Brown 'cannot avoid blame' for house price crash
Monday, 3 December 2007 12:00 AM
Gordon Brown will not be able to avoid the political fallout from a house-price cash, the Liberal Democrats claimed today.
Vince Cable, Lib Dem acting leader and economics spokesman, warned a housing market crash has become a real possibility in the UK, as the country prepares to feel the effects of the transatlantic credit crunch.
With many predicting turmoil in the housing market will be the next negative headline to hit the embattled government, Mr Cable claimed the former chancellor would not be able to shirk a share of the blame for negative equity and rising repossessions.
Mr Cable said: "So far Gordon Brown has avoided taking the blame for the disasters of recent weeks, but if there is a housing crash the prime minister will be at fault and will have to take responsibility for causing misery to millions."
As chancellor, Mr Brown ensured his reputation through ten successive years of economic growth but Mr Cable said today there were "ominous signs" the bubble is about to burst.
The Lib Dem leader said Mr Brown's "economic miracle" had been built on consumer spending generated by household debt, much of which has been secured against the "grossly inflated bubble" in the housing market."
Mr Cable said: "With the credit crunch now biting and the economy slowing we could see millions struggling to pay their debts leading them into mortgage arrears, repossession and negative equity.
"The government's attitude to the economy has been one of hubris and complacency. Ministers have failed to put in place any preventative actions to stop a crash."
He called on the government to work with banks to prevent large-scale repossessions, achievable through leaseback of shared ownership schemes for families in arrears.
The Liberal Democrats also want house prices to be included in the consumer price index, which would make interest rates more responsive to rapidly rising house prices.
Mr Cable said banks had been behaving "too much like casinos" and the government now needed to foster a return to responsible lending.
The Department for Business, Enterprise and Regulatory Reform (BERR) today set out how it plans to tackle over-indebtedness.
In the fourth cross-government Over Indebtedness Annual Report, the BERR said a nationwide crackdown on loan sharks and illegal lending was already underway, while the Department for Work and Pensions is funding the £42 million Growth Fund to help people access affordable credit, including through credit unions.
The Ministry of Justice is also working on plans to improve and extend the options available for people that are stretched to the limit with debt payments.
From next year, the secondary school curriculum will include personal finance education, while the Consumer Credit Act 206 comes fully into force with new laws to improve responsible lending and borrowing.
Newsletter sign up