How to boost the debt without borrowing: spend on houses

The Help to Buy program uses some nice accounting tweaks to get away with being deficit neutral.

One final, quick point on Help to Buy.

One of the two measures announced, in which the Government provides equity loans to people buying a new build house worth under £600,000, involves real cash outlays. The Treasury has budgeted £4.13bn for it:

But the spending counts towards the central government net cash requirement, and it counts towards public sector net debt (Table 2.1 footnote 3, page 65), but it doesn't count towards public sector net borrowing – also known as "the deficit".

The reason is that the government is spending cash, but getting back an asset of equivalent value – in this case, equity in £20bn worth of houses. And when those houses are sold, the loan gets paid back. So assuming house prices continue rising faster than inflation – a fair assumption, given it's basically government policy at this point – it's not really even borrowing, just converting a liquid asset into an illiquid one.

There's still some risk involved. If one of these houses burns down, the Government loses its stake. And if the house is never sold, the Government never gets paid back.

Except. That's basically what infrastructure spending is. You trade £3bn worth of money for £3bn worth of windmills. If you don't want the windmills, you can sell them. And if you get unlucky, you've lost your money.

The Chancellor is perfectly happy to borrow for a guaranteed payoff in the future when it plays well with his voters, but not when it works well with the economy. Shame, that.

Some new houses. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Getty
Show Hide image

Scottish Parliament votes in favour of a second independence referendum

The UK government was quick to respond. 

The Scottish Parliament has voted for a second independence referendum by a margin of 10 votes on the eve of Westminster triggering Article 50. 

After hours of debate - postponed after last week's terrorism attack at Westminster - the MSPs voted 69 to 59 to back the First Minister's call to trigger Section 30 of the Scotland Act.

MSPs voted for a Green amendment which demands votes for 16 and 17-year-olds, but amendments by Labour, the Conservatives and the Lib Dems were defeated. 

Nicola Sturgeon took Westminster by surprise in early March when she announced she would be seeking a second independence referendum for Scotland to decide before it was "too late to choose a different path". 

The Scottish Parliament can vote to demand a second referendum, it still needs permission from Westminster to hold one. So far, the Prime Minister has refused to countenance one before Brexit. After the vote, Scottish secretary David Mundell reinforced this message, suggesting a vote could not take place until the 2020s. 

However, some unionists quietly fear that a tussle between Westminster and Holyrood over powers will only play in the nationalists' favour. 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.