The Spectator

Through the roof

For as long as the era of cheap credit lasts, house prices will remain sky high

When David Cameron said this week that he is worried his children would not be able to afford to buy their own homes, he struck on one of the greatest economic problems of his premiership. The old British promise is that if you work hard and make the right decisions, you can advance in life and own your own home. This is the ladder that most aspire to climb. But for an entire generation, even the hope of home ownership is slipping out of view. A huge number of young Britons cannot hope to have the kind of life their parents enjoyed.

The Prime Minister must know he is on dangerous ground here. His own children, of course, will not have to worry — just as he did not have to worry. A fat handout from the Bank of Mum and Dad will be available to help the young Camerons raise a deposit for their first homes. It is people who hail from families with resources of rather less than the Camerons’ estimated £30 million who face being frozen out of the housing market for life. Or at least for as long as the era of rock-bottom interest rates lasts.

When George Osborne spoke about a “dangerous cocktail” of risk, he blamed everyone but himself: Korean missiles, spluttering Chinese growth, a choking European recovery. In fact, the biggest risk is that the Chancellor has built his recovery on a mountain of debt. It’s very cheap debt, to be sure, but he has increased the national debt burden more in five years than Labour did over 13 years. Nailing interest rates to the floor pours more vodka into the economic punch bowl: with every pound he borrows, the Chancellor fortifies his own ‘dangerous cocktail’. This creates all kinds of risks in an economy, and all kinds of crazy side effects.

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