QE 2 – An alternative to bailing out the banks again

Whenever you disagree with accepted wisdom and just can’t be made to fall in to line with the plans of the established experts, eventually people get exasperated with you and say, “Yeah, well what’s your idea then? Eh? Let’s hear your plan.”

So here is a plan.  Not a whole alternative budget or new economic plan for saving the nation. But a concrete costed (roughly, but not too roughly) and practical plan for stimulating the economy.

It is based on the rumour-cum-expectation that the BoE is going to print up another 100 billion pounds and use it to buy up bonds from the banks and maybe a few other industries.  I have an alternative plan for this 100 billion.  For the sake of argument let’s leave all other madness and idiocy equal.

So, the official plan is to QE 100 billion pounds into existence and use it to buy bonds.  The result of the plan will be to funnel that money mostly into the usual big banks and a lesser amount possibly into some other big companies.

This plan will inject lots more cash into the banks while at the same time relieving them of bad loans and debts probably in the Commercial property sector which is looking very poorly indeed. Basically this will be another bail out but avoiding having to call it that.  The injection will be accompanied by the customary grovelling admonishments about how the government expects (read ‘begs’) the banks to use the money to invest in the wider economy.  Which, given that the banks haven’t with all previous money, they won’t this time either.

The money will disappear into the banks and never be seen or heard from again.

That’s the official plan – basically – making noises about helping ‘the economy’ while just bailing out the banks.

My plan starts from somewhere else entirely and doesn’t involve the banks.

Did you know there are according to recent official figures about 300 000 empty properties in the UK?
Not second homes, of which there are about 228 000, but long term empty.  My plan is to tackle this.

Did you also know that there are at least three way councils can force these properties to be made available for people to live in? Some are in the Housing Act of 2004. Councils can Compulsory Purchase. They can enforce a sale. Or they can serve an Empty Dwelling Management Order.  These range from buying the property to working with a landlord/owner with grants to improve the property in return for the council having control for a while over who lives there.  (It’s obviously not quite that simple but that’s it roughly.)

My costings are deliberately high.  I am costing for outright purchase at full price. Obviously, if properties were renovated with grants, the costs would be much lower. But I prefer to give you the highest possible costs.  So I will use average prices with large errors on the side of safety so as to over-estimate costs.

The average price for a one bed flat in the UK is £219K, for a terrace house its £186K and for a semi its £200K.  Because I have no figures for the breakdown by type of the empty housing, I’ll use 210K as a very generous average price to cover all the empty properties.  300 000 properties at 210K comes to £63 billion.

Now we own 300 000 properties.  Next let’s very generously assign a massive 90K PER property for renovation and fitting.  This will include works necessary to create fire reg. compliant access and egress in the case of properties above businesses. It will also include re-fitting to ABOVE standard regs for insulation.  300 000 at 90K comes to another £27 billion.

Purchase and renovation together comes to a grand total of £90 billion.  I have £10 billion left over.

OK, what have I got for my colossal amount of money spent?  I have 300 000 new properties without building on a single brown let alone green field site.  A great many of these properties, now homes in waiting, will be in city, town and village centers.  They will be therefore in walking distance of local amenities and shops.  They will therefore contribute to the local economy.

In cities they will create exactly the low cost housing needed.

The properties will put £63 billion DIRECTLY in to the pockets of those people who we bought them from.  That £63 billion is not controlled and hoarded by the big banks. It is IN the wider economy.  Those who we paid it to may invest it or spend it on holidays, cars or buying other properties.  Who knows. What we do know is the cash is distributed into the real economy.

I will also have spent the other £27 billion paying builders, plumbers electricians, fitters, double glazing makers, boiler manufacturers, painters, tilers and all the businesses they in turn buy from, insulators, paint merchants etc.  That money will also therefore be sent circulating IMMEDIATELY into the real economy.

I will have provided a great deal of employment. I may have taken some people off the dole to do all this work.  I will certainly have helped all those businesses who supply building materials.

I will have improved the housing stock of the country.  I will have improved the vibrancy of towns and cities.  I will have taken anything up to 300 000 families or individuals off housing waiting lists.

So what down side might there be?  Well it is possible I could depress rents.  Not certain, but possible.  On the other hand I will have brought some needed competition into the rental market also.

So in summary.  The official plan – help the banks and ask them pretty please if they would condescend to help us a little when and if they can manage – you will be able to watch unfold and achieve nothing over the next year or so.  Sadly you won’t be able to judge my plan – turn 300 000 empty properties into homes and in so doing also put 90 billion pounds directly into the ground level of the wider economy – because it won’t happen.

That last £10 billion you  thought I’d forgotten about – I’m going to take £2 billion to pay for legal and admin costs.  I thought I’d leave it to you to suggest what to do with it the rest.