IEA Senior Research Fellow Jamie Whyte has written for CapX criticising proposals for the government to subsidise mortgage holders.

Jamie wrote:

“The Government prevented people from working during the pandemic and paid them with money freshly created by the Bank of England. The money supply increased much faster than economic output. This supercharged inflation, which is now causing interest rates to rise.

“Sir Ed Davey thinks the government should give a total of £3bn to mortgage-holders finding it difficult to meet their payments. If that £3bn were supplied by money printing, it would only exacerbate the underlying problem. But Sir Ed wants the money to be raised by taxing banks.

“British banks already deliver feeble returns to their shareholders. If Sir Ed has his way and imposes another £3bn cost on them, they would have to respond by increasing prices for their other customers. The pain would be shifted from a subset of favoured mortgagees to other bank customers.

“Subsidising mortgage payments would also increase demand to buy homes, thereby pushing up their price. In other words, Sir Ed’s policy would help people who bought homes they couldn’t afford to finance at the expense of people who do not yet own homes.

“No problem is so bad that it cannot be made worse by the meddling of politicians. Alas, meddling is all politicians have to offer. They meddle us into trouble, and then they promise to meddle us out of it. And, in the process, they show themselves to be morally bankrupt. They talk about fairness and what people deserve, but they understand economics so little that they cannot anticipate even the most predictable  effects of their policies or who will bear the cost.”

Read Jamie’s full piece here.