And so onto Blackpool and the final stop of the party conference circuit. While much of the media attention focused on the criticism of Ian Duncan Smith’s leadership it was true that the conference was awash with plots, which were definitely not the imagination of the press. However, the Conservatives also unveiled a lot of new policies, which deserved more attention than they actually got. Sticking to the old adage a policy a day keeps the critics at bay, the Conservative party faithful saw proposals on everything from pensions to health to policing.
The fringe was not as frenetic as Labour, but saw some good debate. Politeia, a conservative think-tank, raised a key question for the party – just where should levels of taxation be set? The Conservative Party has already set out its ambition to cut taxes, even if the Shadow Chancellor, Michael Howard has refused to give specifics. Mr Howard’s problem is that as soon as his colleagues identify savings, they are promptly spent again – think Willets and pensions or Letwin and sheriffs.
The running of the economy is of course one of the key battle areas between the political parties and taxation is likely to be at the centre of the debate. Tim Congdon, from Lombard Street Research, argued that higher rate taxpayers are selling up and leaving the country, as they will not tolerate current levels of taxation. He argued that public spending remains far too high and further tax cuts are needed to bring current levels of spending down to 25% of GDP.
Lord Saatchi, Conservative Treasury spokesman, admitted that the Tory party had been confused saying that “the wires have come out of the Tory machine”. He went onto argue that people’s perception of relative economic competency of the political parties had changed, and that “building a reputation on economics and taxation is a must for any party with a serious ambition for Government.”
When asked about mortgage equity withdrawal, especially research which suggests that 50% of all consumer spending in the last year came from this source, Lord Saatchi said that he felt this clearly cannot continue if the economy ceased to grow. He added that he was worried about debt and affordability within the current mortgage market, but concluded this 50% spending is the difference between the UK and Germany.
Housing was also a theme on the fringe. Philip Hammond MP, Tory housing spokesman admitted that on the issue of key workers and the differentials in the housing market, a classic Conservative response would be ‘well this is a market and markets will self-correct of their own accord’. However, he pointed out that housing plays a much wider role in the economy and no other asset has such an effect on consumer behaviour.
On right to buy, Hammond reiterated the Conservative commitment not only to restore the policy in areas where is has been restricted, but also extend the policy to housing associations. He insisted that housing policy should aspire to provide genuinely affordable housing, not just social housing.
The Miles review yet again entered the discussion and there was yet another take on its implications. Speaking about the review Hammond said that he thought the Treasury saw high levels of owner occupation as an impediment to joining the single currency and have therefore decided that the housing market needs to be “turned on its head” to help the Government join the single currency.
It was on the issue of housing finance that some real “blue sky thinking” is emerging. Hammond feels that the culture of homeownership needs to change: “People still feel they need to take out a big debt they cannot afford, work like crazy all their lives to pay it off and then pass on their home debt free to their ungrateful children”. He argues that different structures need to be explored. Houses could for instance be paid off over two generations with children inheriting their parent’s mortgage, with some kind of payment break in the middle. “You are expected to pay off an asset in twenty five years which in reality you hold onto for sixty years or even longer” explains Hammond.
From a lenders perspective, this is blue sky indeed. But how the risk of such products can be quantified – especially in a world where the nuclear family is now not the norm – is anyone’s guess.