Will the 2022 Cost of Living crisis led to mortgage defaults and bank failures? Once more some notes,

What was the 2008 collapse?

Banks failed because of the bursting of a housing related bubble, in the UK it started with Northern Rock and led to the Govt. underwriting the UK banks, and husbanding the merger of failing building societies or ex-building societies into safer banks. RBS was merged into Nat West.


  1. Kirkland, C. (2015) Thatcherism and the origins of the 2007 crisis. British Politics, 10 (4). pp. 514-535. ISSN 1746-918X https://doi.org/10.1057/bp.2015.12 Was it the US housing market, Gordon Brown’s tripartite regulation or Thatcher’s de-mutualisations.
  2. Britain – the working class and the housing crisis from Thatcher to Blair from union-communiste.org, unsigned, (Is this a Worker’s Fight article?)
  3. 1979 and all that: a 40-year reassessment of Margaret Thatcher’s legacy on her own terms RT Journal Article, A1 Albertson, Kevin A1 Stepney, Paul T1 1979 and all that: a 40-year reassessment of Margaret Thatcher’s legacy on her own terms JF Cambridge Journal of Economics
    YR 2019 DO 10.1093/cje/bez037 VO 44 IS 2 SP 319 OP 342 SN 0309-166X
  4. One of the UK’s unique contributing factors was the fact that mortgage interest attracted income tax relief, known as MIRAS, this was abolished by New Labour, see the House of Commons debate on final abolition of MIRAS in Committee. Mortgage_industry_of_the_United_Kingdom at wikipedia documents the changing source of finance from savings on deposit to capital markets. Does it?
  5. Wikipedia also documents, the Financial_crisis_of_2007 – 2008, although this page is mainly about the US it does document the BIS rules developed as a response. This has a couple of stats suggesting that co-ops and credit unions were safer, however this doesn’t seem to be the case with the de-mutualisations of the UK building societies and the eventual failure of the Co-op bank. There is only one mutual left in the UK. For more, I tried to google search with the search string “thatcher and the privatisation of the building societies”
  6. The FT seem to have caught up (£) and agree, there’s a threat.

Alberston and Stepney’s paper [#3],

The Abstract of 1979 and all that: Economics are the method: The object is to change the soul (Thatcher, 1981) There is a growing disaffection with mainstream politics in the world’s liberal democracies. In particular, the UK has become an increasingly divided nation; as evidenced by, for example, increasing inequality, an emphasis on individualism, the so-called North/South divide and the polarised debate about the UK’s leaving the European Union. Many leading UK politicians claim their inheritance of the “Thatcher legacy” to legitimate their proposed policies, yet it is not clear what is that legacy. Thatcher’s policies, instituted in the 1980s and broadly pursued by subsequent governments, changed the economic and social outlook of the UK. Criticism of her record is taken to indicate one is a left-wing ideologue. Our contribution in the following is that we judge Thatcher’s policies by no standards other than her own. Utilising a holistic approach, we consider whether neo-liberal policies facilitated or undermined the UK’s achieving Thatcher’s stated moral outcomes: the growth of democratic capitalism and the strengthening of the moral economy. We demonstrate, in contrast to contemporary narratives of her “saving the country”, the neo-liberal economic experiment has failed to deliver, even on Thatcher’s own terms. This analysis has contemporary domestic and global implications as generally Thatcherite policies continue to be applied in the UK and in other nations around the world.


I say there is no cash market for housing, to understand it, one needs to look at prices, supply and demand of housing, but demand means one needs to look at the mortgage market and the paradoxical failure of the financial intermediaries to facilitate an effective market for housing. Does the paradox still hold? It was predicated on the role of interest in attracting savings deposits although surely even if they are looking at getting money from the capital markets which they are and did, the rate they can offer depends on the market interest rates.

Alberston and Stepney’s paper look at Thatchers deliberate policies in the encouraging home ownership vs. rental, the deregulation of the financial services market which included the Building Societies allowing them access to funds from the capital markets. They mention the demutualisation of the Building Societies but to them it’s all part of the privatisations to establish a popular ownership relationship between people and capitalism, turning the proletariat into consumers.




Dave Economics ,

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