NatWest chairman Sir Howard Davies’s car-crash interview on BBC Radio 4’s Today programme on Friday was so bad that it made even tone deaf Cabinet ministers look good. If Davies were a politician, rather than a mere banker, he’d be in even more trouble right now after his marmalade-dropping claim that it’s not “that difficult” to get on the housing ladder in the UK.
After presenter Amol Rajan asked when it might get easier for people to buy a home in the UK, and Sir Howard replied, “I don’t think it’s that difficult at the moment”, the sheer disbelief in the presenter’s voice was palpable.
“To buy a house in this country? Are we living in the same country or are you reporting from overseas?” Rajan asked. Davies’s reply was unapologetic: “You have to save, that’s the way it always used to be.”
Of course, things are very much not the way they “always used to be”. We used to have wages that grew. We used to have house prices that didn’t seem astronomic. We used to have rents that were affordable. And we used to build plenty of council houses and houses for sale.
Davies was trying to make the point that the 2008 global financial crisis was triggered in part by banks making 100 per cent mortgages too easy, with people ending up with negative equity and bad credit ratings. But while it’s right to be cautious about repeating the errors of that crash, Davies seemed oblivious to the real world experience of many in the UK today, particularly younger generations.
When put to him the average house price was now many multiples of average earnings, the NatWest boss repeated “they will have to save more”. He didn’t just sound like he was in another country, he sounded like he was on another planet.
Davies later clarified that he “did not intend to underplay” the challenges buyers face and that his comment “was meant to reflect that in this context, access to mortgages is less difficult than it has been” but “fully realises it did not come across in that way”.
Saving more is pretty difficult given the way that stagnant wages have been far outpaced by rising house prices over the past decade or so. A sharp increase in rents has also meant that many are finding it impossible to put aside enough cash for a deposit.
Indeed, house-price-to-earnings ratios have roughly doubled in a generation from 4:1 to 8:1. With lenders demanding deposits of 15 per cent rather than five per cent, some calculate that first time buyers need to save six times more income than in the past. That’s a hell of a jump.
When I tweeted Davies’s remarks, the outpouring of reaction was huge – and withering. Fifty-somethings like me who remember being able to scrape together a deposit years ago now despair at how much harder things have got for our kids. Younger people in “Generation Rent” were not just despairing but furious.
Even those from relatively well-off families are these days struggling to buy homes. They either save up while staying at home longer in their 20s or 30s and they rely on cash given by parents and increasingly grandparents (contrary to the myth of older homeowners not caring, increasing numbers of over-60s are helping their grandchildren with deposits for rent or purchase).
For those without such safety nets, finding an affordable home is a constant worry and insecurity. I wrote last month that 2024 will be the year when the cost of living crisis becomes the cost of housing crisis, with all the problems it causes for our labour market mobility and productivity. For those without such safety nets, finding an affordable home is a constant worry and insecurity.
In his defence, Davies may have been trying to say that it’s not “that difficult” to get on the housing ladder in places outside London and the south east. Yet although prices are definitely closer to wages in the north, it’s not easy to save up a deposit wherever you live in Britain these days.
The main responsibility for solving our housing crisis lies, from “bulldozing” planning restrictions to releasing more cash for council housing, ultimately lies with politicians.
As for bankers like Davies, whose salary is £750,000 a year, one could argue that the market could punish him for his out-of-touch remarks. Some are already regretting banking with NatWest, and I wouldn’t be surprised to see a mini-boycott given the dire PR fallout.
The NatWest chairman is already under fire for his handling of the leak by Dame Alison Rose of Nigel Farage’s banking details, as well as for disappointing financial results last year which led to the bank’s share price tanking.
But there’s the rub. Unfortunately, any reputational damage for NatWest doesn’t just harm Davies, it harms you and me. As taxpayers, we effectively bailed out the bank (then called Royal Bank of Scotland) in 2008 and the Treasury continues to hold shares in it on our behalf.
It’s nearly 16 years since the British state spent an eye-watering £46bn bailing out NatWest. Yet former RBS boss Fred Goodwin is still reportedly collecting a pension of £500,000 a year.
The Tories plan to fully privatise NatWest by 2026, a plan that the Office for Budget Responsibility estimated last year would cost the taxpayer £33bn – because the bank’s shares are currently much lower than they were when the state stepped in. With even lower share prices now, the cost will be much higher.
Despite this, Chancellor Jeremy Hunt plans a 1980s-style “Tell Sid” campaign to encourage the public to buy shares in the bank, and only this week the Treasury quietly sold off one per cent of its 38 per cent stake.
What seems particularly galling is that banks have raked in bumper profits from higher interest rates over the past year, just at exactly the point millions of households faced crippling increases in mortgage payments. The case for a windfall tax on the banks is as strong as it was on energy firms that raked in “Putin profits”.
Meanwhile, a little bit of humility from Davies – whose mega-salary wouldn’t exist but for the British taxpayer – would be welcome. Issuing a full apology (rather than a “clarification”) wouldn’t be “that difficult”, after all.
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