This may be true in real terms, but the reverse is true in relative terms: this imbalance is a consequence of centralisation and it is unhealthy.

As your doctor will tell you, unhealthy behaviour is unsustainable over extended periods of time.

What I find interesting and widely ignored is the floundering potential of rural areas due to infrastructural and transport weaknesses, undervalued by an estimated £300bn/year!

Well set out article. Thank you.

Still it shows that our policy process is still unprofessional and in need of reform. Policy should be less glib and better worked through, and tested for ‘downsides’ with relevant experts.

In the end the tax-induced bias to investment in house ownership will have to be addressed. If not us then by others.

If I get a capital gain on investment in shares or other securities, I pay a hefty tax. If I get a capital gain on my residential property, after costs, then it is tax free. Put this together with draconian and ineffective planning laws for residential property – houses and apartments – which prevent the rate of new dwellings catching up with population growth (much of it not picked up by the stats, as Nick Clegg has pointed out) then you have a permanent propensity towards a housing boom. But maybe the Lib Dems are a tad too populist to address these longer term structural economic problems. Paul

The wording of the speech is, to my eye, guarded at all the right points. It appears that Tim Leunig does not always see why the language of the speech is as it is, nor that on many points the speech suggests ways that policy might go, rather than prescribing ready made “solutions” in the way that New Labour is prone to. However, I am very grateful to Tim for making us look at this speech.

Put simply Tim, the reverse is true. London’s bankers are infact subsidised by the vast majority of Middlesbrough and other provincial residents who pay taxes and rent their homes. A wunch of bankers pays far less in tax than they gain, unearned, from their ownership of valuable properties in the South East (not to mention those second and third homes in the provinces).

Capital continues to flow from the poor to the rich, as the growing wealth gap proves. The north subsidises the south.

Technically – however if the situation is over-extended borrowing then they will still be in a position to pay rent – as opposed to a 1990s scenario of reposession following unemployment.

The problem is as you identify. MOrtgage borrowing is comparatively cheap because it is secured by property – if you reduce that securitisation the risk is higher hence borrowing costs will rise.

It’s easy to say the banks are to blame for lending irresponsibly – but anyone taking on a 110% mortgage of 4-5 times their salary has to take some responsibility for the consequences of their actions.

It would shield individuals and families from the worst effects of economic misfortune. On the negative side, it would undoubtedly increase the cost of borrowing. But again on the plus side, it might also reduce the incidence of irresponsible lending.

Repossessed families often have to be housed at public expense, remember. I would much prefer to see the loss lie with mortgage lenders (albeit briefly) than land on the public purse.

It would be possible to give the courts the power to postpone sale for, say, up to five years. That would require an amendment to TOLATA 1996. Also the Insolvency Act would require amendment to stop banks using bankruptcy as a backdoor way of recovering their investment.

The last time the state tried to force businesses to relocate to the regions was during the 1964-70 Labour government. Anyone old enough to remember George Brown and his “Location of Offices Bureau”? The lasting memorial to this Canutist exercise is the forest of office buildings disfiguring Croydon’s skyline.

You shouldn’t underestimate Vince Cable’s economic expertise, and he is in an economic portfolio. And I think that at least David Laws has been able to use his expertise also in his current portfolio.

That depends on how you define economic portfolio. It might be a stretch to define the Home Office as economic (although a bit of economic thinking in tackling crime is probably helpful) but Children, Schools and Families definitely is.

Are you seriously suggesting we should put all our economists in some Shadow Treasury Ghetto and put non-economists in charge of all the other portfolios?

http://lettersfromatory.wordpress.com

On point 1: If you seriously think that London perpetually subsidising benefits in the rest of the country is a good economic model for a nation then there isn’t a lot more to say. London has become a world of its own – the Westminster bubble, the media bubble, the economic bubble. Thatcher’s narrative that if we just make London the best city in the world then the other 90% of the UK can bask in its reflected glory irrespective of how good their life is has become Gospel it seems.

On point 3: Silly examples. Of course equity isn’t included in inflation figures because nobody needs to buy equity to survive, and most people don’t own any. But everybody needs a home. And if you aren’t poor and needy enough to get secure Council housing, then you only have the choice of the private rental market or buying your own home. Given the weakness of tenancy rights in this country, you’d have to be nuts to start a family in a private rented home, which forces anyone who isn’t poor and needy to buy a home if they want to start a family.

Of course interest rates would have been higher if housing had been included, but then we wouldn’t have ended up in the silly situation we are in now, whereby we cant do anything even slightly radical with the economy for fear of bursting the property bubble and triggering a housing market crash!