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Amber Rudd MP: "Buy now, Pay later" is a way of effectively adding liquidity to a market that seized up under the last government

Amber Rudd Amber Rudd is Conservative MP for Hastings and Rye. Her article is the sixth in a seven part series of articles by Conservative MPs, each discussing the Coalition's policies to get more people into good homes.

There are only so many ways to move taxes and to rein back on regulation.  Economists and politicians can debate whether low or high taxes, and more or less investment, will more effectively reduce the deficit and stimulate growth, but the truth is that these limited levers are also a game of chance, particularly at a time when the euro-zone crisis rages around us.   There are so many different variables buffeting each nation's economy that there is no certainty in particular moves.

So government needs to be smart.  We need to be bold and innovative.  We need to find ways to stimulate the economy through clever ideas, that don't bring a bill to the door of the tax payer.

The newly announced "Buy now, Pay later" policy from the government is one such idea.

Under this scheme, land that is owned and unused by the state can be released to building companies and payment only takes place after the houses have been built and sold.

Housing is an area where we need to stimulate construction not just to boost the economy (it accounts for 3% of GDP)  with job creation but also quite simply because we need more houses, or more accurately more homes.   It is completely unacceptable that so few houses were built under Labour, and already reforms in this area are seeing house construction starts 24% up on an equivalent period under Labour.  Part of the solution is de-regulation and the government is, controversially, addressing that through planning reforms.  But this new "Buy now, Pay later" scheme addresses the commercial side of house building.  It is a way of effectively adding liquidity to a market that seized up under the last government.

Put simply, the government is acting as co-investor to house construction companies.  It holds an IOU for the cost of the land.   No money is being put up, but where the state owns the land for a site, it can be "sold" with settlement when the houses are sold.  This should act as a stimulus for house construction, and could also make good sense for the tax payer who will participate in the uplifted sale price.

With the price of the land taken off the up front costs,  construction is more likely to make commercial sense.  Many communities are frustrated by the fact that potential sites have stalled due to market uncertainties, but zero up-front charge for state owned land will encourage building companies to take the risk, and make them more likely to be able to fund the project.

This is smart thinking.  An innovative way of delivering an extra stimulus to an area that urgently needs to recover, is most welcome.   It's not a solution on its own, but taken together with the other new policy changes announced this week from the housing department, it is another powerful weapon in the armoury.

It is the sort of bold new idea you might find in the private sector.  It is a welcome new idea in the public sector.


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