LETTERS Home Improvements
Sir: Anatole Kaletsky sets out to 'debunk' the notion that property debt and specula- tion has been bad for the economy (Wore than bricks and mortar', 21 September) but the only myth he debunks is the idea that economists and economic journalists like himself know anything about the economy. If we wished to reproduce all the character- istics of the decadence and economic fail- ure of Britain over the last 30 years Mr Kaletsky would be an ideal Chancellor of the Exchequer.
The reason why Britain spends so little on building houses, compared to other countries, is because the Government gives massive subsidies to those who merely pur- chase and possess them. The mortgage sub- sidy (the cost of which has doubled over the last four years) drives up nominal interest rates and cripples the poor house builder while the house purchaser gets a real post- tax cost of borrowing of between 2 per cent and 0 per cent depending on his income tax level. The house speculator gets a cash deduction every month, the poor house builder does not.
Kaletsky seems to think that it is a sign of a healthy economy if the returns on finan- cial assets like shares — representing valu- able productive companies — equate to the returns on a liability like a house which, far from having an income flow, is a permanent cash drain.
I don't think many entrepreneurs who have lost both their businessei and family home will see the seductive rise in the nom- inal value of their houses as having been a healthy phenomenon. Mortgage interest relief has been a massive tax on savers and a burden on entrepreneurs who have had to try to build massive equity to buy a house when they needed it in their businesses.
Many journalists like Mr Kaletsky are liv- ing in houses which, in previous genera- tions, were probably owned by wealth cre- ators, who saved, created capital, and then acquired a house. Today economic com- mentators like Mr Kaletsky can start on the path of borrow-and-spend early in life and solely by dint of inflation reducing their debt over time, acquire a house which their contribution to the wealth of the nation would never have justified. There is no doubt however that Kalet- sky's ideas will go down well among the half-witted yuppies who borrowed 105 per cent of the value of their 1980's specula- tions and now cry out for further Govern- ment irresponsibility to bale them out. It will be equally well received by his heavily indebted boss Mr Murdoch.
Rodney E.B. Atkinson
60 Ashbourne Court, Woodside Park Road, London N12
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