The mortgage industry gathered en masse in London for the CML's annual lunch last week which boasted nearly 1,000 attendees. It was a show of strength and a timely reminder of how important we as an industry are to the public, the economy and therefore politicians.
Ruth Kelly, financial secretary to the Treasury, gave the keynote speech. Widely regarded as one of the government's rising stars, it is telling that Kelly has kept what used to be known as 'the City brief' for so long.
Since the time that government was just a glint in the eye of New Labour the chancellor has seen relationships with the financial industry – and industry generally – as crucial to the economic prosperity of the country.
Indeed such relationships can win or lose elections. Just think of those tax bombshell posters in the 1992 election and the internal mantra Labour that appropriated from the Clinton campaign in 1997: “It's the economy, stupid”.
A safe pair of hands is generally considered essential for this brief and the post holders usually leave sooner or later for headier political heights – former cabinet ministers Helen Liddell and Mo Mowlam; cabinet member Patricia Hewitt; minister of state Mike O'Brien – not forgetting Tony Blair himself.
Kelly gave what was widely perceived as a pretty perfunctory speech. Covering the Miles and Barker reviews she explained the government rationale and next steps. But tucked away in the text of the speech were some thoughts on why the government considers housing such an important area. She told delegates: “In the first place, the low responsiveness of housing supply to demand in the UK has contributed to a strong rise in real house prices and tends to increase house price volatility.”
She went on to say: “Secondly, our high level of mortgage debt is in the most part held at variable rates of interest – far more so than other countries which tend to have a higher proportion of debt at fixed interest rates. And this greater exposure to variable rates contributes to making the UK housing market much more volatile, which itself adds a potential volatility to the wider economy. Thirdly, compared to other European countries, the high level of owneroccupation combined with the ability to withdraw equity from housing creates a strong link between housing, consumption and the wider economy.”
And then came the punchline – or at least what passes for a punchline from a government minister. “This government is facing a unique combination of low levels of investment coupled with high levels of owner-occupation, high house price volatility and regional divergences. To add further pressure, demographic trends suggest that as the population expands another 3.8 million more homes may be needed by 2021.”
In short, house prices and what happens to consumer behaviour have a profound impact and are causing something of a headache. If more evidence were needed, Tribune (the independent weekly of the Labour left) recently ran an article entitled 'It's time to tax property'.
The author of the piece, Victor Cockerill, argued that with predicted budget deficits, the fairest and most efficient solution to the deficit problem would be to tax property. He argued that “this could bring much-needed stability to the property market and have the potential to raise billions, as well as avoiding further and likely dangerous social polarisation”.
Now I can think of a few drawbacks to Cockerill's arguments but the point is that these issues are now taking a high profile in the policy debate.
There is no doubt that housing will continue to rise up the political agenda and if it is not in every manifesto during the next election, it should be. As an industry we have a lot of experience, expertise and lobbying power. We need to be at the centre of this debate and engage with all political parties in a timely and measured way – not carp from the sidelines.
John Woods of Moneyfacts neatly summarised the industry's position in his entertaining and thought-provoking after-lunch speech. He invited the audience to consider the fact that lending on residential mortgages now totals £766bn, which is more than the combined national debt of Austria, Denmark, Belgium South Africa, Mexico, Poland, India, Indonesia, Chile, Argentina and New Zealand. Or in simpler terms, a bit more than the GDP of Canada but a bit less than that of Italy. Quite staggering.