Could Osborne's mortgage scheme be used to buy second homes? He doesn't know

Chancellor unable to say whether the rich will be able to get government support to buy second or third properties.

George Osborne's new mortgage guarantee scheme ("Help to Buy") garnered him plenty of favourable headlines from Fleet Street but is the Chancellor on top of the detail? Asked this morning on the Today programme whether the £12bn scheme, which will underwrite mortgages for buyers with deposits of between 5-20 per cent, could be used by the well-off to buy second (or third) homes worth up to £600,000, Osborne was unable to say. The Chancellor made it clear that this was not the intention but would only say that he was "working with the industry". 

The mortgage market is an extremely complex thing. The intention of the scheme is absolutely clear, which is that it is for people who want to get their first home or have a home and want to move to a bigger home, because perhaps they have got a bigger family. We are working with the industry to get a scheme that works.

The Treasury has issued a list of those properties that will not eligible for support, including buy-to-lets, but it makes no mention of second homes. Labour has been quick to pounce on the omission, noting that Osborne was unable to deny that the new scheme "will allow wealthiest to buy second homes with govt support". Ed Balls's special adviser Alex Belardinelli quipped that they could use next month's "millionaires' tax cut" to do so. 

Lib Dem peer Lord Oakeshott (Vince Cable's representative on earth) has also responded, urging Osborne to "say no now". If he wants to shut down an encouraging Labour line of attack, the Chancellor would be wise to take his advice. 

Update: Following Osborne's refusal to confirm that second homes will be exempt, Ed Balls has gone on the attack, declaring that the government "is basically saying that if you’ve got a spare room in a social home you’ll have to pay the bedroom tax, but if you want a spare home we’ll help you buy one."

Here's the statement in full: 

Not only is George Osborne pressing ahead with a tax cut for millionaires it now seems that his mortgage scheme will help people, no matter how high their income, to buy a subsidised second home worth up to £600,000.

The Government is basically saying that if you’ve got a spare room in a social home you’ll have to pay the bedroom tax, but if you want a spare home we’ll help you buy one.

Is the Government really going to give millionaires a tax cut averaging £100,000 and then give them a taxpayer guarantee if they use that money as a deposit on a house - a second home or even a home to buy to let? Not just tax cuts for millionaires but subsidised mortgages for millionaires.

Surely people struggling to get a mortgage and those who want to own their first home must be the priority for help, not the small number who can afford to buy a second one. We will only tackle the housing crisis and help first time buyers if we finally build the new affordable homes we have said should be at the heart of any proper plan for jobs and growth.

This more of the same Budget stuck with a plan that is completely failing on growth, living standards and the deficit, but the one new thing George Osborne announced is already unravelling.

George Osborne leaves number 11 Downing Street in central London on March 19, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images
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A simple U-Turn may not be enough to get the Conservatives out of their tax credit mess

The Tories are in a mess over cuts to tax credits. But a mere U-Turn may not be enough to fix the problem. 

A spectre is haunting the Conservative party - the spectre of tax credit cuts. £4.4bn worth of cuts to the in-work benefits - which act as a top-up for lower-paid workers - will come into force in April 2016, the start of the next tax year - meaning around three million families will be £1,000 worse off. For most dual-earner families affected, that will be the equivalent of a one partner going without pay for an entire month.

The politics are obviously fairly toxic: as one Conservative MP remarked to me before the election, "show me 1,000 people in my constituency who would happily take a £1,000 pay cut, then we'll cut welfare". Small wonder that Boris Johnson is already making loud noises about the coming cuts, making his opposition to them a central plank of his 

Tory nerves were already jittery enough when the cuts were passed through the Commons - George Osborne had to personally reassure Conservative MPs that the cuts wouldn't result in the nightmarish picture being painted by Labour and the trades unions. Now that Johnson - and the Sun - have joined in the chorus of complaints.

There are a variety of ways the government could reverse or soften the cuts. The first is a straightforward U-Turn: but that would be politically embarrassing for Osborne, so it's highly unlikely. They could push back the implementation date - as one Conservative remarked - "whole industries have arranged their operations around tax credits now - we should give the care and hospitality sectors more time to prepare". Or they could adjust the taper rates - the point in your income  at which you start losing tax credits, taking away less from families. But the real problem for the Conservatives is that a mere U-Turn won't be enough to get them out of the mire. 

Why? Well, to offset the loss, Osborne announced the creation of a "national living wage", to be introduced at the same time as the cuts - of £7.20 an hour, up 70p from the current minimum wage.  In doing so, he effectively disbanded the Low Pay Commission -  the independent body that has been responsible for setting the national minimum wage since it was introduced by Tony Blair's government in 1998.  The LPC's board is made up of academics, trade unionists and employers - and their remit is to set a minimum wage that provides both a reasonable floor for workers without costing too many jobs.

Osborne's "living wage" fails at both counts. It is some way short of a genuine living wage - it is 70p short of where the living wage is today, and will likely be further off the pace by April 2016. But, as both business-owners and trade unionists increasingly fear, it is too high to operate as a legal minimum. (Remember that the campaign for a real Living Wage itself doesn't believe that the living wage should be the legal wage.) Trade union organisers from Usdaw - the shopworkers' union - and the GMB - which has a sizable presence in the hospitality sector -  both fear that the consequence of the wage hike will be reductions in jobs and hours as employers struggle to meet the new cost. Large shops and hotel chains will simply take the hit to their profit margins or raise prices a little. But smaller hotels and shops will cut back on hours and jobs. That will hit particularly hard in places like Cornwall, Devon, and Britain's coastal areas - all of which are, at the moment, overwhelmingly represented by Conservative MPs. 

The problem for the Conservatives is this: it's easy to work out a way of reversing the cuts to tax credits It's easy to see how Osborne could find a non-embarrassing way out of his erzatz living wage, which fails both as a market-friendly minimum and as a genuine living wage. A mere U-Turn may not be enough. 


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