Car sales


             The latest car sales figures confirm that the UK is beginning to grow and recover whilst the Euro area remains mired in deep recession.  The five months to May saw car sales in the UK rise by 11%. In Germany car sales fell 8.8%, in France they fell by 11.9% and in Italy by 11.3%. Continental car sales were very weak in 2012 as well.

            In the UK the inflation figures for last  month came out a little higher thanks to air fares and petrol. The underlying inflation figures were better and point to likely further falls in the rate . A more stable pound and falling commodity prices will also help.

            Confidence is picking up in the Uk economy according to latest surveys. House prices have started to advance and there is a pick up in building as a result.

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  1. lifelogic
    Posted June 19, 2013 at 6:02 am | Permalink

    A slight and long awaited glimmer of hope, on the back of a slight recovery in the US. It could of course have recovered far more quickly, with cheaper energy, fewer regulations, sensible employment laws, a much smaller state sector, lower taxes, less EU, functional banks and a sensible leadership and positive vision from Cameron.

    Alas, thanks to Cameron, the glimmer will soon be extinguished by Miliband, the voice of the state sector unions.

    • lifelogic
      Posted June 19, 2013 at 7:31 am | Permalink

      Yet more appalling revelations from Cameron’s claimed priority in three letters the hugely dysfunctional, but free at the point of death NHS. Appalling cover ups too and destroyed reports it seems. Did Cameron not say something typically vacuous about his priority in three letters N H S? Mind you they also promised something about cast iron and £1M IHT thresholds.

      Total contempt for patients and even the relatives of those failed patients. We have their money already so tough, try to encourage them to go somewhere else seems to be the general approach. With cheap hidden cameras and now no pay off gagging clauses, the dreadful facts will surely all come out. But Cameron clearly likes it just as it is.

    • Graham Devon
      Posted June 20, 2013 at 7:55 am | Permalink

      I don’t see what’s so great about rising house prices. I only bought half a house and want prices to fall so I can buy the other half. After that I intend to join the uber perma prop bulls and stop pretending that I want prices to fall so my toddler can buy.

  2. Jerry
    Posted June 19, 2013 at 6:30 am | Permalink

    What is not clear about these car sales figures is if these are increased sales due to heavy discounting by the manufactures or not, a rise of 11% is very good but not so good if the profits are being cut by discounting – or worse, stock is being shifted, at no profit, just to clear. Also where is any such profit going, whilst car sales in the EZ might be flat-lining does a EZ car manufacture need to sell within home market if it is ‘syphoning’ off the profits from its non “home” market – in much the same way as the UK car industry concentrated on exports in the immediate post WW2 era.

    I also see that another housing bubble is looming, house prices do not need to rise for builders to make a profit on new build, in fact quite the opposite (but then the government plan to give cheap mortgages away like Fannie Mae and Freddie Mac did in the US…), we really MUST stop thinking of houses as investments, they are places to live (and, for some, to work).

    Nothing to write home about inflation either, close to (and expected to reach) 3% by the end of the year. True that it could have been worse but surely this just goes to show that government must do two things, cut fuel duty even more as this burden so often makes the difference between a job worth doing or not to the SME or sole-trader, affects all by depleting disposable income, damages the UK tourist industry (and that is just for road fuel), to pay for this -hopefully dramatic- cut in fuel duty the government and not the UK population at large must face the next round of cuts, many departments and or budgets could be closed down as has been suggested many here before.

    • A different Simon
      Posted June 19, 2013 at 9:53 am | Permalink

      The bank of england have told the government that a fall in house prices is a systemic risk to the whole financial system .

      They stop just short of telling them they mustn’t let it happen .

      Maintaining house prices is now official policy . It has become a responsibility of the gubbament .

      Evidently lessons from the Govt’s previous attempt to buck the market by flushing billions down the toilet in the ERM fiasco have been forgotten or ignored .

      • Mark
        Posted June 19, 2013 at 3:52 pm | Permalink

        Not quite: banks surveyed reported their assessments of risk to the BoE.

        Participants’ perceptions of an increased risk of property price falls (in particular residential property price falls) could be consistent with views of prices becoming overinflated or about to become overinflated. Responses in the low interest rate category focused on the risk that artificially low interest rates are creating distortions in asset allocation, potentially leading to overinflated risky asset prices.

        The top two risks — sovereign risk and the risk of an economic
        downturn — were also those cited as having the greatest
        potential impact (Chart 7):
        • Sovereign risk (38% of respondents viewed it as their
        number one risk).
        • Risk of an economic downturn (32%).
        • Risks surrounding the low interest rate environment (7%).
        • Risk of financial institution failure/distress (4%).
        • Risks around regulation/taxes (3%).
        • Risk of property price falls (3%).
        • Risks surrounding monetary and fiscal policy (3%).

        So banks think that property price falls are actually not that damaging a risk for them compared with economic problems or sovereign default. They also think that property price falls are a likely consequence of the bubble being created by Osborne’s schemes.

        • A different Simon
          Posted June 19, 2013 at 10:58 pm | Permalink

          Mark ,

          Thanks for tempering my outburst .

          They couldn’t very well report themselves as the biggest risk to the system .

          Wonder why they didn’t mention some classes of syntheic derivatives , is it because they are not a systemic risk or that nobody dares mention them ?

          Without writing off and down bad debt and declaring some of these synthetic derivatives null and void the system has been unable to purge itself .

          Seem to be so many circles and spirals that nobody knows who owes what and the measures taken since seem to be designed to obfuscate things further so that they can never be unwound .

          Turns out every market is rigged and frigged so what confidence can anyone have to invest in a sham .

          What a farce .

      • Jerry
        Posted June 19, 2013 at 4:28 pm | Permalink

        @ADS: Except that maintaining house prices is not the same as wanting/allowing them to rise!

      • APL
        Posted June 20, 2013 at 7:29 am | Permalink

        A different Simon: “The bank of england have told the government that a fall in house prices is a systemic risk to the whole financial system .”

        Central banks are a systemic risk to the financial system.

        But in news yesterday, US treasury rates ticked up appreciably across the duration spectrum.

        Rising mortgage rates look to be on the way.

  3. Andyvan
    Posted June 19, 2013 at 6:39 am | Permalink

    Oh great the already ludicrously high cost of housing is starting to increase again. That will certainly help people that are struggling to make ends meet already. All they have to do is sign up for indentured servitude for a minimum of 25 years and they can afford a rabbit hutch to exist (not live) in. Not to worry though, car manufacturers are managing to flog more of their overly complex, expensive to repair tin boxes than they have been. Wonderful. Now we’ll get the nauseating spectacle of politicians claiming credit for it all and expecting us to applaud their economic skill and statesmanship.

    • lifelogic
      Posted June 19, 2013 at 10:06 am | Permalink

      If we want cheaper houses we need more supply, easier and cheaper planning, fewer daft building regulations, cheaper utility connections, no silly requirements for social housing to be provided as a back door tax on other buyers, lower stamp duties and other fees.

      • ian wragg
        Posted June 19, 2013 at 4:06 pm | Permalink

        and less immigration…….

    • alan jutson
      Posted June 19, 2013 at 10:15 am | Permalink


      Just look on the bright side.

      The more new cars are sold, the more choice we have of a decent selection of second hand ones at reasonable prices, once the huge depreciation cost have been suffered by others. !

      I wonder how the new car sales are split between the general public and business sales replacements ?.

      • lifelogic
        Posted June 19, 2013 at 4:28 pm | Permalink

        I never quite understand why people want to pay £30K+ on a new cars that will be worth perhaps £10K in three years time, when perfectly good second hand ones are available for £2K or less. Over, say thirty years, buying new every 3 years you waste perhaps £180K. This, with sensible (and tax efficient) investment then over the thirty years of investment might have returned well over £1M. I assume it is some personal insecurity that drives it all or rather like champagne a desire for conspicuous consumption.

        • zorro
          Posted June 19, 2013 at 7:57 pm | Permalink

          There is no accounting for taste….Some people actually voted for Cameron thinking that he would deliver on his promises….


    • Ralph Musgrave
      Posted June 19, 2013 at 12:41 pm | Permalink

      Put another way, we had a credit crunch caused by excessive and irresponsible borrowing followed by a house price bubble, and what do the authorities do? They cut interest rates and implement QE so as to re-inflate the bubble. If only Laurel and Hardy were in charge, we’d be much better off.

      • zorro
        Posted June 19, 2013 at 7:59 pm | Permalink

        ‘Here’s another fine mess you’ve gotten me into’….Cameron is to Osborne as Hardy is to Laurel…..


  4. alan jutson
    Posted June 19, 2013 at 7:05 am | Permalink

    So the private sector is showing signs of growing, so at least this is some good news at last, especially for employment and retention of jobs.


    Is government showing signs of reducing its costs?

    Iit says it is making cuts to departmental Budgets, but it still seems to be spending more than its income from tax, which is bad news.
    The government needs to get its cost basis in order, not simply rely upon future growth to sustain its existance.

    • lifelogic
      Posted June 19, 2013 at 10:08 am | Permalink

      The state sector needs to be no more than 30% not nearly 50% as now. They are 50% over remunerated already including pensions and many do nothing of any positive value for the economy at all.

  5. Mike Wilson
    Posted June 19, 2013 at 7:43 am | Permalink

    ‘House prices have started to advance …’

    To ADVANCE!!!! Whoopee – now my sons will DEFINITELY be moving abroad. Now they will have NO CHANCE of ever settling down in the land of their birth and, one day, enjoying the security of buying and owning their own home. Oh NO! That is only for the rich! Or the buy to let investors the banks favour with lending their made-up money to.

    House prices ‘ADVANCING’ (i.e. GOING UP! EVEN MORE! IF THAT WERE POSSIBLE!) is not a GOOD thing. It is a BAD thing. A very BAD thing.

    • JimF
      Posted June 19, 2013 at 11:48 am | Permalink

      Yes, I think this view from Mr R is very old fashioned, from the days when all good graduates aspired to work for ICL and buy a house. No student loan, lower NI ees, no silly NEST tax.

      In total these now take about £450 off a starting graduate salary, plus upper £200s income tax. Net result far less residual income to pay a mortgage on properties where interest rates can only go one way, unless the governemnt start giving loans away from printed money. Oh yes, that is just what is happening. Quite mad.

    • Tad Davison
      Posted June 19, 2013 at 12:38 pm | Permalink

      I’m right with you Mike. My lad is struggling like hell to save enough for a decent deposit to put down on a house, but sees his efforts as futile, as the cost keeps outstripping his ability to save. What’s your take on the rise in the cost of housing under the last Labour government?


      • Mike Wilson
        Posted June 19, 2013 at 3:07 pm | Permalink

        Tad, don’t get me started on the rise in the cost of housing under the last Labour government.

        In 1997, having won the election, Gordon Brown said; “I will not allow a house price boom to put at risk the sustainability of the recovery”. Sounded like a good idea. He watched the Tories destroy the economy with a house price boom and bust in the 1980s which caused a stagnant economy in the first half of the 1990s and he said he wasn’t going to make the same mistake.

        So, he introduced a new banking regulation regime and then stood by while a house price boom took place on an unprecedented scale. Here in the home counties, we already had high prices. But, in places like Liverpool and Newcastle, back street terraces went up in price from about 15k to over 100k as buy to let ‘investors’ descended like locusts buying up the houses and renting them to the council for housing benefit claimants to live in at a guaranteed £395 a month rent.

        A young kid in Northern cities, on average wages, has not one chance in a million of buying even a humble 2 up, 2 down terrace.

        Down here house prices went up by a factor of between 2 and 3.

        I bought a cottage in Cookham in the mid 1980s for £35k. Two up, two down cottage built for £105 at the turn of the century for farm labourers to live in. Thanks to the Tory house price boom in the 1980s and the Labour house price boom of 2000 to 2008, those cottages now change hands for £350 thousand. Unbelievable. They used to be lived in by postmen, labourers, tradesmen etc. Now, how much money would a young person need to earn to live in a very modest little property?

        80k a year? Even at the lowest interest rates in living memory!

        Yes, Gordon Brown and his co-idiots were complete fools who let the bankers get away with ruining the economy and ruining the prospects for the next generation. I hope, when the day comes, his epitaph will read ‘I will not allow a house price boom to put at risk the sustainability of the recovery’.

        But, alas, the Tories appear to be just as inept. Look at the comment here ‘house prices are advancing’ … from someone who most people regard as being one of the Tories few financially literate MPs.

        None of them get it. High house prices damage the economy. Full stop. If people are spending money on big mortgages they are not spending it in the shops. It is that simple.

        Reply I am describing what is happening. There are pluses as well as minuses. What matters is if more housing comes forward as a result of current policy. We all agree that a credit based price bubble with no extra building is a bad idea, and that’s what we had prior to 2008.

        • Mike Wilson
          Posted June 19, 2013 at 5:39 pm | Permalink

          Reply to myself! I have to say more. A lot of buy to let locusts bought up those properties in Liverpool, Manchester, Leeds and Newcastle when they were still 20k. Just 5 years housing benefit rent at £395 a month paid for those houses outright.

          After that it is just pure profit – less a lick of paint now and then.

          And the money is all provided by your good self and my good self. We are such wonderful and generous people. We stand by and get robbed blind by politicians who give our money to buy to let locusts to live the life of Riley.

          And all this was dreamt up and executed under the friend of the people, New Labour. Yes, they can house unlimited numbers of their voters and we can damn well pay for it.

        • Mike Wilson
          Posted June 21, 2013 at 7:28 am | Permalink

          Sorry Mr. Redwood. You must see your position is incoherent.

          ‘House prices advancing’ is not going to produce more houses – as people cannot afford them at current prices. What is going to happen over the next 20 years as the people currently, say, 25 years old get older. ‘House prices advancing’ mean they will never be able to buy. ‘House prices advancing’ must mean that, in due course, they will not be able to afford to rent – as rent is generally used to pay off mortgages. What will happen when interest rates rise? Rents up even higher?

          Your position is, I am afraid, completely illogical. All you are hoping for is for house prices to rise and for current home owners to feel a bit more positive. It is short termist, populist and, quite frankly, pathetic. We deserve better from a government.

          If we agree we need more house building then, sorry, we have to give people planning permission. We have to stop the situation where land to build on is so scarce, so sacred, that people knock down perfectly good houses to build half a dozen flats in their place. Where new build properties are built ever smaller with smaller gardens. Where parking is sacrificed over housing density.

          Look at Jennet’s Park in Bracknell. I know someone who lives there and, as the estate is developing, he says there is a lot of unpleasantness developing because there is nowhere near enough parking. Row after row of 4 bed houses with tiny gardens and one garage at the back with one parking space in front of the garage. On Sundays, when people have visitors – and no parking is allowed on the roads themselves – apparently a great deal of unpleasantness is taking place as people argue about other people parking in their spaces etc.

          We need to release land, in a big way, for self build for young people. That is the only way to stabilise the situation. House prices must come down so that people spend less on housing and more in the economy.

          Can you please explain why house prices going up – why people spending more of their income on housing (which is the inevitable consequence) is a good thing. And please don’t say that if people have more equity they spend more. The only way they can spend their equity is to borrow against the value of the house – and that is what got us into this mess in the first place.

          Reply There is nothing “illogical” in my position. I am describing and forecasting what is happening – house prices are rising now and are likely to rise further. That is not a wish or a policy recommendation by me, but a statement of the obvious.
          This is not all bad news, though I understand the point people are making here that younger potential buyers need lower prices to be able to afford new homes. The homes experiencing rising prices are clearly not unaffordable to some, as they are selling. Their sale at higher prices releases money for the vendors whilst requiring higher commitments by the buyers. More sales and pruchases in the market creates jobs and activity for all sorts of people.
          I have also in another post set out my position on the desirability of building more affordable homes for first time buyers who want to get started, and have explained how I think that could take place. Rising prices is leading to more homes being built. New homes are a small proportion of the market, so they do not have a decisive influence on house prices generally in most circumstances.

          • Mike Wilson
            Posted June 21, 2013 at 10:10 am | Permalink

            ‘Their sale at higher prices releases money for the vendors whilst requiring higher commitments by the buyers.’

            A sale at a ‘higher price’ only releases money for the vendor if they are exiting the property market or downsizing.

            A typical property chain could have first time buyers buying a property for 100k. The sellers take on an extra 50k mortgage and buy another property for 150k. The sellers of that property take on another 50k mortgage and buy a property for 200k. The person selling that property, let us say, is moving abroad. The 200k he moves abroad with represents the 100k the first time buyer paid + the 50k extra mortgage taken on the first vendor + the 50k extra mortgage taken on by the second vendor. Let us say the first time buyer has saved very hard for 5 years and put down a 20k deposit and takes on an £80k mortgage. The £200k the top vendor walks away with is comprised of the £20k saved by the first time buyer + his 80k mortgage + the extra 50k of borrowing taken on by vendor 1 + the extra 50k of borrowing taken on by vendor 2.

            As you can see, the top vendor’s pile of cash is comprised entirely of the first time buyer’s deposit and other people’s debt. It is not some magic pile of money that has grown over the years. It is just the sum of the deposit plus the additional debt.

            So, great, one person has a pile of cash and 3 others have a pile of debt.

            Now, house prices go up by a factor of 2. Multiply all the figures by 2. The person at the top of the chain walks away with 400k and everyone else has twice the debt. Mortgage payments are twice as large and 3 people have a lot less money to spend each month – creating demand and jobs.

            I am assured by local estate agents that many of the houses that currently sell are bought (largely) for cash. This is because interest rates are so low that people would rather put their money into an asset that returns a yield of 4% rather than leave it in the bank earning next to nothing. This element of the housing market will collapse when interest rates rise.

            This argument is pointless. You and your ilk are determined to base our economy on endless money being lent into the housing market, with eternal house price rises. The fact that this is completely unsustainable in the medium term you do not seem to give a fig about – nor do you care for the next generation. They are to be milked to pay our debts, to pay the interest on our debts, to pay our pensions and to buy our houses with ‘advanced’ prices. Your horizon is the next election. It is all you care about. You don’t care about the enslavement in debt that ‘advancing’ house prices inevitably means.

    • wab
      Posted June 19, 2013 at 7:33 pm | Permalink

      Mr Redwood is a Tory and the Tories are the party of the old and of the propertied classes, so perhaps from their perspective, house prices rises are “good”. But even most middle-aged people who have a house are really worse off with increased prices, because they cannot afford to move to a bigger property. Of course they can instead splurge on consumption by borrowing against the equity, and that is obviously the government “thinking” behind ever perpetual house price inflation.

      Unfortunately, almost all the media, including the FT, which really should know better, also report the story the same way as Mr Redwood. Apparently inflation is evil unless it is house price inflation, which is saintly, if you believe these people.

      If bankers should be jailed for “reckless misconduct” then MPs and civil servants should also be jailed for “reckless misconduct”. Government policy leading to absurd house (and energy) prices is reckless misconduct under any sane view of the world, and any MP supporting (indeed celebrating) these policies is equally guilty.

      Reply I describe what is happening and forecast what might happen. I understand worries about higher house prices, but you should understand what is happening and how it will lead to more building.

    • zorro
      Posted June 19, 2013 at 8:02 pm | Permalink

      Indeed….subsidies and probably no effective control over foreign non residents taking advantage of the bung….


  6. John Eustace
    Posted June 19, 2013 at 7:54 am | Permalink

    The report I saw on German TV news last night attributed the increase in UK car sales to the PPI compensation payouts from the banks arriving in customer’s pockets. That seems a plausible explanation to me. Admittedly it could be the UK sales heads managing their German bosses expectations as to the likelihood of the trend continuing.
    Unfortunately we can’t generate sustainable economic success through penalising banks for mis-selling – or is there another scandal in the wings ready to take over when PPI is finished?

    I think you have heard our views on house prices – brave of you to mention them again!

  7. Bob
    Posted June 19, 2013 at 7:54 am | Permalink

    Where were the cars made?

    “In order to join the EEC, we had to abandon free trade with a number of English-speaking democracies. As we applied the Common External Tariff in stages in the 1970s, our commerce was artificially redirected towards the European mainland. Glasgow, Liverpool and Bristol found themselves on the wrong side of the country, and went into decline.”

    • Tad Davison
      Posted June 19, 2013 at 1:06 pm | Permalink

      Thanks Bob, I’ll send that link to the local pro-EU Lib Dem MP, Julian Huppert, but doubtless he’ll not want to debate it with me. Just like one Kenneth Clarke, Mr Huppert is so convinced the EU is a fantastic thing that we really must belong to at all costs, he will not even entertain a proper debate on its inhibiting and chequered history, its present viability, or even its long-term sustainability. Thus, the problem remains, how does one change the mind set of a brick wall?

      We can give all these people all the facts in the world, and show them graph after graph, but obstinacy and intransigence have no logical basis. God help us if they ever serve on a jury! They’ll convict someone without even considering the evidence!

      One minor point about cars though. I always try to buy vehicles that have been made in Britain, in order to give a British bloke a job, even if it’s really only a glorified assembly plant, with components made elsewhere. Perhaps we all ought to think long and hard about only buying British goods wherever possible, and to hell with the EU altogether.


      • Tad Davison
        Posted June 19, 2013 at 1:07 pm | Permalink

        ………………….and I meant to add, Daniel Hannan for PM!


    • Jerry
      Posted June 19, 2013 at 1:28 pm | Permalink

      @Bob: Many of those ports were in terminal decline well before Mr Heath signed the UK up to the EEC, the decline was brought about by increasing container traffic and the restrictive union practices in the traditional ports that prevented them being converted to such traffic – for the port operators it was cheaper to build new ports, road and rail links and then use unskilled, non-union labour and this was often done were land was cheaper. Obviously, like Mr Hannan, Bob you are not old enough to remember the dock strikes of the 1960s and early 1970s…

      • Bob
        Posted June 19, 2013 at 6:25 pm | Permalink

        “Many of those ports were in terminal decline”

        Interestingly, last time I drove past Avonmouth there were acres and acres of imported cars awaiting distribution.

        Our only successful car factories are government subsidised and foreign owned.

        Even Gordon Brown’s “scrappage” scheme benefited overseas economies more than ours.

        The main growth sector for exports seems to be stolen cars in containers.

  8. formula57
    Posted June 19, 2013 at 8:23 am | Permalink

    That news is even better than you suppose for it is a repeat happening! From the Guardian – “Dec 14, 2012 – New UK car sales up 11.3% compared with 10.3% slump in Europe – with … this year, adding to signs that the UK economy could be recovering despite … .

    So a double blip recovery. Congratulations due to George.

  9. Normandee
    Posted June 19, 2013 at 8:44 am | Permalink

    I’m sorry but why are house prices increasing a good thing? we need a rationalisation of the housing market not continual increases in what is a false market. There is not a house in the UK that is good value for what it is, and it keeps debt levels in the UK at astronomic levels, with only Agents,Lawyers, and Banks profiting at higher levels than necessary. Governments should be weaning us off this high price circus, by controlling or freezing prices and as the French do, introduce a tax on equity that encourages long term residence and taxes speculators (the longer you stay in the house the lower tax rate on the equity, reducing to zero after, I think it’s, 12 years.)

    Reply Rising house prices encourages the building of more homes, and helps with confidence generally.

    • Mike Wilson
      Posted June 19, 2013 at 10:10 am | Permalink

      Reply to reply: ‘Rising house prices encourages the building of more homes, and helps with confidence generally.’

      You don’t seriously believe that do you? I always thought you understood a bit about economics and life in general.

      The only way house price above inflation (and there is NO wage inflation these days) – is by way of increased debt.

      People having bigger mortgages and paying higher rents is a BAD thing. Surely you can see that? Or are you so blind to the consequences of high house prices – so desperate for idiots to have some sort of ‘feel good’ factor based on their unearned, based-on-someone-else’s-debt equity – that you are going along with the herd?

      Sorry but this really is utter nonsense. The next generation are already priced out of the housing market and you make an inane remark like rising prices ‘helps with confidence’. Well I’ll tell you something Mr. Redwood – they don’t help the confidence of the next generation. They are crushing the next generation – forced to live with Mum and Dad into their 30s.

      It is time someone called a spade a spade and stated that our ludicrous ‘hey, we’re all rich because the banks have lent more and more money into the housing market’ mentality is ruining the economy.

      If you earn 2k a month and spend 1k a month on a mortgage or rent – that’s half your wages that you do not have available to buy things with and create demand, jobs and make money move around the economy.

      I can’t say what I really think of your comments and position because you would not publish my comment. I really did think you knew a bit better and were not one of the political establishment idiots that have bought into this ‘high house prices good, higher house prices better’ drivel.

      • zorro
        Posted June 19, 2013 at 8:10 pm | Permalink

        John seems to have a bit of a blind spot on this issue….The salaries and high paying jobs are not there to support these prices. The only thing supporting them are the controls on building, results of excess immigration and Osborne’s subsidies……It is a truly Brirtish disease/mindset/herd psychosis….it is all based on funny money and UNSUSTAINABLE DEBT…..


    • A different Simon
      Posted June 19, 2013 at 11:02 am | Permalink

      Quote “Reply Rising house prices encourages the building of more homes, and helps with confidence generally. ”

      Only if those who are holding land and preparing to build believe that the house prices will not fall .

      If prospective housebuilders think land prices are being artificially maintained at above their natural level or stimulated then they are going to put investment on hold .

      If the market was allowed to function properly so that house prices were allowed to fall to their natural level housebuilders could have real confidence that they had bottomed out .

      So many policies seemingly unrelated to land prices are when you look at it related to land prices . Pensions schemes were closed down and the Govt made no effort to ensure adequate saving specifically so that the money not saved could be funneled in to land prices and mortgage interest .

      MP’s should be prosecuted for their dereliction of duty on this as the problem of inadequate provision for old age comes home to roost with a vengeance .

      Perhaps a bit of carrot is needed . An annual land value tax payable whether the land is developed or not to deter hoarding and underutilisation .

      Both the fed and the bank of england have pointed out that house prices are at unsustainable bubble levels . I would have thought MP’s should be concerned if house prices are going in the wrong direction .

    • Normandee
      Posted June 19, 2013 at 11:36 am | Permalink

      it encourages the building of the wrong type of housing, building the higher price houses to maximise profit, not the smaller more economical we very badly need. This is why an element of control is needed, the builders need to be convinced to build what we want not what they want. Government contracts can help this, selling on to agents at cost (including an element of government costs). The Agents would be government appointed and controlled, this would create a first time and economical home owners programme, solving a lot of the housing problems we have now.

    • JimF
      Posted June 19, 2013 at 11:38 am | Permalink

      Reply to reply
      I think you are wrong. Despite owning my own house I feel LESS confident about the future when I hear increased house prices. The next generation will be LESS able to afford to stay in the Country (except, of course, when they are on 26K a year benefits).
      Doesn’t this shout something to you?

    • waramess
      Posted June 19, 2013 at 12:42 pm | Permalink

      Reply to Reply,

      What an astonishing statement. Cheaper houses will result in more buyers and lead to more house building.

      More expensive housing will lead to less demand and less housebuilding unless we are to encourage unsafe lending once again, in which case someone other than just the buyer will be in deep trouble.

      Reply Sometimes the logic of the market is reversed.London has the dearest properties by far, the fastest rate of house price inflation, and the best build rates.

      • PT
        Posted June 19, 2013 at 1:11 pm | Permalink

        And who’s buying all those new London houses, Mr Redwood? I’m sure you’re aware that geniune, domestic home buyers account for very few of these purchases.

      • Mark
        Posted June 19, 2013 at 3:59 pm | Permalink

        And as we know, 74% of London newbuilds are sold to overseas buyers off plan – often not for occupation, but as speculative investments kept vacant to preserve their “new” cachet among Asian buyers. The activity doesn’t reflect on the UK economy at all, but rather on the tiger economies of Asia. It doesn’t even provide new housing. Just piles of unoccupied bricks.

    • Mark B
      Posted June 19, 2013 at 2:12 pm | Permalink

      It is a simple question of demand and supply.

      Governments all over the world and throughout history have a very bad record when interfering with the free market. Soviet Russia collapsed in part, to the fact that a very small number of people thought they knew better and the real value of things. It didn’t end to well did it !

  10. Acorn
    Posted June 19, 2013 at 9:01 am | Permalink

    Germany still knocked out five and a half million cars against our one and a half million; the latter being a quarter less than the UK used to make back in the seventies and France still makes. Nearly six years after the Great Recession started, our Austerian flagellators, still have us six percent below the trend GDP growth line that Alister Darling left. That’s what Austerian flagellators do I suppose

    • Mike Wilson
      Posted June 19, 2013 at 10:11 am | Permalink

      And your answer would be more debt?

      • Acorn
        Posted June 19, 2013 at 7:23 pm | Permalink

        Yes. Government debt is not what you think it is in an economy that issues its own fiat currency; and, can never go broke in that currency. It can always pay any bill presented to it in its own currency.

        Try the bank of Mum and Dad game with the kids. Dad is the Treasury, Mum the FED. Dad spends some DadDollars that mum designed with photoshop and printed off in her locked dressing room (a family sovereign fiat currency is created). Dad buys services from the kids like washing the car etc., in exchange for DadDollars. The kids say these are just bits of paper they are no good to us. Dad says, if you want to keep living in this house it is going to cost you ten DadDollars a week. Welcome to tax driven money.

        Notice that Dad spends before he ever gets close to getting his DadDollars back from taxing the kids. When he does, Mum will tear them up and print nice new ones when Dad needs them. Mind you, printing to many and spending them on more services than the kids are prepared to give time to, will force up the price of kids and inflation gets invented in the family economy.

        Dad notices at the end of the month, that he is not getting all his DadDollars back, the kids are saving them, hence Dad is running a deficit, which is accumulating as the family (think national) debt. Little Jimmy wants a week off, and he is planning to sub-contract some of his chores to his siblings, for which he will have to pay in DadDollars that’s why he is saving. Jimmy’s saving is Dads deficit.

        Little Merv thinks he could start a bank and make loans that will create deposits, this would be a different sort of money to DadDollars. Merv knows that he will have to balance his assets with his liabilities because he will end up being a USER of DadDollars. Dad and Mum don’t have that problem. They don’t have liabilities, they ISSUE the DadDollars.

        Notice that Dad spends before he taxes and taxes don’t pay for anything. They are used to control the number of DadDollars in the economy (overheating, inflation). Likewise, Dad does not have to borrow money from anybody, he issues it, or Mum does for him, but he can choose to do it to allow Mum (the central bank) to control the interest rate and the liquidity of DadDollars in the economy.

        • Mark
          Posted June 20, 2013 at 8:07 pm | Permalink

          Mugabe tried that. So did the Weinar Republic.

          • Mark
            Posted June 20, 2013 at 8:07 pm | Permalink


          • Acorn
            Posted June 21, 2013 at 6:46 am | Permalink

            They didn’t try it, they did it, not seeing a problem. They proved the passage above: “Mind you, printing to many and spending them on more services than the kids are prepared to give time to, will force up the price of kids and inflation gets invented in the family economy.” Weimar unemployment benefits did it for them and having to pay war reparations in hard currencies.

        • Mike Wilson
          Posted June 21, 2013 at 7:37 am | Permalink

          Your example is, I am afraid, simplistic and, in fact, rather puerile.

          We, as a country, do not live in a bubble. We have to trade. We have a currency and that currency has to have a value against other currencies. If Mum just keeps printing willy nilly, other countries will say ‘I don’t want a million of your silly bits of paper, I want 10 million’.

          I can’t be bothered to explain it all to you – but rest assured that of the £700 billion (or whatever the current number is) that the government raises in taxation they are, ACTUALLY, paying about 60 billion of that money in interest to the people who have lent the government money. That figure is rising every day and in the not too distant future we will be spending as much money on debt interest as we do on the NHS.

          If the money printing continues ad infinitum, inflation will rise even higher and investors will start demanding higher returns on the money they lend the government. This will cause what is known as a ‘debt spiral’.

          • Acorn
            Posted June 21, 2013 at 5:00 pm | Permalink

            Have you ever stopped to think where the money comes from that the government borrows? We here at Acorn only know one bloke that issues Pounds Stirling; his name is George Osborne.

            “I can’t be bothered to explain it all to you”.

            Sorry Mike, but we are falling off our seats here laughing. BTW, its circa £575 billion in National Accounts Taxes and £49 billion in Treasury interest payments. About a third of those interest payments the government is actually paying to itself. That’s because the BoE (Mum as above) has swapped the Gilts and Treasuries for some out-of-thin-air cash under QE and the APF. The Treasury owns the BoE, at the macroeconomic level, in a sovereign fiat currency economy, they are one and the same entity.

            That’s enough for today.

  11. margaret brandreth-j
    Posted June 19, 2013 at 9:14 am | Permalink

    I presume these car sales include continental brands

  12. Robert Taggart
    Posted June 19, 2013 at 9:25 am | Permalink

    Damn, more congestion, more pollution and more debt – for those materialists who just cannot do without their ‘toys’.
    Moi ? never even had a driving lesson – let others ‘chauffeur’ us around !

    Reply Yes, non drivers still travel by bus and taxi.

    • lifelogic
      Posted June 19, 2013 at 10:12 am | Permalink

      Nothing more annoying than Guardian think lefties cadging a lift from you to somewhere or other then telling you about the evils of cars and the virtues of bikes and public transport all the way.

      • Robert Taggart
        Posted June 19, 2013 at 1:57 pm | Permalink

        Guardianista ? – Moi ?? – NOT !
        Bikes ? – for this couch potato ?? – NOT !!
        Public Transport ? – virtuous ?? – YEP !!!
        Cannot afford anything else – cannot even afford that sometimes – train ‘unfares’ !!!

        • lifelogic
          Posted June 20, 2013 at 7:55 am | Permalink

          I was not suggesting you were like that.

    • Robert Taggart
      Posted June 19, 2013 at 11:06 am | Permalink

      Taxi ? – not on our ‘expenses’ – courtesy of DWP !

    • Jerry
      Posted June 19, 2013 at 1:39 pm | Permalink

      @Robert Taggart: Modern cars do not live for ever, not every new car sold by the dealer means an extra car on the roads.

  13. ian wragg
    Posted June 19, 2013 at 9:42 am | Permalink

    Interesting article in todays business section of the Telegraph on the bloated state sector and where to cut.
    No chance of this happening with the LibLabCON. Better we wait ’till the stables have been cleared out and then we may get some real growth.

  14. Mike Wilson
    Posted June 19, 2013 at 11:15 am | Permalink

    I have to comment again … because this thread contains the most nonsensical comments I have seen in a long time.

    ‘Rising house prices encourages the building of more homes …’ which people CANNOT AFFORD because of the rising prices!

    Orwell, where are you?

    And the houses builders build – when the state graciously gives its permission – are smaller and smaller and smaller – while the prices are getting bigger and bigger.

    We appear to live in a mad house.

    • Jerry
      Posted June 19, 2013 at 1:49 pm | Permalink

      Mike Wilson: “We appear to live in a mad house.

      Indeed, and many have paid good money for it, at least when one rents one can much more easily change houses, even change county if that is were the work is…

      • Mike Wilson
        Posted June 19, 2013 at 5:24 pm | Permalink

        But renting these days, under the Conservative introduced Shorthold Tenancy Agreements – where your security of tenure is just 6 months means that renting – other than for youngsters sharing – is not a practical proposition for families. If you get your kids into a local school and then get kicked out of your home and can’t find anywhere to rent locally, you are stuffed.

        If governments are determined that a small group of Buy to Let landlords should own all the property and the rest of us should rent like serfs – they are going to have to change the tenancy laws so people can rent long term – at guaranteed rents and be able to decorate their homes to suit themselves. Oh, and not have some eegit from an estate agent around every 3 months to do an ‘inspection’.

      • lifelogic
        Posted June 20, 2013 at 7:57 am | Permalink

        Indeed unless you have have cash you either rent a house or rent (borrow) the money to buy one. Often the former is a better option.

  15. PT
    Posted June 19, 2013 at 11:22 am | Permalink

    So house prices ‘advancing’ is to welcomed, is it? Wow, just wow. You’ve gone way down in my estimation Mr Westwood. Have you really reverted to the ‘if all else fails, boost house prices instead’ politcal mantra? Seems so.

    And once house pricess continue to ‘advance’ ahead, what happens when affordability is stretched to the limits once again? Cut rates to 0%? State backed 100-125% mortgages?

    And if rising house prices are the answer sufficient housing supply, why did we still fail to build enough during the biggest price boom in our history, circa 2002-2007?

    Reply I was sorry to learn you now have a dimmer view of Mr Westwood, whoever he might be.

    • Tad Davison
      Posted June 19, 2013 at 1:22 pm | Permalink

      Reply to reply. My apologies. For the last twenty-odd years, I’ve called you ‘John’. Sorry Vivienne, I’ll remember in future! lol


    • PT
      Posted June 19, 2013 at 1:28 pm | Permalink

      Oops, silly me. Apologies.

      I’d still appreciate if you’d address my points.

  16. Iain Gill
    Posted June 19, 2013 at 11:41 am | Permalink


    Come off it. Car sales are a market heavily manipulated by the government.

    Super low interest rates pushes sales up just like houses.

    In cars we have punitive taxes on cars only a few years old, as what was at the time considered reasonable emissions now pushes them into very expensive tax brackets, destroying the value of many second hand cars and incentivising folk to buy new ones. And the simplistic way the green attributes of cars is measured for tax purposes has pushed a lot of unreliable technology into the market to push down exhaust emissions, but all that unreliability leads to more workshop time which in itself is not green.

    And of course mostly the car sales you are so pleased about are being imported, many from countries which have trade barriers in place to hamper British businesses selling in their markets.

    So I don’t see anything positive in this news.


  17. Iain Gill
    Posted June 19, 2013 at 11:50 am | Permalink

    Oh and being on the side of house price rises in the current environment where they are already heavily manipulated by government and unrealistically high is probably not the best of stances for you. The house price market needs a big correction downwards, and that will happen sooner or later, the government has manipulated the current situation but they will not be able to do that for ever. I can buy the land and build a decent 3 bed semi for around 50 K most of the rest of the money is propping up the state run planning industry.

  18. Richard1
    Posted June 19, 2013 at 12:21 pm | Permalink

    Yes that is good news.

    But growth wont be helped by these absurd proposals from the banking commission. With a sensible chap like Andrew Tyrie in the chair I’m surprised some of this got through – perhaps it was the Archbishop’s contribution. If you tell bank directors that 1) the most important thing is safety in lending and if they are found to be ‘reckless’ in a vague and subjective way they go to gaol, and 2) they cant have any incentive payments for 10 years, then those bank directors will prefer very high fixed salaries, no bonuses, no share options and will deploy their depositors’ money where they cant possibly be criticized – gilts for instance. That will stifle UK growth and kill the banks as any kind of commercial enterprise.

    On this subject I caught bit of today’s The Daily Politics. On it, Lord Myners slandered you by saying: ‘In 2004 John Redwood produced a report for the Conservatives saying the problem with banking is there was far too much regulation’. he was not challenged on this nonsense even by Grant Shapps who should have known and be briefed to say: Labour implemented all sorts of useless box-ticking regulation and set up a useless ‘tripartite’ regulatory structure which failed. Under Labour, UK bank leverage, which had been stable for the 80s and 90s at c. 20x, rose to c. 50x. That, along with the build-up of debt (also Labour govt policy) was the reason for the bank collapse and the recession. I suggest you prepare a crib sheet for all your colleagues on this, it really is absurd that Labour politicians arn’t nailed to the wall on this issue whenever it comes up.

    Reply Yes that is an old Labour line which Mr Shapps should have knocked down.

  19. uanime5
    Posted June 19, 2013 at 12:41 pm | Permalink

    How do that car sales figures in these countries compare to 2008 levels? After all if the UK’s car sale figures are still below the 2008 levels, while other European countries have already recovered, this means that the UK is recovering more slowly than other countries.

  20. waramess
    Posted June 19, 2013 at 12:48 pm | Permalink

    Has God answered the print and pray group with a positive response or are they just whistling to keep their spirits up?

    Economic activity will manifest itself quite clearly when unemployment figures come down consistently month by month for a couple of successive quarters.

    Not really much chance of that then?

  21. Credible
    Posted June 19, 2013 at 2:47 pm | Permalink

    Why is advancing house prices a good thing? There is plenty of demand for houses as it is, but most people can’t afford them.

    • lifelogic
      Posted June 19, 2013 at 4:36 pm | Permalink

      Demand is not real demand unless it is backed by the ability to pay, without that it is just desire. We would all desire a nice house in Chelsea with river views but we are not creating demand unless we have the £20M to pay for it.

  22. Mark
    Posted June 19, 2013 at 3:39 pm | Permalink

    Even the Building Societies have publicly said that Help to Buy is a bad idea, inviting a bubble:

    It’s not inspiring confidence among bankers, and if it leads to rising rents it will soon suck out the lifeblood of the economy.

    • Jerry
      Posted June 20, 2013 at 6:46 am | Permalink

      @Mark: “Even the Building Societies have publicly said that Help to Buy is a bad idea, inviting a bubble:

      Whilst very true, I would not have expected the Building Societies to have said anything different, even if there was no risk of a bubble – think about it…

  23. Turnbull
    Posted June 19, 2013 at 5:54 pm | Permalink

    I live with my sister and can’t afford a house. Even here ‘up north’ you can’t buy much for under a squillion quid!

  24. Jon
    Posted June 19, 2013 at 6:10 pm | Permalink

    Great news indeed. What are we doing to stop the war on financial services from the EU ? I’m also sceptical about Steve Webbs’ proposals for collective funds for large money purchase pensions.

  25. Winston Smith
    Posted June 19, 2013 at 10:24 pm | Permalink

    New car sales have been increasing for the past 2 years. What and where are they being sold?

    I’ve posted this on here before. A large number of new car sales are subsidised by taxpayers: the Motorbility scheme and also the VAT dodge on adding a disability feature – buy a £30k car for £25k by adding a £250 mobility feature. Then remove it and sell the new car for £28k.

  26. Alte Fritz
    Posted June 20, 2013 at 9:59 am | Permalink

    Someone should tell Ken Clarke.

  27. Lindsay McDougall
    Posted June 20, 2013 at 10:19 am | Permalink

    Most of this is good news but we need rising house prices like we need a hole in the head. It is difficult to easy any long term good coming from the Governor’s (and government’s) policy of ultra-easy money. Perhaps we are already starting a pre-election boom.

  28. Mike Wilson
    Posted June 21, 2013 at 11:43 am | Permalink

    One final comment on this topic, if I may … I must say I am impressed by the fact that the host permits some fairly harsh and contrarian comments aimed at his views.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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