Help to Buy will inflate another housing bubble

One major part of the scheme, hurriedly brought forward by three months in an attempt to counter Labour’s populist announcements, is potentially toxic.

The Conservative Party has spent the past fortnight accusing Labour of reviving 1970s-style socialism in the form of policies such as a temporary freeze in energy prices. The irony is that it has done so while undertaking the largest-ever state intervention in the housing market. With the introduction of its Help to Buy scheme, the government that arrived in office committed to rebalancing the economy away from its reliance on property and private debt has adopted a policy that will encourage the reverse.

The first part of the scheme, which came into effect in April, is a justified intervention. By allowing buyers to borrow 20 per cent of the value of a new-build home worth up to £600,000, the government is seeking to incentivise housebuilding, which last year stood at its lowest level since the 1920s. After six months, it has had some success. In September, construction activity grew at its fastest rate since November 2003, helping to stimulate growth and employment.

It is the second part of the scheme, hurriedly brought forward by three months in an attempt to counter Labour’s populist announcements, that is potentially toxic. George Osborne, ostensibly a fiscal conservative, has issued £12bn of state guarantees for up to £130bn of mortgage lending. The offer applies to all properties, whether new-build or not, and will allow buyers to purchase homes worth up to £600,000 provided they make a deposit of at least 5 per cent.

In an attempt to emulate the success of Margaret Thatcher, whose Right to Buy council house scheme increased the Tories’ electoral fortunes among low- and middle-income groups, David Cameron has presented the intervention as one aimed at supporting first-time buyers. He declared during the Conservative conference: “As Prime Minister I am not going to stand by while people’s aspirations to get on the housing ladder are being trashed.”

Yet the early signs are that Help to Buy will do less to aid would-be buyers than Mr Cameron suggests. Those banks participating in the scheme are offering interest rates around 5 per cent, above the level that many can afford when average earnings are still 1.7 points below inflation. As such, the policy risks acting primarily as a subsidy for existing homeowners seeking to trade up or to borrow against the value of their property. Mr Osborne’s decision to set the cap for aid at £600,000, when the average house price is £172,000, is evidence that he is more concerned with creating a pre-election feel-good factor among Tory-leaning owners than he is with aiding firsttime buyers.

Even as it allows some to make it on to the ladder, the scheme risks blocking the route for others by further widening the gulf between prices and earnings.

David Cameron meets two first time buyers as the Government launches the Help to Buy scheme. Image: Getty

This article first appeared in the 11 October 2013 issue of the New Statesman, Iran vs Israel

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Tim Shipman's Diary

The Sunday Times political editor on poker, pasta – and being called fat by Andrew Marr.

A couple of Saturdays ago, I was having dinner with my wife at Padella (which serves the best pasta in London) when the phone rang. It was an irate David Davis. “You’re reporting that a friend of mine has said Philip May wants Theresa to quit. It’s not true. I don’t even know Philip May.” I calmly explained that I wasn’t accusing him and I had his friend on tape. “Who was it?” he asked me. I wasn’t saying. “Well, it’s not bloody helpful,” the Brexit Secretary said before hanging up.

The following day, I woke up to watch Philip Hammond explain to the BBC’s Andrew Marr why his cabinet colleagues had leaked me details of how the Chancellor had branded public-sector workers as “overpaid”. “I don’t know who [Tim Shipman’s] sources are,” he said, after inaccurately suggesting that I was being fed information as part of some Brexiteer conspiracy to discredit the cabinet’s leading Remainer.

On Monday, I did an interview with Eddie Mair in the back of a beer garden in Ireland, where I’m playing cricket. In reality, the leaks had much more to do with colleagues irritated at Hammond’s sometimes grating behaviour. Word reaches me that he regards it all as very unhelpful. It seems odd after 16 years in political journalism to have to say this, but we’re not here to be helpful. It might make sense if our politicians gave us less to write about. Over the past three years, they have delighted us enough.

Back for seconds

Voter fatigue is a recognised problem. No one talks about journalist fatigue. We all hope that Theresa May rejuvenates on her Swiss walk (perhaps regenerating into Jodie Whittaker). Thanks to the decision she took when she last went walking, I’m facing the obliteration of another summer holiday writing a second political tome covering the period since my Brexit book, All Out War, up to the general election. What looked at one stage like the boring second album is now a rip-roaring tale of hubris and nemesis. When I asked for title suggestions on Twitter, there were plenty of votes for “Mayhem” and “Mayday”. The most imaginative was: “The Snarling Duds of May”. Sadly, it’s too long for my publisher.

Catching the big fish

The new-found attention from writing books is a double-edged sword. To my delight, then embarrassment, Andrew Marr referred to me twice as “the doyen” of the print lobby. “We keep trying to stop him,” Marr’s editor, the redoubtable Rob Burley, confided at a rival magazine’s summer party. The following week, Marr said: “The biggest fish in the pool, if only physically, is Tim Shipman…” I got a text from a special adviser friend asking: “Are you paying him?” I pointed out that Britain’s best-known political interviewer had just called me a fat bastard live on national television.

New blood

I make my debut on BBC2’s Newsnight alongside Ash Sarkar of Novara Media, one of the new websites that cheerlead for Jeremy Corbyn. She is nerveless and fluent in her mid-twenties, when I was a tongue-tied naif. People who get the Corbyn phenomenon are rightly getting more airtime. Off the air, she tells me that she’s a “libertarian anarchist” and then asks me where I live. “Are you going to smash it up?” I ask nervously. She smiles. Ash’s main concern is to paint the town red in the Saturday-night sense. A Labour MP draws attention to her Twitter biog, which concludes: “Walks like a supermodel. Fucks like a champion. Luxury communism now!” Bravo. I think…

Brexit gamble

I was greatly cheered by the induction in the Poker Hall of Fame of the late Dave “Devil­fish” Ulliott, the player who did the most to create the TV and online poker boom in Britain. Westminster has a few useful card sharps – Paul Stephenson, formerly of Vote Leave, among them – but I don’t know any politicians who play. By contrast, the US presidents Harry Truman, Dwight Eisenhower, Lyndon Johnson and Richard Nixon were all accomplished poker players.

When I worked in the US, I interviewed a member of Barack Obama’s poker circle when he was a state senator in Chicago. The cautious, composed and occasionally bold player he described was the mirror image of the politician we came to know. His Republican rival in 2008, John McCain, preferred the chaotic gambling of the craps table and his erratic campaign reflected that. Too many of the current cabinet seem to be dice men. What we wouldn’t give for Devilfish running the Brexit negotiations.

Blundering through

Anyone who has ever dealt with McCain would have been saddened by the news that he is suffering from brain cancer, but his resilience almost makes you feel sorry for the tumour. McCain is undoubtedly the most media-friendly politician I have ever met. When I travelled on his plane in 2008, he took every question from the foreign press pack and made us feel welcome. Through him, I also met Steve Duprey, the former boss of the New Hampshire Republicans. He was fond of explaining Duprey’s first law: “In politics, before considering malevolence, always assume incompetence.” I have had much cause to remind myself of that over the past three years.

Paranoid android

If you are looking for a summer read, I recommend Jonathan Allen’s and Amie Parnes’s Shattered, a great insider account of Hillary Clinton’s disastrous 2016 presidential election effort. It shows how a flawed candidate with little ability to connect with the public presided over a paranoid regime of advisers engaged in Shakespearean bloodletting that led to them coming a cropper when fighting a charismatic populist. On second thoughts, you could always wait to read my second book this autumn. 

Tim Shipman is the political editor of the Sunday Times. “All Out War” is now available in paperback (William Collins)

This article first appeared in the 27 July 2017 issue of the New Statesman, Summer double issue