The 2.5% VAT cut was already chip paper by the time it was announced, having been a hot media topic the preceding weekend.
And the mortgage rescue ideas were reruns of Prime Minister Gordon Brown’s plans announced in September.
Like a comedy film that has all the good gags in the trailer, there’s nothing more anti-climatic than giving away the punchline in advance.
Chancellor Alistair Darling’s (pictured) announcement that national debt will grow by 118bn was the only surprising part of the report.
Simon Ward, chief economist and strategist at investment firm New Star, says that consumers spend cash based on their perceived future earnings rather than current income, so because we have been warned about future tax hikes the VAT cut will have little effect now.
City think tank Reform adds that many of the necessities that lower income families buy, such as food and children’s clothing, are already VAT-exempt so the cut will have minimal impact. But many businesses that can’t claim back VAT will benefit to a degree.
The rescue scheme that allows borrowers to turn their mortgages into shared equity or ownership schemes could have been expanded.
Sadly, its eligibility clause precludes its use by anyone who has missed repayments, even if this was a result of the recent lack of remortgaging options.
Also, extending the Income Support for Mortgage Interest scheme catering for borrowers with joint mortgages but single incomes would have been more use to a greater number of home owners.
Stamp Duty is still an issue due to the fact that its calculations are based on the total value of properties rather than the excess over the tax’s threshold. A temporary Stamp Duty hiatus with an undefined end point may have stimulated demand. My favourite suggestion came from the Association of Mortgage Intermediaries for an extended ISA scheme hosted by National Savings and Investments to allow buyers to save large tax-free deposits.
The Crosby report received little media coverage but recommended that the government intervene in mortgage finance by guaranteeing 100bn of mortgage-backed securities in 2009 and 2010.
This could help fill the gap left by the struggling securitisation market, which has halved in size compared with 2007 figures. Such a recommendation would at least bolster liquidity.
Savvy spending by the government combined with the same from consumers will apparently help to get us out of the recession.
Whitehall needs you to spend but if you want to own property you have to keep saving.
But with clients and lenders torn in two directions, do not expect results any time soon.