Was today’s financial crisis partly driven by irresponsible lending or irresponsible borrowing? We might expect institutional lenders generally to know a little more about risk than borrowers, conduct appropriate credit checks and offer sound advice. The failure of this theory implies large-scale irresponsible lending on an international basis.
We have seen mortgage lending occur on ridiculously high income multiples and in a deceptively low interest rate environment. If we have an interest rate of 5%, adding 1% to that represents a 20% increase in outgoings. Today we must empathise with the many real victims of this cavalier lending approach in our real economy.
It is surely right that governments collectively intervene to try and stabilise the financial markets upon which so much else depends. Some American commentators have called this “capitalism on the upside, socialism on the downside”. I do not care what they call these remedies, only that they work. We are all mortgage holders now.
At the same time, we are bound to ask how the government credit guarantees themselves are being funded and what impact there would be if these huge sums of money actually had to be paid. If governments had intervened earlier, would these guarantees have even been necessary? Perhaps there was a case for both capitalism and socialism on the upside with restrictions in place to prevent lending on unsustainable multiples. Unbridled capitalism has created today’s mess and we must surely learn from that.
Other forms of intervention can be made to assist economic activity nationally and locally. There will be opportunities to start construction projects and we are well placed to do this inCrawley. The Town Centre North scheme is a major part of this but there are other initiatives alongside it.
The council will soon be letting two of its largest contracts ever. These will be to progress towards the Decent Homes Standard and the higher Crawley Standard for our council housing stock of more than 8,000 dwellings. Alongside this, we have the major neighbourhood centre regeneration projects in Bewbush and Langley Green. We are also accelerating the neighbourhood centre improvement programme.
A particular challenge with the fallout from the credit crunch is the delivery of affordable housing. There is reduced capital coming in from council house sales and slower starts on new development sites. Today’s economic conditions make the supply of affordable housing even more important and we will look creatively at how to deliver this.
Government can decide to help us. They could stop taking from us more than £13 million ofCrawleytenants’ rent each year and they could help make the direct build of affordable housing an effective means of delivering the numbers required. Given their readiness to intervene elsewhere, I hope that the government will not be found wanting.
Councillor Bob Lanzer, Leader of Crawley Borough Council
13th October 2008