August’s jump in house prices is further proof stamp duty holiday was a mistake

The 2.1% rise cited by Nationwide was likely to be due to cheap loans and a desire to get out of cities

Last modified on Wed 1 Sep 2021 15.03 EDT

More evidence that Rishi Sunak’s pandemic freebie for homebuyers was a waste of money: even when the stamp duty holiday was partly removed, house prices continued to fly. The 2.1% rise in August, on the Nationwide’s readings, was the second largest monthly increase in 15 years.

It all suggests the 13% rise in house prices since the start of the pandemic had little to do with Sunak’s subsidies. The Resolution Foundation thinktank reached that conclusion in a persuasive analysis last week, arguing that the big drivers were low interest rates – a proven catalyst – plus accumulated lockdown savings and the desire among some buyers to get out of cities in search of more space. That account rings true. The housing market did not need support and Sunak did not have to let an estimated £4.4bn in tax receipts slip between the cracks.

The pressing question today – at least for would-be buyers watching the market with incredulity – is whether house prices can possibly sustain the current pace. Sadly for them, the general direction looks set. While the current 11% annual rate of house price inflation clearly cannot continue for much longer, there are no obvious roadblocks ahead.

The traditional ones are rising unemployment and fear of higher mortgage rates. The jobless rate stands at 4.7%, far lower than predicted even a few months ago. Meanwhile, the Bank of England continues to make soothing noises on interest rates by sticking to its view that the current bout of higher inflation elsewhere in the economy will pass.

There is still a slight sense of quirkiness about the August figure, but it does capture the tone. House prices are hot. That is dangerous for the long term, but it’s hard to spot likely causes of a sudden cooling.

KPMG doesn’t deserve to be in the big four

Not KPMG again. Yes, it’s another outing for the big four auditor with a talent for generating headlines.

The UK chairman, Bill Michael, provided light entertainment earlier this year by resigning after telling staff to “stop moaning” about the impact of the pandemic on their working lives, but now we’re back to the hard stuff: a disciplinary tribunal to consider the allegation that KPMG and several of its employees provided the Financial Reporting Council with “false and misleading information” during the regulator’s inspection of the audits of Carillion and another outsourcer firm.

The tribunal will meet next January, so one can’t speculate on the outcome. But KMPG, which flagged the alleged matters to the FRC itself, was only stating the obvious when it said the allegations in the formal complaint “would, if proven, represent very serious breaches of our processes and values”. You bet: misleading a regulator is near the top of the pile for auditors’ offences.

But, remember, the formal complaint is separate from the main event for KPMG arising from its work for Carillion. The core focus is still on two investigations by the FRC into the actual auditing of the construction outsourcer that collapsed in 2018. The FRC has completed its initial reports and the outside world awaits the final findings.

In the meantime, KPMG has set things up nicely by being fined £13m last month and severely reprimanded in a case where it was found to have failed to act solely in the interests of its client, Silentnight, rather than the private equity firm trying to buy the struggling mattress company. The accounting watchdog called that case “deeply troubling”. The previous month the FRC had said it was unacceptable that improvements were required to KPMG’s audits of banks for the third year running.

A lot is riding for KPMG on the various Carillion inquiries. The firm sits firmly at the bottom of the big four class. In a properly competitive auditing market, it would have been relegated already.

Diversity at the Bank remains a dream

What was it that Andrew Bailey, governor of the Bank of England, was saying about improving diversity at Threadneedle Street? Here it is, in a column for this newspaper only a month ago: “We are well aware of just how damaging it can be for organisations to be made up solely of people from similar backgrounds who think in the same way.”

And here comes the first big hire since Bailey’s fine words. The new chief economist is Huw Pill, a white Oxford-educated man who used to be chief European economist at Goldman Sachs. He will report to deputy governor Ben Broadbent, a white Cambridge-educated man who was senior European economist at Goldman Sachs for a decade.

“Structural and cultural change will not happen overnight,” Bailey also said in his column. Indeed.

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