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

Labour picks Gillian Troughton to fight Copeland by-election

Troughton, a Copeland councillor, was critical of Jeremy Corbyn during the summer leadership race. 

Labour has picked Gillian Troughton, pro-nuclear former doctor to fight the Copeland by-election.

After accepting the nomination, in an email shared online, Troughton said she was "pro-nuclear; no ifs, no buts", and that her husband worked in the nuclear supply chain. She is also a local councillor and a practising Christian. 

She described the election as a choice about the NHS: "I have been part of the campaign against the proposed cuts to A&E and the maternity wing because I know that our community needs this service."

Like Jamie Reed, the current MP for Copeland, Troughton is a critic of Jeremy Corbyn and backed Owen Smith in the 2016 Labour leadership campaign.

She also campaigned to remain in the EU, and now must win over a voting population that voted 62 per cent to leave - the strongest Eurosceptic vote in Cumbria. 

Her victory is a symbolic defeat for the Labour leadership, as she beat Corbyn supporter Rachel Holliday, also a councillor with ties to the nuclear industry and the NHS. 

However, the decision to pick a non-Corbynite may be a relief for those within the Labour leader's camp who worry about "owning" a possible by-election defeat. 

Corbyn said of the selection: “I am delighted that Gillian Troughton will be Labour’s candidate for the Copeland by-election. 

“Gillian is a local councillor with a strong track record of getting things done for her community. She has campaigned tirelessly to maintain local hospital services. 

“As a St John’s blue light ambulance driver, Gillian has seen first-hand the extent of the crisis caused by this Conservative government, which has chosen to fund tax cuts for the wealthiest instead of our health service. 

“I am proud that Labour has selected a local candidate with such dedication to her community.”

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.