It is high time voters were given the right to recall their MPs

 
Allister Heath

WE SHALL soon find out whether the coalition is serious about introducing a right of recall for Members of Parliament. The whole concept is revolutionary; embracing it in a proper way would transform British politics forever and help re-establish the bond between voters and those they elect to represent them.

The basic idea is simple: under certain circumstances, the electorate would be able to petition for a sitting, elected MP to be recalled at any time during his or her term of office – in other words, a by-election would be called and the MP would have to fight for his or her seat. The devil, as ever, is in the detail: under what circumstances could this happen, and what would the exact mechanism be? Under soft versions of this plan, a right of recall could only ever be exercised following a scandal, perhaps only if the MP had been suspended from Parliament for obvious wrong-doing, rather than merely breaking electoral promises. Under the more radical version, the only requirement for a by-election to be called would be if enough constituents signed an online petition.

The soft version would be almost irrelevant and would do little to restore trust in the system; the more radical version would need safeguards not to become too destabilising, with a significant minority of registered voters in every ward in a constituency needing to sign up to prevent vexatious moves. But as long as these restrictions are in place, we need a genuine, hard-core right of recall. The Athenians had it; the Swiss, Canadians and Americans have it at canton, state or provincial level. Let us hope that the coalition has the courage of its convictions.

MORTGAGE MANIA
IT WAS RBS’s turn to announce caps on mortgages yesterday, following the lead set by Lloyds last month. The two state-backed banks won’t lend more than four times’ income for mortgages worth £500k or more, in a move which will add to growing signs of a slowdown in the London property market after months of insane growth.

I’m all in favour of sensible lending, rather than the foolish, happy-go-lucky nonsense we saw a few years back. Excessive loans to value are extremely dangerous. It also makes sense that banks are having to stress test for steep declines in house prices and are having to make sure they fully understand borrowers’ incomes and expenditures. Credit mustn’t be too easy.

But some aspects of the new provisions are questionable. Why is it that only the state-backed lenders have decided to do this, and why have they decided to impose the same exact guidelines? Why the £500k cut-off point? And why is it still OK for people buying cheaper houses to borrow more? It is hard to see why the risk is higher only for more expensive homes – unless, that is, the banks believe that it is a segment of the market that is especially over-valued.

Ultimately, what ought to matter for a lender is the chance of getting all of its money back in the event of a repossession – and that suggests bigger deposits, rather than smaller loan to income ratios, may be most sensible. Deposits protect lenders by reducing the chance of negative equity; loan caps protect buyers by reducing the chance of them defaulting if interest rates go up or income goes down.

Lenders have traditionally exercised discretion: they’ve leant more to people who they believe to be likely to enjoy significant increases in income (for example, trainee accountants) and less to those who they believe are riskier bets. They have also been able to deal with those who depend on erratic bonuses. It would be a great shame were this flexibility to be stamped out.

It is good news that banks are seeking to pre-empt a problem. But if the Bank of England believes that other, pure private sector banks should follow suit, then that is something it should be telling us, loud and clear.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath