A sadly all-too-revealing interview on this morning’s Radio 4 Today programme between John Humprhys and Edward Alan John, the Baron George, GBE, PC, DL (the former Governor of the Bank of England).
John Humphrys: I don’t know if you’ve seen The Times this morning but you know the story, that house prices, they reckon the next generation will be having to pay ten times – ten times, extraordinary – their annual salary to buy a house. That’s a huge amount of money, isn’t it, relative to earnings?
Eddie George: Well, of course. I don’t think that’s true across the whole of the population. I haven’t actually read the article very carefully but I think it’s some sectors of the population will have to pay ten times their earnings – people on relatively low earnings. But nevertheless it’s a serious problem and I think affordable housing is a major issue. I don’t think that it’s caused solely by the reduction in interest rates during the period of global weakness.
Humphrys: No, no, but it’s a factor, isn’t it?
George: We were very conscious of what we were having to do and we tried very hard not to do more than we had to to keep the economy moving ahead. But if we hadn’t done it, then we would have actually seen a decline in output [and] a rise in unemployment. That wasn’t something we thought was sensible to see.
Humphrys: But shouldn’t the people who manage, who run our economy take serious note of what’s happening in the housing market?
George: Of course they do.
Humphrys: But I mean, if we’re at the stage – and we are there now probably, aren’t we? – where an awful lot of people simply – not just young people but nurses on modest incomes, living in the south east – simply cannot afford to buy a house, surely somebody should do something about that?
George: Well, of course. I have every sympathy with people who find themselves in that sort of situation. What you do find is that an awful lot of parents are assisting – I think this was mentioned in the article – are assisting their children to operate in that kind of environment, but I think the real issue is the availability of affordable housing and I think that in lots of parts of the country that’s going to be an issue for some very considerable time.
Humphrys: Does it worry you that individually now we owe so much? Huge numbers of people are massively indebted.
George: Well, they’ve also got massive assets.
Humprhys: Not everybody.
George: Of course not everybody, but you can’t run the economy to put everybody in an ideal situation. I mean, that’s just not realistic. I mean, you have to focus on the economy as a whole if you’re operating at the sort of macro-economic level and that’s what we did.
For the record, Sir Edward George (then a mere commoner) earned a basic annual salary of £256,893 when he left his post as Governor of the Bank of England in 2003.
Also for the record, some other earnings statistics (2007 data):
• Current starting salary for a newly-qualified nurse – £20,026
• Current starting salary for a newly-qualified teacher – £19,641 (though most teachers get a golden hello of £4,000-£5,000, so that’s all right)
• Mid-career average salary for a nurse – £26,110
• Mid-career average salary for firefighter – £27,876
• Mid-career average salary for police officer – £35,578
• Mid-career average salary for a teacher – £33,361
If I were running the argument (which I would happily do) that the Bank of England had to bear responsibility for the freezing of millions of people out of the housing market, I would need to be armed with answers to the following two questions:
a) what was Eddie George supposed to have done with interest rates during his tenure?
b) how much should he have been being paid?
I confess that whilst I sympathise utterly with the point of the post, I don’t have confident credible answers to either of those.