Michael Harrison's Outlook: Affordable housing plan could be non-starter

Tony Blair thinks property prices will continue to rise and so it is only fair that first-time buyers on low incomes should be helped on to the housing ladder before it is yanked away completely. Kate Barker, on the other hand, thinks prices are more likely to fall and, as one of the Bank of England's rate-setters, advises would-be buyers to act accordingly. Who's a key worker to put their trust in?

Tony Blair thinks property prices will continue to rise and so it is only fair that first-time buyers on low incomes should be helped on to the housing ladder before it is yanked away completely. Kate Barker, on the other hand, thinks prices are more likely to fall and, as one of the Bank of England's rate-setters, advises would-be buyers to act accordingly. Who's a key worker to put their trust in?

The Prime Minister has a vested interest in wanting house price inflation to continue, of course. He has a £3.6m house in Connaught Square which he is yet to rent out and is unlikely to move into for another four years at least. Mr Blair also has an impending election to fight and knows that rising house prices imbue voters with the feel-good factor as well as driving the economy in the right direction.

The Bank, on the other hand, has inflation to fight. Having projected a decline in house price growth into its charts for as long as anyone can remember, reality seems finally to be catching up with theory in Threadneedle Street.

Mr Blair's particular version of nirvana is to have rising house prices at the same time as affordable housing. Hence the latest piece of social engineering yesterday from the PM and the Deputy PM John Prescott - stolen, incidentally, straight out of the Conservatives' locker. This is called shared ownership and consists of concreting over south-east England with starter homes built on former NHS sites and then allowing nurses and teachers to part-own them with the added bung of a £16,000 discount off the market price. These first-time buyers would not be allowed to own the property outright and would be obliged to give the local council or housing association the right to repurchase when they moved on. But at least they would have benefited from any uplift in house prices. Who knows, they might even have made a big enough profit to join the real housing market.

The number of first-time buyers staying at home with their parents or putting off that initial purchase until they are in their thirties testifies to the dearth of affordable housing. But the Government's generosity is not all it seems since the £16,000 bung will cost it a mere £20m a year.

Meanwhile, Mr Prescott has invited private housebuilders to come up with designs for starter homes costing less than £60,000 - a sum which would not even buy a garden shed in many parts of the South-east.

Without developer-friendly councils and well-funded housing associations, (currently the exception and not the norm) the Blair/Prescott plan threatens to be a non-starter.

The Prime Minister presented a teapot and a set of cups as a house-warming present to one of the luckless homeowners he encountered yesterday as he toured a starter home development in north-west London. An increase in the stamp duty threshold would have been of more practical value. But that would be expensive. Worse, it would mean consulting Gordon first.

RBS succession

The intriguing feature of Royal Bank of Scotland's search for a new chairman is not so much that it threatens to split the board but that the names in the frame should all be Scotsmen. Even before RBS swallowed up NatWest, it was a large enough bank not to be run with such a parochial mentality. Nowadays it is certainly too big a beast. Barclays has a Canadian chairman, Abbey has a Spanish one and Lloyds TSB is run by an American, but north of the border, the Scottish mafia still seems to rule the roost.

When Sir George Mathewson, the current chairman, was elevated from the role of chief executive four years ago, his only serious competition for the job came from another Scotsman, Sir Iain Vallance, the former BT chairman who also sits on the board. This time around, the early candidates once again all have a familiar Caledonian ring to their names - Sir Tom McKillop of AstraZeneca, Sir John Kerr of BP and Sir Peter Mason of Amec.

All three men have their merits - but being Scottish is not one of them. The fact that RBS has dropped the word Scotland from its branding overseas ought to tell it that the next chairman does not need to have been born in that country either.

The other intriguing question is whether Sir Tom's name has been leaked at an early stage of the search to preclude him from the final selection. Despite his impeccable Scottish credentials and his availability from next year when Sir George is tipped to stand down, the well-publicised problems Sir Tom has suffered in his current day job don't advance his candidacy.

Sir Tom is said to be the candidate favoured by Peter Sutherland, the RBS non-exec driving the search for a successor. The two men sit on the board of BP, where Mr Sutherland is chairman.

Mr Sutherland, for his part, is said to have a combative relationship with RBS's chief executive Sir Fred Goodwin and is looking for a chairman with the experience and willpower to keep Fred the Shred in his place, not that Sir George himself is renowned for being a shrinking violet. All in all, it is shaping up nicely to be a brutal affair.

Rescuing Rover

John Towers made a rod for his own back when he predicted last November that MG Rover would tie up its much-touted rescue deal with China's Shanghai Automotive Industry Corporation before the end of this month. With the deadline about to pass and no agreement in sight, the chairman of Phoenix Venture Holdings can expect little respite from a sceptical outside world and none whatsoever from a downright hostile press unless and until the Chinese standard is raised above Longbridge.

The muttering has already begun with a brace of stories over the weekend questioning whether the deal was still alive and analysing the damage limitation exercise ministers will embark on if the Chinese walk away and MG Rover is pronounced dead.

The reportage added little to the sum of human knowledge other than to remind us how spin-obsessed the present government is. It also contrasted starkly with the impression emerging from Longbridge which, if we are to believe it, is one of frenetic activity as teams from Rover and SAIC criss-cross the time zones tying down the last remaining details of their joint venture.

Nevertheless, it is the kind of coverage MG Rover could do without. A new year has not brought with it a new era of optimism about the future of Longbridge and more negative headlines can only further undermine the confidence of dealers, customers and employees alike.

Mr Towers' critics, and there are plenty of those, will doubtless respond that he should have taken all this into account before he offered his hostage to fortune last November. If there is one thing which irks the Chinese government, it is being taken for granted.

The Chinese know they are almost certainly MG Rover's last chance and for that reason they are in the driving seat. But they must also realise that the opportunity to acquire a Western car maker, complete with its intellectual property rights and proprietary knowledge - the very DNA of the business - does not come along very often. For SAIC, this deal is much more than another licensing agreement, the like of which it already has with Volkswagen and General Motors. It is about access to Western markets and Western technology, in both car and engine-building capability. That gives MG Rover a degree of leverage.

It is perfectly possible, therefore, that what the media mistakes for a deafening silence from Longbridge is, in fact, the sound of some very hard-nosed negotiation taking place behind closed doors before a deal is duly signed. MG Rover's 6,500-strong workforce can only hope so.

m.harrison@independent.co.uk