George Osborne is offering a hair of the dog that bit us

The Chancellor George Osborne wants a mini-boom to restore growth, but that’s what got us into this mess

Seemingly every day now, America’s benchmark index for stocks and shares, the S&P 500, reaches new highs. Even in Britain – laid low by mountainous debt, a broken banking system and an unbalanced economy highly dependent on squeezed household and government demand – the FTSE 100 is back where it was before the collapse of Lehman Brothers. Most other asset prices are storming ahead, too. In London, house values are once more in overdrive. The Nikkei has risen 80 per cent in six months and bond prices in most major economies are close to historic highs.

glad_stone: 'Help to buy' is an utterly transparent case of reinflating the bubble, without caring about the even worse bust that awaits when it finally pops. The only way it could possibly be justified is if Osborne and co. had reason to believe that proper economic growth might be achieved to justify the newly grotesquely inflated asset values which will result. Oh - and that interest rates will stay at half a percent for at least a generation. Parrotting cringeworthly slogans based on the fact that 'aspiration' rhymes with 'nation' is not a sufficient substitute. Ironically, Osborne will be remembered alongside Brown as half of the double act which finally destroyed the UK economy.

Titus__Pullo: Encourage people who otherwise couldn't afford to buy a house under normal market conditions to do just that with interest rates at historically low levels and then wait for interest rates to return to normal historic levels effectively multiplying their borrowing costs - what could possibly go wrong?

morgan: It's wholly about votes in 2015. If the public at large are not concerned by the condemnation of the scheme by senior economists why should the politicians care? No matter what happens to the country in the long term they will still be rich.

lacoste: ' . . . a plan that Rachel Lomax, former deputy governor of the Bank of England, this week rightly branded as just more “hair of the dog that bit you”.' Walks like, talks like, sounds like Fannie Mae and Freddie Mac. This is Osborne's cynical, inept, irresponsible, pre-election Ponzi bubble.

moraymint: Jeremy, I don't think our complex society can function for long, if at all, on economic growth of 1% - 2% per annum, can it?  Surely, the deficit and the debt pile itself become amplified and exacerbated by anaemic growth.  The longer low/no growth persists, the more rapidly the economy spins downwards.  Certainly this would be the case for as long as the political class clings to unchecked state spending.  In essence, the country inches ever closer to bankruptcy (and/or currency collapse), money printing notwithstanding. That said, I would also wager that forecast economic growth of 1% - 2% per annum is itself optimistic.  My own view is that economic growth will toggle around 0% with the economy occasionally nudging up towards 1% per annum and equally often sliding in to contraction. As yet I see/hear nothing from our political 'elite' that leads me to think they understand the state we're in, still less what needs to be done to tackle the principal challenge we face: the end of growth - and a reversion to something like the economics of pre-industrial society.  The shale gas/oil bonanza will buy time, but that's all… and not much time at that. We need a plan shaped over a 10 - 25 year timescale whose aim is to transition our economy and, therefore, our society to one which functions on the basis of trend economic growth of no more than, say, 1.5% per annum. The implications of this - if/when one gives them serious consideration - are shocking. I presume, therefore, that this is why our political "elite" prefers the economics of Mr Micawber, of assuming that something will turn up; it usually does. I have my doubts that "something will turn up" and, consequently, I suspect that the shocking implications of a complex society entering an era of low/no economic growth will slam into us like a steam train over the next 5 - 10 years.

lacoste: moray: As a fellow science graduate, I agree that the 'cheap oil' era is over. We should regard petrol driven cars as a soon-to-be archaic concept. I am more optimistic than you about long term economics - because of the potential of shale gas, thorium reactors and, ultimately, thermonuclear power generation. My concerns and fears are with the current lot of political airheads. Their collective horizon is the next election; they cannot see far enough - or care - about the future, technology and investment. Politicians' life span is typically five years; the important decisions require twenty-year-plus vision. Our political system does not choose and reward the right people. The 'European Project' is the greatest threat since 1939, but most voters are unconcerned about the European Union and its consequences. It is a powerful bunch of oligarchs pursuing an archaic and dangerous concept of European governance.

cousin_kevin: Excellent post, Moraymint, as always.

biffoo:  It's a fine theory Mr Mint - if you were working in an economic vacuum. Unfortunately, as you recognise,  there is another factor. Politicians.

moraymint: biffoo I took the view a few years ago that the best, if not only way to prepare for and deal with the hugely significant economic and social challenges and changes ahead is to do so despite politicians and government. This is what I'm teaching my children now. In other words, the political class is at the heart of our socio-economic malaise, whilst viewing/deceiving themselves as our saviours.  Nothing could be further from the truth. Do you really believe, for example, that the Emperor Barroso holds the key to the future peace, prosperity and freedom for all Europeans (which includes us, of course… because the mainstream British political class - currently led by David Cameron - says that we're all Europeans now)? Or that Nick Clegg knows how to turnaround the British economy and reinstate industrial age rates of economic growth? Clegg seems to know a lot about the management of pre-school nurseries - which is unlikely to be a socio-economic game-changer. Clegg also covets a European Commission sinecure (perhaps as the Emperor Barroso's economic adviser?). The future, then, is about finding ways to survive and thrive which involve slipping out from under the crushing yoke of "the state" (including looking every which way to avoid paying tax*). The cost of government in a complex society like ours is now wholly unsustainable in the medium-term, still less over the longer term. To cite one topical example, how do you think the NHS is getting on these days? Improving services? Getting more efficient? Likely to be more cost-effective a decade from now? If politicians don't change the situation (of government activities spiralling out-of-control) by design and proactively, the situation will change anyway. By definition, the situation will change largely out of political control - which is worrying. When I say politicians should "change the situation by design and proactively" I mean decimating the size, complexity and cost of government at all levels; disengaging immediately from the abject madness of the Tryants' Charter Lisbon Treaty should be the first step .  But, as Harry Hill would say, "What are the chances of that happening, eh?" ---- * I advocate tax avoidance, not tax evasion. I advocate tax avoidance because the political class is in breach of contract. I pay taxes willingly on the understanding that politicians will spend my money wisely; they don't. If they're not stealing your money and mine, they're wasting it off the Richter Scale.

Titus__Pullo: how do you think the NHS is getting on these days? Killing thousands unnecessarily in Mid-Staffordshire the last time I looked. So much for Gordon Brown's countless billions of NHS "investment" and David Cameron's "ringfencing". But, hey, let's promote the management and have a nationwide rollout.

elliemaesgrandad: Five to ten years . . . you give it that long?

Titus__Pullo: My understanding of economic growth is that developed societies need to grow by around 3.5% per year just to stand still. 2% is required to offset the fact we're all living a little bit longer and 1.5% of economic growth is derived from improvements in technological efficiency gains which as we automate and improve processes mean that fewer people are required to achieve the same output. So we need economic growth to replace those jobs which become redundant. I've come around to your thinking on our previous economic growth being based upon cheap energy costs. Now we've entered a different era where extraction costs for fossil fuels are high amd increasing. Of course we in the west (and in particular the UK) are compounding this problem by our political elite's ruinous "green" energy policies. I also doubt the promise of cheaper energy through shale will ever be felt by ordinary consumers. Inbetween extraction and delivery will stand the voracious appetite of politicians to squeeze the last drop of tax from the average person. I also agree with you the 1% to 2% per annum growth is almost certainly political wishful thinking. With QE pumping money into a system to benefit of the already rich and to the detriment of those on marginal incomes the only conclusion is we will see an increasingly fractured society with ever larger disparities of wealth. And when you include the issue of unfettered immigration I can't think of a more potent brew for social unrest in the future. In my opinion, it is already too late.   

phantom: "We need a plan shaped over a 10 - 25 timescale" NO! We need small government, light (and proper) regulation and budget surpluses. Government should only plan for the defence of the realm and the provision of law and order.  If government has no business doing it - sell it.  If government shouldn't be doing it - stop it. As for the rest, it should simply get out of the way. Government should be cutting spending, giving the money back to taxpayers and let them work out what to spend it on. Spend it on the wrong thing - stupid you.

moraymint: phantom Yes, I agree/accept that we neither need nor want a 'planned economy' so to speak; that's the last thing on my mind. What I meant (but obviously wasn't clear) was that the government, any government needs to set about systematically managing down the size, complexity and cost of the state.  Time is of the essence, but you'd never know that by observing the antics of the current lot in Westminster. The political class must internalise the idea that they/we simply cannot go on like this: deceiving themselves and deceiving the electorate about the capabilities of government over, say, the next quarter-century. I really do believe that we're on the road to ruin for as long as our political elite refuses steadfastly to contemplate reducing the size of the state.  Politicians need to front up to themselves and to the voters: listen people, we're up sh*t creek without a paddle and society needs to brace itself for some heavy duty change. I don't hold much hope for this scenario; I know as well as the next guy that politicians really only tell voters what they think voters want to hear: relax, the government will solve all of your problems for all time; vote for me.

sothcoastreader: Whichever way one looks at it, the economy of this country is boat on a very long river, in pitch darkness, with no navigation, no rudder and nobody on the bridge with a clue what to do.

oberstleutnant: No freaking paddles, either.

stephenmarchant: sothcoastreader, A good analogy!

ultimatequestion: The Titanic at least had a rudder and a crew on the bridge… The whole pack of cards will come tumbling down soon.

undercover: Cameron and Osborne are this generation's Ted Heath and Anthony Barber. Two of the worst double acts in political history

jayengee: Closely followed by Blair and Brown?

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