The British Government, like many others, has become dependent on maintaining high property values. So it’s doing it’s best to prop them up. Yesterday it announced that it (ie the taxpayer) will subsidise the purchases of couples who can afford only 75 per cent of the purchase price of a new house. Anyone with basic economics will know that this will merely bid up the price of all houses. Perhaps that is the Government’s real purpose. If it wanted to do something about poverty or homelessness it would tackle them directly. Instead it shovels taxpayer funds into the property market. Its appears that the Chancellor’s priority is to keep consumer spending high – at least for the duration of his political career – by inflating property values.
A Social Policy Bond regime would do away with this sort of nonsense from the outset. It would first identify the desired outcome and then let bondholders, not government, decide on how best to achieve it. It’s possible that a government issuing bonds would say that its purpose was to boost property values so that consumers would spend more. But it’s hard to imagine such a use of taxpayer funds being admitted, let alone approved. The current policymaking regime depends absolutely on fudge, obfuscation and deception. It allows government to favour its own alleged ways of achieving vague, unspecified or conflicting goals. Very often the actual result, as here, is to subsidise wealthy individuals or corporations at the expense of small businesses or the disadvantaged.