Private sector can carry the burden

Christian Wolmar's article about our public-private partnership plans for London Underground (Special Supplement, 14 February) is flawed. He ignores PricewaterhouseCoopers' recent report that showed that the PPP could save about £4.5 billion over a public-sector bond-financed alternative. He argues that the public sector could finance projects and the private sector manage them. But it is only through the packaging of finance and project management - making the private sector responsible for overrun and maintenance costs - that the PPP will deliver the efficiencies that London Underground needs.

The overall cost of borrowing will be less because less will have to be borrowed. Under the PPP, London Underground will concentrate on the job of running trains, signals, station and safety. The private sector will bring its expertise to bear in building a better infrastructure. The PPP will keep London Underground in public ownership and focused on serving passengers.

Wolmar suggests that the potential need for subsidy is the killer point. This is nonsense. We have always made clear that we shall address any need for subsidy when we have seen the PPP bids. A point he misses is that without the PPP the mayor would need even more subsidy to bring the network up to scratch. If the Jubilee Line extension had been financed by a £2-billion mayoral bond, Londoners would now face a bill for the £1.5-billion cost overruns. The PPP is designed so that the private sector bears the risk of cost overrun, and therefore has the incentive to keep to budget.

Keith Hill MP
Parliamentary under-secretary of state,
Department of the Environment, Transport and the Regions

I was disappointed by what appeared to be a rather complacent attitude towards the state of our railways shown by Lord (Gus) Macdonald. An "airline system" is all very well for long-haul flights, but entirely inappropriate for a day trip by rail from, say, Liverpool to Nuneaton. The potential rail traveller has an alternative - the car, which does not need to be booked 14 days in advance!

Trevor J Rhodes
Wallasey, Merseyside

This article first appeared in the 21 February 2000 issue of the New Statesman, Just wait for the gold rush to end

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How can Britain become a nation of homeowners?

David Cameron must unlock the spirit of his postwar predecessors to get the housing market back on track. 

In the 1955 election, Anthony Eden described turning Britain into a “property-owning democracy” as his – and by extension, the Conservative Party’s – overarching mission.

60 years later, what’s changed? Then, as now, an Old Etonian sits in Downing Street. Then, as now, Labour are badly riven between left and right, with their last stay in government widely believed – by their activists at least – to have been a disappointment. Then as now, few commentators seriously believe the Tories will be out of power any time soon.

But as for a property-owning democracy? That’s going less well.

When Eden won in 1955, around a third of people owned their own homes. By the time the Conservative government gave way to Harold Wilson in 1964, 42 per cent of households were owner-occupiers.

That kicked off a long period – from the mid-50s right until the fall of the Berlin Wall – in which home ownership increased, before staying roughly flat at 70 per cent of the population from 1991 to 2001.

But over the course of the next decade, for the first time in over a hundred years, the proportion of owner-occupiers went to into reverse. Just 64 percent of households were owner-occupier in 2011. No-one seriously believes that number will have gone anywhere other than down by the time of the next census in 2021. Most troublingly, in London – which, for the most part, gives us a fairly accurate idea of what the demographics of Britain as a whole will be in 30 years’ time – more than half of households are now renters.

What’s gone wrong?

In short, property prices have shot out of reach of increasing numbers of people. The British housing market increasingly gets a failing grade at “Social Contract 101”: could someone, without a backstop of parental or family capital, entering the workforce today, working full-time, seriously hope to retire in 50 years in their own home with their mortgage paid off?

It’s useful to compare and contrast the policy levers of those two Old Etonians, Eden and Cameron. Cameron, so far, has favoured demand-side solutions: Help to Buy and the new Help to Buy ISA.

To take the second, newer of those two policy innovations first: the Help to Buy ISA. Does it work?

Well, if you are a pre-existing saver – you can’t use the Help to Buy ISA for another tax year. And you have to stop putting money into any existing ISAs. So anyone putting a little aside at the moment – not going to feel the benefit of a Help to Buy ISA.

And anyone solely reliant on a Help to Buy ISA – the most you can benefit from, if you are single, it is an extra three grand from the government. This is not going to shift any houses any time soon.

What it is is a bung for the only working-age demographic to have done well out of the Coalition: dual-earner couples with no children earning above average income.

What about Help to Buy itself? At the margins, Help to Buy is helping some people achieve completions – while driving up the big disincentive to home ownership in the shape of prices – and creating sub-prime style risks for the taxpayer in future.

Eden, in contrast, preferred supply-side policies: his government, like every peacetime government from Baldwin until Thatcher’s it was a housebuilding government.

Why are house prices so high? Because there aren’t enough of them. The sector is over-regulated, underprovided, there isn’t enough housing either for social lets or for buyers. And until today’s Conservatives rediscover the spirit of Eden, that is unlikely to change.

I was at a Conservative party fringe (I was on the far left, both in terms of seating and politics).This is what I said, minus the ums, the ahs, and the moment my screensaver kicked in.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.