The temptation to be seen to be doing something rather than nothing is very attractive for a politician. George Osborne took the opportunity at last night's annual Mansion House speech to do just that. Faced with a housing market in the south-east of England that is livelier than a Brazilian beach carnival, Mr Osborne has decided to grant new powers to the Bank of England to cap mortgages, by either limiting the amount buyers can borrow compared to their income or by restricting the proportion of a house price that can be paid with a mortgage.
Tackling the overheating housing market is to be applauded, given the rapid rise in prices in London and elsewhere in the south-east of England. The IMF has warned that it is a major threat to stability and to the progress of the economy out of recession. Acting on that without the clunking fist of across-the-board interest rate rises would be admirably surgical, since this way the residents of Kingston upon Hull are not punished for the spendthrift house buying of Kingston upon Thames. But there is a problem here: Mr Osborne's policies are incoherent.
If the issue is an overheating property market, then the very first part of the solution lies in Mr Osborne's hands, by ending or curtailing his own Help to Buy scheme. By not doing so, while pushing the Bank of England to take action, he risks pressing down on both the accelerator and the brake at the same time.
Then there is the question about whether this is the right action to be taking. It is unusual for a Conservative government to be imposing what looks something like the credit controls of an earlier era. But that aside, does the Bank really want to be the government's fall guy? When Threadneedle Street raises interest rates, as it probably will need to do sometime soon, it affects mortgage repayments, credit card bills and investment. The danger is that the Bank will prefer not to place lending limits on individuals. If Mr Osborne really thinks that house prices are too high and mortgage lending qualifications need to be tightened, then he should do it himself, and be held accountable.
The root causes of England's house price boom are manifold and long-standing, the prime one being as always that Britain is a crowded island and space is at a premium in and around London. Building new houses is difficult and expensive, and Mr Osborne is also to announce new plans and money to redevelop so-called brownfield sites. Alas, brownfield sites are to the housing market what crackdowns on tax evasion are to fiscal policy: a magical resource for politicians. The real problem remains: too few houses where there are jobs, and too few jobs where there are houses.
