Darling's Big Mini-Budget

The quiet man gets the tone right for the statement of his political career

Prime Minister's Questions has been increasing in volume recently, making me think that parliament is already in election mode.

But even the most hostile recent Brown-Cameron exchanges were as nothing compared to the atmosphere surrounding this afternoon's pre-Budget report.

Alistair Darling began very low-key, almost sotto voce to early chortles about his claims that the government was "living within our means".

But the jeers began in earnest as the chancellor stated that the present crisis began in the US housing market.

Somehow such conduct felt inappropriate here. Vince Cable later described the situation as a national emergency and he is right. His party leader, Nick Clegg, sat through the proceedings in respectful silence, as did his Liberal Democrat colleagues - respectful not of the government, but of the gravity of the situation.

David Cameron would have done well to order his backbenchers to sit through the statement in silence. Such an approach would have spooked the government and, in the end, the chancellor drove them into submission with his relentless, quiet monotone anyway.

This was an assured performance from Darling, who appears to be genuinely unflappable in what he can now say is an "unprecedented global crisis" without being accused of talking down the economy. Indeed, such was the hyperbole flying around the house that this seemed like something of an understatement.

Darling won the battle with Downing Street to be honest about the fact that a fiscal stimulus now would have to be paid for later. This didn't stop George Osborne from punishing him for his frank approach, but it rather spiked his guns.

The chants from the Labour backbenches of "What would you do?" seemed to unsettle the shadow chancellor.

It was striking that Darling's economic forecasts were so optimistic: 1.5-2 per cent growth to return as early as 2010. I do hope he's right. There's clearly no point whatsoever in putting a set of emergency measures in place if you don't think they will work.

George Osborne said this marked the greatest failure of public policy in a generation. Like Margaret Thatcher before him, his voice has lowered a register and his righteous fury was at times impressive. At key moments, however, his voice cracked including when he described plans to increase National Insurance as "not just a tax bombshell but a precision guided missile".

Osborne's attack went down well with the Tory backbenchers, but it did not wound his opponent, who was able to engage what now must be Labour election narrative: where the government acted the Tories would have done nothing. "What would you do, George?" is a slogan of some resonance.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.