Minister reveals housing fears in briefing gaffe

Minister reveals housing fears in briefing gaffe

With the government beset by near-daily accidents, Flint inadvertently revealed her grim forecast when she was photographed walking into Downing Street with her briefing papers visible. Close inspection revealed that her document read: "We can't tell how bad it will get." The briefing paper, which was visible to photographers through a plastic folder, also revealed that she intends to announce extra help for first time buyers today, mainly by extending shared equity schemes. The unintended disclosure is deeply embarrassing for the government since ministers have privately said that they want to do nothing to increase pessimism about house prices for fear of talking the economy into a recession. The government, as opposed to the Bank of England, does not normally make forecasts on house prices.

The paper also revealed that the government's hopes of building 3m more new homes by 2020 are under threat from a stalling housing market. The promise to build the extra homes was one of the first commitments made by Gordon Brown when he became prime minister. Flint's briefing paper stated that house prices would fall "for the first time in recent years. Given present trends they will clearly show sizeable falls in prices later this.....continued below

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According to figures published yesterday by Flint's Department of Communities and Local Government, house prices in March were still 5.2% higher than 12 months ago, but the cooling market is beginning to have an impact. In February, prices had been 6.3% up year on year.

Flint's projections will have worried cabinet ministers yesterday as they discussed the double impact of falling house prices and rapidly rising food and fuel prices, a lethal political cocktail which is damaging Brown's government.

The briefing paper also warned: "House building is also stalling. New starts are already down 10% from a year ago. House builders are predicting further falls. Having seen net additions reach roughly 200,000 in each of the last two years, the figure for 2008-09 is almost certain to be well down on that."

The briefing paper insists that the projected fall in house prices is not being caused by a decline in demand. It states: "Underlying demand for housing remains high and the fundamentals of the economy remain sound. But the market is being affected by the global credit crunch, which is making it difficult for many who would like to buy to do so."

The government has injected an extra £50bn into the banking sector in an attempt to prevent a collapse in the mortgage market, but judging by the briefing paper ministers are not confident that the rescue package will work. The paper openly admits: "We can't know how bad it will get. But we need to plan now to put in place effective measures against the risk that it does get worse, and to prepare for the upturn." Apart from monitoring the position, Flint intended to tell the cabinet that she and the chancellor were holding talks with the largest and smallest mortgage lenders to see if there is anything further to be done to keep the market afloat.