The Bank of England Inflation Report and housing
Gavin Smart, director of policy at CIH, talks about the inflation report and the role housing could play in the economic growth in his latest blog.Yesterday saw the release of the latest Bank of England Inflation Report in which the Bank revised down its prediction for growth in the UK economy in 2012 to zero. A year ago the Bank had been expecting growth of 2%, something close to recent, pre-recession growth.
The Bank’s views mirror those of many other economic commentators, including theInternational Monetary Fund IMF, that growth remains elusive and that the downturn may continue for some time. The Bank suggests that economic activity may not now reach pre-financial crisis levels until 2014.
This is an unprecedented period of economic stagnation, now far longer than even the Great Depression of the 1930s as this analysis by the National Institute of Economic and Social Research shows.
Interviewed yesterday on Radio 4’s Today programme former director general of the Confederation of British Industry (CBI), Sir Richard Lambert, highlighted the role that housing could play in promoting economic growth. He said that housing and construction schemes should be high on the Chancellor’s list of options for creating more jobs and stimulating growth.
When asked to identify options for tweaking the Chancellor’s recovery plan he said “bold” housing schemes were an obvious place to begin.
His recommendations for growth reflect the views expressed by CIH chief executive, Grainia Long, in her speech during Housing 2012 when she said: “The government’s growth strategy must be redrawn, rebalanced - and must put housing front and centre.”
“Every pound worth of investment in construction is worth £2.84 to the economy.”
In a previous blog about the IMF’s analysis of our economic prospects I described housing as an underused tool in the government’s bid to return the economy to growth. Richard Lambert would appear to share this analysis.
Continued disappointingly weak growth in the UK economy only strengthens the case for government looking to housing investment to bolster its growth plans. It played a key role in our recovery from the 1930’s recession and has the potential to perform the same role again.
And of course housing investment could also play a big part in beginning to address the massive housing supply crisis we face. There is much to gain here, for government, for people locked out of the housing market or living in poor and unsuitable homes and for the country at large.