Wednesday, 24 July 2013

Help to Buy: the worst Treasury scheme ever?

So, 'Help to Buy' then. The Government scheme to subsidise 15 per cent of your mortgage (20 per centif you're buying a new home) with mortgage guarantees for existing dwellings, or an actual interest free loan for new builds - if you can stump up five per cent of the deposit.

Well. Well, well, well. Where shall I begin?

The Government says this is aimed at helping first time buyers get on the housing ladder, with every sign of a straight face that I can't quite believe. Because they must know that this one's a stinker.

I'd like to get angry about this particular thought-free zone, but in fact I'm just burying my head in my hands. Because Help to Buy is a stupid, ridiculous, absurd, half-baked, disgusting, laughable, wrong-headed and downright destructive policy that should be cancelled forthwith.

Don't take my word for it. Ask any other economist - anywhere. Ask the IMF. Ask the Institute of Directors. Ask Allister Heath of City AM, a right-leaning economist who 'Public Policy and the Past' doesn't normally agree with, but whose thoughts are worth quoting at length:
The Coalition has responded to an overvalued, broken property market by subsidising credit further, nationalising risk, artificially bolstering the number of housing transactions and pushing up prices, while failing to liberalise the market to allow the increase in the supply of properties that is so badly needed. No wonder many existing homeowners are feeling happier – boosting their wealth and allowing them to remortgage and spend is clearly at the heart of Osborne's re-election strategy but it will only make the inevitable day of reckoning even more traumatic.
All 'Help to Buy' will do is to pour petrol on the flames, further inflating the UK's ridiculous residential property market, and thus making it harder, not easier, for young people to get a start in the property market. While, of course, making everyone else - perhaps a bit older, and a bit richer than those who really need help - a lot richer. At public expense! I ask you. I'll repeat that, actually: at public expense!

Nor are there really clear controls on who gets the money - which will go to anyone who wants it, really, with some provisos about people with outstanding debts or County Court judgements against them. EU nationals will probably have to be included. Pretty rich people who just want a bigger house will be included. Second home owners are supposed to be excluded, but all borrowers have to do is sign to form to say that the money isn't for those purposes.

It's a shambles. If Ministers really wanted to help first time buyers, they would limit the value of the property involved to (say) £300,000 - not the £600,000 involved in this scheme. They'd say only first time buyers were eligible. They'd bring in tougher checks.

I'd like to say that this was all some gruesome mistake - some half-baked think tank policy that somehow slipped through the machinery at No. 11 Downing Street. Except that it isn't. It's all of a piece with the Chancellor's strategy from the beginning, which has been to reduce public indebtedness while private borrowing soars to take up the slack. All the while wringing his hands about the rise of household indebtedness - which has always been predicted to rise and rise in the Treasury's own forecasts.

That's a crazy policy. Private sector debts are six times larger than those of the public sector, and they're what landed us here in this mess in the first place. Remember the banking crash caused by reckless borrowing? It doesn't look as if HM Treasury does.

And of course the real reason that this is being announced now is to pump up a pre-election credit boom that'll help the Government be re-elected - a strategy which shows some signs of working. Remember all those worthy speeches about 'rebalancing'? About the 'march of the makers'? Well, they've all just gone in the bin. And in a few years we'll be right back here, just as we were in the mid-1970s, the early 1980s and the early 1990s, sifting glumly through the broken dreams of young homeowners who can't meet their repayments and talking about - well, I don't know - actually making and selling things for a profit.

The whole thing stinks. 'Help to Buy' might be the worst policy ever to emerge from the Treasury. It's worse than the Barber Boom, the sado-monetarism of 1980-81, and it's worse than the ERM debacle. It'll saddle us all with billions and billions of pounds worth of debt, while just covering up the real source of our housing emergency - that we just don't build enough houses.

It must be stopped, and it must be stopped now.