Vince wows the IFS

On Monday Vince Cable gave the 2008 Institute for Fiscal Studies Annual Lecture. (The Telegraph, among others, has highlighted his speech).

This lecture is the sort of thing that Chancellors and members of the monetary policy get to give, not opposition politicians. It says something of the respect with which Vince is held by serious economists that he was invited to deliver it. And did he deliver. This was a serious speech, by a serious economist, for serious economists. If that’s you, read it in full.

For most people it was a speech about bubbles, going back to the Tulip mania in the 1630s, and talking about our recent housing market. Vince has – to his credit – been worried about this since 2003. His proposals were:
1) The Bank of England’s mandate should include asset as well as general prices (using the Swedish model, and as advocated by former MPC member Sushil Wadhwani);
2) Bank capital adequacy rules should be tightened in booms, to stop banks getting carried away;
3) The creation of a counter-cyclical national land value tax;
4) That banks should offer those with mortgage arrears shared ownership;
5) That government should allow social housing agencies to borrow to buy 150,000 properties a year at wholesale prices from desperate building firms;
6) That we need more credible (read, more restrictive) fiscal rules; and
7) That we need more liberalisation in energy and food markets – both of which have seen big price rises recently, unlike more liberalised sectors.

The press release, powerpoint slides and full speech are here.

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12 Comments

  • Yes, it’s wonderful, isn’t it. And several people in my office say it’s the best policy they’ve heard in ages.

  • Andrew Duffield 9th Jul '08 - 10:43am

    Pity that Vince felt constrained to limit his call for LVT to business rates only. Having gone to great lengths to correctly blame the imminent and likely massive “bust” on almost 2 decades of property (i.e. housing/mortgage credit) “boom”, he ducked the opportunity to push for a shift of our own policies in the obvious and logical direction. LVT (SVR) on business land – including on commercial and residential land banks – is already Lib Dem policy. It’s how domestic property is taxed AFTER it’s built that remains the crux of current and future credit crunch problems.

  • David Heigham 9th Jul '08 - 12:42pm

    Speaking as an economist, “Wow!”.

    As a LibDem, for the next two years the theme of politics is “It’s the economy, stupid.” On the economy, our thinking is way ahead of Tories and Labour. In every way, what Vince is saying is more adequate than anything the others are getting in a twist about. We must register all this as where the LibDems stand before before Osborne and Brown/Darling try to produce inferior copies as their battle cries.

  • Implicit in the fact that the Telegraph accorded so much attention to this speech (following on from what amounts to positive reviews of Nick Clegg recently by them) is an interesting shift in their editorial position back to a more whiggish Morning Post style and suggests a serious level of underlying scepticism of the Cameron project among some of the traditionalist media.

  • Should we be playing up to any possible sympathy of the Telegraph?

  • There may well be a topical motion to conf on this basis, so I hear.

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