Housing is the real Tory problem

Whoever picks up the poisoned chalice of Tory party leadership, the main problem they should address is not Europe, not the single currency and not pay packet tax cuts. It is the housing market, and how to revive it.

Almost all economic prosperity derives from the spin-offs that flow from confident home-trading. And although Britain's sovereignty and the way we allocate our national resources are, of course, far weightier long-term concerns than negative equity, the fact remains that the Tories will never be re-elected to tackle these greater issues of destiny unless they first restore normal working order in the housing market (ie, house prices not going down).

The crucial centrality of housing to construction's fortunes is underlined this week by the Construction Forecasting and Research figures on workload prospects. Thanks to the 1995 drop in house sales, expectations across the economic board have been downgraded (see page 12) so that 2% total growth is now all that is predicted over the next three years. Should housing weaken further - as it shows every prospect of doing - standby for a further downgrading of even that modest figure.

CJ has recently argued that against a national backdrop of job insecurity, mere tinkering with Miras and abolishing stamp duty would be insufficient to restore housing's 'feel-good' factor. Starkly, we concluded that nothing would - short of a miraculous economic upturn. On further reflection, and after lively discussions with a number of leading housebuilders, we have been persuaded to modify our line.

Job insecurity will undoubtedly continue to act as a depressant on many people's home-trading activities. But perhaps - and we can say it no more strongly than that - a raft of tax measures can be forced past the Treasury that will make house purchases a far more attractive proposition for those more confident souls who wish to move. A critical momentum of movement would result, which could transform the bleakness currently gripping home-owners and those who nervously aspire to that status.

The incentives would have have to be considerable, and Treasury would hate such profligacy. Additionally, the action would reduce the scope for across the board tax cuts, making it unfair to those untouched by the housing slump. But the truth is, the lives of the vast majority, be they owners or not, are being held back by this malaise. Economic recovery, from which all will benefit, is impossible while it continues. Messrs Major and Redwood take note.