There is no demand abroad so we can't grow through exports.



We have a Treasury that is doing nothing and a central bank that is trying to support the economy but we're in a position where monetary policy is not being effective on stimulating demand (ie a liquidity trap).



We will be stuck in recession/low growth for years waiting for the market to 'self correct' and we will lose masses of lost output in that time.



The economy needs to be kickstarted by an increase in government spending ideally on some infrastructure to address problem areas etc the housing stock. As regards concerns over borrowing its a different situation to Greece, UK government borrowing costs are at record lows anyway so price signals are telling us that its a sensible time to borrow to get the economy moving again. You can tighten fiscal policy as the economy grows again, its much easier to rebalance a budget when you are back in a 3% growth spell.

I know I've mentioned this before but:



Between central and local government, there are thousands of hectares of land available, suitable for housebuilding. Invite charities and not-for-profit organisations to lease this land on 99 year, peppercorn rent agreements. The average cost of building a house (materials & labour) is about 40% of the total value (including land), so pension funds and insurance groups would be falling over themselves to lend the money to build because the returns would be far greater than government bonds could offer. These houses could then be rented at 50% of the prevailing rentals.



Some caveats would need to be built into the system such as: the houses could NEVER be available on a "right-to-buy" basis and the remuneration of executives of the housing management companies (non-profit remember) should be subject to a cap - say £100,000.



Such a scheme would:



Return unused land back into useful land and promote community



Create jobs through a building programme



Stimulate demand for goods to furnish the homes



Reduce the amount of housing benefits paid (the vast majority of the current recipients are already working)



Increase revenue to the exchequer through PAYE & NI and VAT



It wouldn't cost the government a single penny, the land is already there, they own it, they simply decide to do absolutely nothing with it.

Problem is, as I have said earlier, the social housing sector cannot finance the investment, direct payment of benefits means that pension funds etc are totally disinteretsted in future investment. and why should senior management of social housing be capped, I know of some very good people earning £200k a year that could get more in the private sector.



for once, listen to someone who knows about the issues.

Did you completely miss the bit about finance coming from Insurance groups and pension funds? Both are big buyers of gilts because they see a steady, if unspectacular return, such a scheme would offer better returns than government bonds. If UK institutions weren't interested, there are plenty of European ones who already make substantial investments in similar schemes and would be willing to invest here.



The reason for capping senior executive pay is simple: although an organisation may be prima-facie "not-for-profit", that doesn't prevent the executives from divvying up what would be deemed profits among themselves. Hence the need for a cap. Any surplus revenues should be earmarked for re-investment back into the projects or to cover contingencies such as maintenance & repairs etc.



The only drawbacks I could foresee to such a scheme would be: private landlords would see their revenues from rents reduce as a knock-on effect. The banks who hold the motgages on buy-to-let properties may also see their liabilities increase because the mortgage may be higher than the value of the property. Tough, they were happy to trouser the profits in good times, it's high time they stopped trying to socialise debts in difficult times. But the main drawback remains that this government would be required to conduct a complete sea-change in ideological approach to housing.

you clearly have anecdotal knowledge of the sector, so I'll leave you too your Indy informed rants, I KNOW the sector and I KNOW how it works.

if there was a sensible time for government borrowing it is now when govt debt is as cheap as it as ever been. That ability to borrow at record lows should be used to finance capital projects not just poured into banks bottom line, There are two fundamental flaws with this current plan to inject capital that must be relent. Firstly the condems have scared any confidence out of the economy which has suppressed demand. Secondly the banks wont pass the low interest rates on. Thye will profiteer by charging ridiculously high rates and charges on any money they do re-lend again suppressing demand. I think its a safe bet that in twelve months the banks will come out pleading that they wanted to lend but nobody wanted their money just like they did with project merlin. If gideon had any sense he would have taken advantage of the state owned banks to get this money into the economy at sensible rates the competitive pressure of a state bank lending at reasonable rates would also push the others into lending at sensible rates.

So come on then, what would you actually propose?



You know, make some suggestions instead of pontificating that because you "Know" the sector (same as you "know" how the Olympics works etc), anyone else who proposes a break from the traditional way of doing things is an Indy-reading idiot. Why should the provison of housing be yet another commodity to be traded and profited from?



BTW you really should try reading the Independent, they have contributors and columnists who would appeal to your venal tory ideals too.

There was a young man on one of the news channels yesterday. He ran his own computery business and had approached a couple of banks for finance to expand. They were willing to lend but at rates of over 20%. Considering they are borrowing at next to bugger-all, that is close to usury

No it is usury.

I suppose the simple answer is the old Irish answer, it would be easier not to be starting from here, it would be easier if Osbourne hadn't done what he did two years ago and kill the little growth there was stone dead. It was a bright wheeze, get all the pain out of the way, a boomlet and a successful general election (for the Tories anyway) Balls said it wouldn't work and it hasn't.

What is needed initially is a temporary cut in VAT - which despite all the naysayers, is what stimulated the economy in 2009. The increase to 20% was the exact opposite of what was required. And as has been already said on here - get some investment in housing, in much needed public works, restore the schools rebuilding programme. If you get constructon right the rest will follow. When the Tories came in crying woe, woe and thrice times woe they overegged the pudding and scared everyone. Time to back down. Solution no 1? Sack Osbourne, it may not be entirely his fault but for credibilty of the the government he has to go.

You may know how the sector 'works' now but its not working that well. It's not how it worked in the past or, hopefully, in the future. Cod'eads suggestion has been put forward by serious individuals.

Banks are paying more than peanuts on the markets for money to lend, that's the main reason for this Bank / government initiative - to give them cheaper money to lend on more cheaply.



The young chap may have no track record and be considered high risk by the bank.



So many of the hard-pressed small businesses that bemoan banks not lending to them are not actually borrowing to expand but are basically not viable.

Osborne won't go and neither will many, if any others. This lot know they are a one-term government, they knew it before Cameron accepted the Queen's invitation to form a government. They are making the most of getting as much out of the state and into the hands of their chums as they can. The old tory grandees know this and are fuming at what is going on because many of them know that it could well be their seats that are lost.