Myners: ‘Funding for lending is fuelling an irresponsible housing bubble’
Labour peer and former chairman of Land Securities Paul Myners has claimed the government’s Funding for Lending scheme is driving up house prices
Speaking at the BCO conference in Madrid last week, Myners called on the treasury to force banks to raise additional capital, claiming the Funding for Lending scheme was fuelling an ‘irresponsible housing bubble’.
Myers also urged government to invest in the nation’s ‘creaky infrastructure’ while interest rates remain low.
‘We are trapped in an austerity spiral which has cost us a great deal over the past three years. Most criminal of all has been a cut back by the government of capital expenditure.’
‘When a government can borrow at very low interest rates, it should be an opportunity to fix our creaky infrastructure, but it hasn’t been done.’
Myners also hit out at the government for its public and persistent pessimism about the economy: ‘If the government will not speak positively about the future and take immediate action on infrastructure projects, then it is not altogether surprising that institutions are investing their money overseas. Politicians should lead.’
The former chairman of Land Securities also called on the property industry to reduce its dependency on bank lending. ‘We need to develop new forms of finance – we’re too dependent on banks.’
‘We’ve got a far from perfect banking structure – too few banks – three major domestic banks. The Archbishop of Canterbury has talked about the need for local banks – the old building societies that became absorbed into large banks. But it’s very hard to get back to where we once were.’
Labour approach ‘insufficient’
Myners also admitted that when he undertook the restructuring of the banks with Gordon Brown in 2008, they did not go far enough to reform the banking system. ‘With hindsight the actions we took were insufficient’
We should have been more radical than we were
‘With the benefit of hindsight, I think we should have been more radical than we were.’
Myners also admitted that Labour should have eliminated or reduced the national debt during the boom years. ‘In 2007, we were running too high a deficit when we should have been running a surplus. We had our foot on the accelerator.’
In his speech, Myers did say he believed the economy has now turned a corner. ‘Growth is picking up and will continue to pick up. I believe the economy will be growing quite strongly by the time we get to the next general election.’
‘I don’t think growth will be strong enough to guarantee the re-election of the Conservatives,’ Myers added.
Nevertheless, Myers said the Labour party needs more work before it is ready to successfully challenge the Tories at the next election:
‘I don’t think Labour is yet ready to form another government. The team does not look strong, although it’sdeveloping. Ed needs buffering and I’d like to see Alistair Darling appointed as the Chancellor of the Exchequer,’ Myners said.
Myers said the driver of growth would be ‘monetary policy’, referring to the successive rounds of quantitative easing. ‘I think there will be no significant improvement in business investment and the public sector deficit will continue to be high. Monetary policy will continue to be the driver of economic growth.