Repossessions and the Housing Market

Part of Opposition Day — [9th Allotted Day] – in the House of Commons at 1:30 pm on 2 April 2008.

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Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury) 1:30, 2 April 2008

We do agree with that, and we argued that case at the time. The hon. Gentleman was probably rehearsing his intervention while I was speaking, because I did say that half of what I wanted to say concerned constructive solutions. However, I agree with his specific point, which we have made many times.

In addition to the problems of debt and the problems of debt service, there is a problem at the heart of the economic difficulties, which is inflation in the housing market, its consequences and the turnaround that may come from it. Since this Government came to office, the relationship between price and earnings has roughly doubled for housing. That has meant that a lot of people are a great deal wealthier and they have been happy to spend that wealth, which raises the question of what happens as the market goes into reverse.

At the core of the Government's case, which is summarised in their amendment, is a statement made by the Chancellor a few weeks ago:

"Housing market conditions today are very different to those we saw in the early 1990s. Interest rates remain at comparatively low levels—as do mortgage rates. And unemployment is currently at 30-year lows."

That is true, as far as it goes, but it is deeply misleading and extremely complacent, for several reasons. First, if we look back at what I call the great Tory recession—[Hon. Members: "Which one?"] There were several, but I am talking about the last one, at the beginning of the 1990s—