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Please, Chancellor, don't be tempted to extend Help to Buy in the Tory manifesto

By Peter Hoskin
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Reading the papers, this week, has been like running into a brick wall. There are just so many stories about house prices and house-building, including:

  • “House prices rose last month at their quickest pace in nearly three years, gaining 4.6 per cent compared with a year earlier, Halifax said.” – The Times, Tuesday 13 August
  • “Industry insiders said an average home will be worth £266,708 by the end of next year.” – Daily Express, Wednesday 14 August
  • “The communities minister, Brandon Lewis, hailed figures showing that housing starts rose to 29,510 in the second quarter of 2013 as evidence that the market had turned the corner.” – The Guardian, Friday 16 August

The common denominator between all these reports – besides the bricks and mortar – has been the Government’s two-part Help to Buy scheme. Why is demand for houses rising? Because of Help to Buy, say expert witnesses. Why is house-building on the up? Because of Help to Buy (or at least the first part of it), say ministers. Help to Buy, Help to Buy, Help to Buy.

This must be a novel, probably happy, feeling for ministers. For years now, it’s seemed as though the Bank of England has had a freehold on the economic policy levers that actually matter. But now the Government has introduced a scheme that is making a swift and appreciable difference. From an idea in Whitehall to a reality on the streets – it rarely happens so directly.

Does that mean Help to Buy is a good thing? I’ve already detailed my concerns about it, so suffice to say that they haven’t been allayed by this week’s news. A government-sponsored borrowing binge remains a government-sponsored borrowing binge, whether it succeeds on its own terms or not. In fact, the impression of success could even be worse, as it creates a precedent for more state involvement in the housing market in future.

All of which is to say: George Osborne should make sure to do what has been promised, and end Help to Buy in 2017. The longer it goes on, the more it’s likely to inflate house prices, and the less it will benefit potential buyers – and that’s before we consider worst-case scenarios to do with a build-up of overstretched, indebted homeowners, all underwritten by the Government. Should Help to Buy feature in the Tory manifesto, it should be in the context of that 2017 deadline, not anything beyond that.

If Osborne is to encourage home ownership, he would do better to look at Stamp Duty. The Taxpayers’ Alliance recently launched a campaign on that front, and today highlights research which found that, during recent Stamp Duty Holidays, a one percentage-point cut in the tax increased market activity by 20 per cent. That’s some of the intended effect of Help to Buy, but without its scarier potentialities.


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