust cycle

The Tories argue that the latter measure would be a way of building on the Right to Buy scheme they introduced in the 1980s, but they fail to add that it was arguably the Right to Buy legislation that encouraged the boom and bust cycle the country has experienced ever since.

Another potentially contentious area is the move to encourage councils to build more homes by giving them more of the Council Tax and business rates from new developments. Of course, this could drive inappropriate behaviour in some cash-strapped local authorities unless suitable safeguards are put in place.

The Tories also envisage a greener England, no doubt seen through rose-tinted glasses, and to encourage more new houses with gardens and adequate parking facilities. This would includes putting a stop to so-called garden-grabbing and suburban infilling. All I can say is good luck with that in the concrete jungle of the South. I think it may be too late.

Meanwhile, the Liberal Democrats opt for attractive-sounding rhetoric without much substance, with phrases like “we want to hard-wire fairness into society” and “we will reform consumer law to improve the ability of people to access and secure goods and services affordably, efficiently and on fair terms”. I’m not sure what any of that means but it gives you a flavour.

The Lib Dems are keen to rebuild the Post Office, and have detailed plans to extend the network as well as give the organisation the ability to raise private capital by selling 49% of its shares and using the cash to reinvest in the business.

At the same time it wants to give Post Office employees an opportunity to own a stake in the remaining 51%, as well as give it the ability to borrow privately by removing the present restrictive Treasury controls.

The party is also keen to adopt the Labour options of ending bank bonuses, breaking up banks and racking up taxation for higher earners.
The Lib Dems say they want to remove layers of red tape from business and introduce sunset clauses - nothing to do with business owners selling up but more about giving certain regulations and elements of legislation expiry dates.

In an anti-European move the Lib-Dems want to end the easy ride that European directives currently benefit from by ensuring a full cost-benefit analysis is carried out before new legislation in enacted. This could mean a dilution of our current position in the EU, although unsurprisingly the party has not clarified that aspect yet. But in a hung parliament who knows what could happen? It is widely believed that the Lib Dems would hold the balance of power.

Oh well, at least all the political activity should provide a welcome distraction from the gloom of recession for a few weeks.

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