wont happen, once benefits start getting paid direct to claimants the ability of social landlords to borrow will collapse, we've just completed a £150m bond issue, it will be the last one we manage to get through unless the legislation is reversed.

add in the Green Deal and Tenants Cash Back and Welfare Reforrm and social housing is only going one way, backwards even quicker than it ever has before.

In an uncertain economic period like we have now, if you give individuals money (presumably through tax cuts) all they will do is save it, not spend it. By investing in a massive, short-term infrastructure project such as increasing the social housing stock, you get people off benefits and into work. These people then inject their newly disposable income into the retail and service sectors by buying goods and services. The Treasury gets back some of its investment through an increased tax take and reduced numbers on benefits.

and who would increase social housing stock, which builders, which contractors, the same one's that raped the exchequor for Decent Homes and we saw no economic benefit?

People would not spend or save but pay down debt (at least the majority, who have debt). That's the logical thing to do. It's what has been happening. On one level it's also a good thing, on another it means the economy is quite slow. In fact what we really need is to export. Consumer spending within a purely domestic context is fine, but the reality is consumers buy stuff from abroad creating a balance of payments deficit. We need to pay down debt and export alot more. If we ride out the huge storm ahead (and that won't be easy, given the Eurozone bank losses will stop somewhere - my guess is in the UK - given the increased frequency and panic within Osborne's speeches aimed at telling the EZ politicians) and get an export led economy steaming forward (we can dream!). Then we should engineer a huge reduction in real house prices over a period of years.

There is no demand abroad so we can't grow through exports.

We have a Treasury that is doing nothing and a central bank that is trying to support the economy but we're in a position where monetary policy is not being effective on stimulating demand (ie a liquidity trap).

We will be stuck in recession/low growth for years waiting for the market to 'self correct' and we will lose masses of lost output in that time.

The economy needs to be kickstarted by an increase in government spending ideally on some infrastructure to address problem areas etc the housing stock. As regards concerns over borrowing its a different situation to Greece, UK government borrowing costs are at record lows anyway so price signals are telling us that its a sensible time to borrow to get the economy moving again. You can tighten fiscal policy as the economy grows again, its much easier to rebalance a budget when you are back in a 3% growth spell.

I know I've mentioned this before but:

Between central and local government, there are thousands of hectares of land available, suitable for housebuilding. Invite charities and not-for-profit organisations to lease this land on 99 year, peppercorn rent agreements. The average cost of building a house (materials & labour) is about 40% of the total value (including land), so pension funds and insurance groups would be falling over themselves to lend the money to build because the returns would be far greater than government bonds could offer. These houses could then be rented at 50% of the prevailing rentals.

Some caveats would need to be built into the system such as: the houses could NEVER be available on a "right-to-buy" basis and the remuneration of executives of the housing management companies (non-profit remember) should be subject to a cap - say £100,000.

Such a scheme would:

Return unused land back into useful land and promote community

Create jobs through a building programme

Stimulate demand for goods to furnish the homes

Reduce the amount of housing benefits paid (the vast majority of the current recipients are already working)

Increase revenue to the exchequer through PAYE & NI and VAT

It wouldn't cost the government a single penny, the land is already there, they own it, they simply decide to do absolutely nothing with it.

Problem is, as I have said earlier, the social housing sector cannot finance the investment, direct payment of benefits means that pension funds etc are totally disinteretsted in future investment. and why should senior management of social housing be capped, I know of some very good people earning £200k a year that could get more in the private sector.

for once, listen to someone who knows about the issues.

Did you completely miss the bit about finance coming from Insurance groups and pension funds? Both are big buyers of gilts because they see a steady, if unspectacular return, such a scheme would offer better returns than government bonds. If UK institutions weren't interested, there are plenty of European ones who already make substantial investments in similar schemes and would be willing to invest here.

The reason for capping senior executive pay is simple: although an organisation may be prima-facie "not-for-profit", that doesn't prevent the executives from divvying up what would be deemed profits among themselves. Hence the need for a cap. Any surplus revenues should be earmarked for re-investment back into the projects or to cover contingencies such as maintenance & repairs etc.

The only drawbacks I could foresee to such a scheme would be: private landlords would see their revenues from rents reduce as a knock-on effect. The banks who hold the motgages on buy-to-let properties may also see their liabilities increase because the mortgage may be higher than the value of the property. Tough, they were happy to trouser the profits in good times, it's high time they stopped trying to socialise debts in difficult times. But the main drawback remains that this government would be required to conduct a complete sea-change in ideological approach to housing.

you clearly have anecdotal knowledge of the sector, so I'll leave you too your Indy informed rants, I KNOW the sector and I KNOW how it works.

if there was a sensible time for government borrowing it is now when govt debt is as cheap as it as ever been. That ability to borrow at record lows should be used to finance capital projects not just poured into banks bottom line, There are two fundamental flaws with this current plan to inject capital that must be relent. Firstly the condems have scared any confidence out of the economy which has suppressed demand. Secondly the banks wont pass the low interest rates on. Thye will profiteer by charging ridiculously high rates and charges on any money they do re-lend again suppressing demand. I think its a safe bet that in twelve months the banks will come out pleading that they wanted to lend but nobody wanted their money just like they did with project merlin. If gideon had any sense he would have taken advantage of the state owned banks to get this money into the economy at sensible rates the competitive pressure of a state bank lending at reasonable rates would also push the others into lending at sensible rates.

So come on then, what would you actually propose?

You know, make some suggestions instead of pontificating that because you "Know" the sector (same as you "know" how the Olympics works etc), anyone else who proposes a break from the traditional way of doing things is an Indy-reading idiot. Why should the provison of housing be yet another commodity to be traded and profited from?

BTW you really should try reading the Independent, they have contributors and columnists who would appeal to your venal tory ideals too.

There was a young man on one of the news channels yesterday. He ran his own computery business and had approached a couple of banks for finance to expand. They were willing to lend but at rates of over 20%. Considering they are borrowing at next to bugger-all, that is close to usury

No it is usury.
I suppose the simple answer is the old Irish answer, it would be easier not to be starting from here, it would be easier if Osbourne hadn't done what he did two years ago and kill the little growth there was stone dead. It was a bright wheeze, get all the pain out of the way, a boomlet and a successful general election (for the Tories anyway) Balls said it wouldn't work and it hasn't.
What is needed initially is a temporary cut in VAT - which despite all the naysayers, is what stimulated the economy in 2009. The increase to 20% was the exact opposite of what was required. And as has been already said on here - get some investment in housing, in much needed public works, restore the schools rebuilding programme. If you get constructon right the rest will follow. When the Tories came in crying woe, woe and thrice times woe they overegged the pudding and scared everyone. Time to back down. Solution no 1? Sack Osbourne, it may not be entirely his fault but for credibilty of the the government he has to go.

You may know how the sector 'works' now but its not working that well. It's not how it worked in the past or, hopefully, in the future. Cod'eads suggestion has been put forward by serious individuals.

Banks are paying more than peanuts on the markets for money to lend, that's the main reason for this Bank / government initiative - to give them cheaper money to lend on more cheaply.

The young chap may have no track record and be considered high risk by the bank.

So many of the hard-pressed small businesses that bemoan banks not lending to them are not actually borrowing to expand but are basically not viable.

Osborne won't go and neither will many, if any others. This lot know they are a one-term government, they knew it before Cameron accepted the Queen's invitation to form a government. They are making the most of getting as much out of the state and into the hands of their chums as they can. The old tory grandees know this and are fuming at what is going on because many of them know that it could well be their seats that are lost.

Yes the real problem is one of demand (businesses not even applying for loans as there is no point expanding) rather than supply of loans. Like you say many businesses especially small ones have no track record or collateral which is the market failure, the bank doesn't have enough information on them to make an accurate assessment. There is a scheme called Enterprise Finance Guarantee that small businesses can apply to where the government guarantees 75% of the loan to the bank in the event of default, so its still the bank that makes the decision on whether the business is viable, but it takes away some of the risk so the ones that are at the margin where the bank thinks they look like they have a good plan but feels its a bit of a risk, will get loans. There are limits as to the overall amount of cover any bank gets from the government though, so they can't just use this to guarantee all their loans.

the likes of lloyds are refusing to even read business plans or look through the books of businesses in certain sectors e.g anything property or construction related. liquidity is the life blood of any economy and the banking sectors refusal to release funds to viable companies strangles off growth and jepordises the viability of these businesses so the circle continues. The failure to lend on the basis that the economy is weak is a self fulfilling prophecy. The govt owning a section of the banking sector gives them a way of breaking this circle but its one the condems refuse to use

This why we need to do what I believe Cruddas is looking at in Labour's policy review. It is setting up regional investment banks based on the German model who's job it is to lend to businesses and take along term view. The idea may well be to not de-nationalise RBS but instead turn it into this kind of entity divided up into separate regional banks with this task in mind.

Any hint of that happening and you can bet your life this bunch of shysters will have it flogged off to their mates, no matter what the cost to the taxpayer

Which is why the government needs to start spending more in the economy to stimulate demand.

Osborne keeps saying his austerity plan has restored confidence on the markets, but what confidence is this? UK government bonds have low interest rates but thats a consequence of expectations of long term low interest rates from the B of E as much as confidence that we won't default, rates were never high anyway even when Labour were in power.

The 'market' has no confidence in the economy hence the private sector banks don't want to lend. They had all this supposed evidence that austerity can be expansionary because by cutting the size of the state it releases resources to the private sector so the private sector will grow, but it wasn't an issue of fighting over resources anyway because there are large numbers of unemployed workers and large amounts of investment funds being unused.

There are four components of demand, consumer spending, business investment, government spending and net exports. Most of our main trade partners are in a worse state or as bad a state as us so we can't expect huge amounts of exports any time soon, so if we're committed to cutting government spending we are relying on consumer spending and business investment - and where is this going to come from....?

The big joke is the government even rejects the tax cutting argument. If you want to stimulate demand then cut VAT and you get a direct effect on spending, because people only benefit from a VAT cut by spending. It's not like an income tax cut where people will save some of the benefit so it doesn't contribute to demand. But the Tories for some reason seem totally disinterested in this tax cut, the tax cuts they want is tax cuts for the top earners, which have the lowest effect on contributing to demand. The IMF has suggested the UK needs to look at VAT cuts as a stimulus but Osborne won't have it.

The Tories have never cut vat. They introduced it as part of the EU package at 10%. When Labour left office in 1979 it stood at 8% The first Tory budget put it up to 15% (they'd denied they'd double it in the campaign and they didn't

) They then increased it to 17.5% in 1990, where it stayed until the temporary cut in 2009. This cut was decried as useless by the Tories and Lib/Dems but IMO did more to stimulate growth than any other measure Labour took in that period. Almost the first thing Osbourne proposed was a VAT increase to 20%, The result is what we've now got.
The Tories believe in low taxes - but low income taxes which benefits the better off more than low VAT benefits them. It seems to me that it's an ideological thing with them. But the time for ideology is rapidly running out. Time for some pragmatism. We're up s h i t creek time to look for the paddle.

This is a very good point and I believe "major hound" hit the nail on the head when they said it was for ideological reasons they cut income tax and not VAT.

[url=http://www.telegraph.co.uk/finance/economics/9339754/Cable-calls-for-state-support-to-boost-new-house-building.htmlVince Cable calls on government to stimulate housebuilding[/url

Someone should remind the dopey old fooker he IS part of the government

What Cable is suggesting would have to be agreed between Treasury and Dept for Communities & Local Govt (Eric Pickles), its not something he could control in BIS. So Cable is saying this in public to try and put pressure on his colleagues, he has probably already been telling them this in Cabinet.

At least Cable is speaking out a bit and not just being a toady parroting the government line.