Another energy shambles from the coalition

Lib Dem energy secretary Ed Davey and Tory energy minister John Hayes go to war over wind farms.

On the day that Michael Heseltine's growth report called for the government to adopt a "definitive and unambiguous" energy policy, ministers are offering anything but. In an interview in today's Daily Telegraph, the recently appointed Conservative energy minister John Hayes, launched a full-frontal attack on wind farms, declaring that they could no longer be "imposed on communities" and that "enough is enough".

He told the paper:

We can no longer have wind turbines imposed on communities. I can’t single-handedly build a new Jerusalem but I can protect our green and pleasant land.

We have issued a call for evidence on wind. That is about cost but also about community buy-in. We need to understand communities’ genuine desires. We will form our policy in the future on the basis of that, not on a bourgeois Left article of faith based on some academic perspective.

Unsurprisingly, his outburst hasn't gone down well with his boss, Lib Dem Energy Secretary Ed Davey. The Department for Energy has let it be known that Davey removed the remarks from a speech Hayes made yesterday and that his comments "will not be government policy". One source tells the Guardian:

What he planned to say was not government policy; will not be government policy. It might be what the Tory party would like to be energy policy, but it is not. He is not in charge of renewable policies on his own, he has to follow the coalition agreement which is in favour of renewable energy and meeting our legal EU targets for 2020.

He has been very silly to give interviews to the Telegraph and the Mail on a speech he was not allowed to deliver.

The only way we are going to meet our targets is if we include renewable energy which is ultimately a cheap form of energy, and in parts of Wales and Scotland is popular.

The row is another example of how coalition discipline is breaking down. Earlier this week, Nick Clegg denounced Defence Secretary Philip Hammond for "jumping the gun" by announcing £350m of new funding for the renewal of Trident and last week the Lib Dems declared that they would veto Iain Duncan Smith's plan to cap benefits for larger families. Even taking into account the reduced standard of collective ministerial responsibility in a coalition, the degree of disunity is striking.

After David Cameron's botched announcement on energy prices earlier this month (which Davey did not receive prior notice of), it's also further evidence of the government's increasingly chaotic approach to policy in this area. Expect Ed Miliband to point out as much at PMQs later today.

The turbine sails of the Scout Moor Wind Farm in the South Pennines. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

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.