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Comment: Gordon Brown's relaunch falters
Evening Standard2 Sep 2008
This week was to bring the relaunch of Gordon Brown's premiership. Expectations had been raised high. However, his Chancellor's downbeat assessment of the economy at the weekend has put the Prime Minister once again on the back foot.
Today Mr Brown is announcing a rescue package for the plummeting housing market, which will be vital to his chances of stabilising his leadership at a time when the opinion polls have been showing the Conservatives with an unchanged 20-point lead.
This week schools secretary Ed Balls has lashed out at succession talk. That suggests wider tensions at the top following two months of rumours about a leadership challenge. Meanwhile, Mr Brown's ostensible communications chief, Stephen Carter, has been sidelined during internal battles at Number 10 Downing street.
But most serious of all are the continuing shockwaves following Alistair Darling's comments. The pound is now at its lowest ever against the euro since the single currency was launched in 1999, driving up the price of imports. Mr Darling is now being blamed by business leaders for helping Britain talk itself into recession. With growth in the second quarter officially at almost zero, the chief executive of one of Britain's biggest building firms declared recently that anything the Government does will have little chance of reviving the falling housing market.
Against that backdrop, Mr Brown's proposals for a Mortgage Rescue Scheme in which councils, housing associations or even developers will bail out families facing repossession by taking rent in place of mortgage payments are indeed a drop in the ocean. The new mortgage market by some measures has shrunk by more than two thirds since last summer. Possibly as much as £80 billion of lending that was previously available for house purchase has disappeared thanks to the credit crunch. So this limited package will achieve little.
As for the temporary removal of stamp duty on homes below £175,000, that will have little impact in London where the average house price is still around £300,000.
The Mortgage Rescue Scheme will have the positive effect of staving off the trauma of repossession for some hard-pressed families but inevitably it will help a few who turn out to have been reckless rather than deserving.
As for the homeBuy Direct scheme, the limits are too low to help many London housebuyers. And plans for councils to buy up unsold new-build homes could saddle future council taxpayers with liabilities. They will require scrutiny as town halls pick the local developers they choose to help. heavy existing borrowing and a worsening outlook for tax revenues mean any other anti-recession measures will be similarly limited - to say nothing of the Chancellor's room for manoeuvre in this autumn's pre-Budget report. The Bank of England looks unlikely to cut interest rates as inflationary pressures continue.
As Mr Brown contemplates one of the most difficult party conferences any Labour leader has faced in recent times, he will need more than tinkering at the edges of the housing market - and even a Cabinet reshuffle - to revive his fortunes this autumn.
