8 May 2009

MPs’ expenses: did system fuel the housing boom?

Big Ben in the rain - ReutersIf you step away from the details of bathplugs, unnecessary taxis and sibling cleaning contracts, there is a staggering picture emerging about the MPs who decide our laws.

During the biggest housing boom in Britain’s history (and some economists argue in world history) many of the politicians who had the power to rein it in were in a position to benefit handsomely from that boom, at taxpayers’ expense.┬áIt’s what I would call culturally corrupt rather than actually corrupt.

MPs have been able to claim for mortgage interest, plus other expenses for the running and maintenance of a second home – an asset which soared in value.

The 200 per cent increase in house prices over the past decade in the UK, compares with about 4 per cent in Germany.

That huge increase did not universally benefit all in Britain. It was a massive redistribution to homeowners from homeseekers. It was a redistribution that led senior Bank of England figures to question privately why younger people weren’t kicking up more of a fuss.

So I raise the question that MPs’ expenses may anger the public for many reasons, but did they indirectly contribute to the severity of this recession?

Our MPs were at the very best immune from the downside of the property boom thanks to their parliamentary perks. At worst some MPs appear to have built small buy-to-let empires on the back of the taxpayer.

Politicians talked a good game about “affordable housing”, but fundamentally their own personal financial interests – in pure economic terms – could have been to make housing less affordable.

Let’s put it like this: if MPs were as nakedly exposed to the dark underbelly of Britain’s housing surge, without the featherbedding of their expenses, would there have been more political pressure to rein in the boom?