Sir: In his article, Anatole Kaletsky asserted that if labour
mobility in Britain is limited by housing it is because homes generally are in short supply'. Later on he warned against blaming the booms and slumps of the housing market on 'socialist Aunt Sal- lies like planning controls'.
There is not a general shortage of hous- ing throughout the country. There was not even one during the recent boom. The housing shortages of the late Eighties were concentrated in the South East, East Anglia and the South West.
It was for political and environmental, not financial, reasons that we did not build enough houses in these areas. So when between 1985-89 economic success increased the demand for housing in them beyond the available supply, it led to large price increases. As a result, the differential between prices in the most prosperous parts of the country and those in less favoured places, grew steadily during most of the decade. It was this that made it so hard for an unemployed man in Strathclyde to move to a job in Berkshire.
Because of financial deregulation it also had the undesirable side effect, as Mr Kaletsky said, of fuelling an inflationary consumer boom. In order to stop that the Government had to raise interest rates and mortgages to penal levels, and the price of houses has now come crashing down. The undesirable effects of very high interest rates include a deep recession and a huge number of homes repossessed.
Mr Kaletsky suggested that a return to some form of mortgage control might enable the authorities to steer a middle course between these two extremes. The Governor of the Bank of England and the Chancellor of the Exchequer had a well publicised disagreement on this point ( The Spectator, 6 April 1991).
But such devices are only necessary to control a distorted market. If supply and demand were in better equilibrium house prices would not rocket around in such a boom and bust fashion. That however will not be achieved without reconsidering the `Aunt Sally' of planning controls.
Richard Ehrman
50 Sulivan Road, London SW6
`Someone's invented Nigel Mansell's wheel.'
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