Come on, Darling

The Chancellor's speech is likely to address the issues on affordable housing, but doesn't this overlook the greater needs in the midst of this economic crisis?

No one is queuing for tickets, yet never before has a Chancellor’s speech been so eagerly anticipated. Alistair Darling will address Parliament on Wednesday to offer a remedy for what is hoped will be a budget to kick start the home market.

His solution will be more public money offered up for loans. But if house hunters want cheap cash for affordable housing, there is a struggling sector in much greater need of our cash.

The UK’s manufacturing industry, particularly the car industry, has suffered the brunt of the recession in the last 12 months with orders plummeting and hundreds of workers laid off each week.

The problem with the budget is that too much anticipation surrounds the launch of multi billion pound package of government guarantees to resurrect the housing market.

The Treasury will underwrite at least £50bn worth of new mortgage-backed assets to address the lack of finance being made available by the dysfunctional banking system.

But look at the situation. The worst economic crisis in living memory, a huge drop in tax revenues, and worst of all, increasing unemployment. These are factors that cannot be remedied by simply propping up inflated house prices that have only fallen by 20 percent in 18 months.

Loan schemes, offering businesses genuine access to cheaper cash, are much more important. These can only be raised if fears over higher borrowing costs and hefty tax increases in the years ahead are set aside to keep workers in jobs. And what’s wrong with that? OK, those urging the Chancellor to reign in any thoughts of increased debt insist current levels will place an unacceptable burden on future years. Government borrowing for 2008/09 topped £95bn - £17bn more than Mr Darling revealed as the target in his pre-Budget report last November. But public sector debt in the UK, currently at around 50 percent of national income, compares well against some other large economies.

That figure is certain to rise further over the next five years, and more borrowing now will certainly lead to future cuts in government spending and the aggressive tax-raising measures. But the UK’s ability to pay back anything at all will rely on the health of the business community and the manufacturing industry’s output.

The Treasury's new mortgage plans will be announced in a market notice alongside the budget, with banks immediately given access to schemes.

The anomaly is they can already call on government support for new loans under the credit guarantee scheme, which was launched last autumn. This is just more of the same medicine that isn’t working.

The reality is that interest rates on loans are only realistic and affordable for those who don’t really need the cash. In other words, cash loans are cheap for those who are cash rich. Mr Darling must resolve this dilemma. Forget affordable housing for the time being. What Britain needs most is affordable cash for the needy: the manufacturers.

The rest can get in line.