Disaster for Cameron as Lib Dems win Eastleigh and UKIP beat the Tories

The PM faces a backlash after the Lib Dems win the by-election and the Tories finish behind UKIP in third place.

Let the Tory crisis begin. The result has just been declared in Eastleigh, where the Lib Dems have won with a reduced majority of 1,771 (4.26%) and where, disastrously for David Cameron, UKIP has finished second. A by-election that Cameron needed to win to convince his backbenchers that their party can achieve outright victory in 2015 has ended with the Tories finishing more than a thousand votes behind Nigel Farage's outfit. Coming second in a constituency where the Lib Dems hold all 36 council seats would have been allowable but to finish third, after a well-resourced campaign, is a terrible outcome.

For Clegg, the result will come as a considerable relief. Had the party lost the seat after earlier leading in the polls, it is his handling of the Rennard scandal that would have been blamed. That the outcome was a comfortable Lib Dem win is proof of the adage that "all politics is local". Voters were more concerned with the proposed gravel pit than they were with the disgrace of Chris Huhne or the allegations against Lord Rennard. Ironically, the result owed much to the "pavement politics" pioneered by the party's former chief executive.

The result is one of the biggest boosts to Clegg's leadership since the formation of the coalition. For once, he goes into his party's spring conference with something to celebrate. By holding Eastleigh in the most unpropitious circumstances, the Lib Dems have upset the assumption that they face wipeout in 2015. The Conservatives' hopes of a majority rest on the belief that they can take as many as 20 seats off Clegg's party (half of the Tories' 40 target seats are Lib Dem-held) but tonight's result significantly undermines that strategy. It is becoming ever harder to see how the Tories will improve on their 2010 performance.

For Labour, which finished a poor fourth, the result is a major disappointment. Having chosen to fight to win, rather than concede the seat to the Lib Dems, it saw its share of the vote increase by a mere 0.22 per cent. The hope was that Eastleigh would demonstrate the progress the party has made in the south, where, outside of London, it holds just 10 seats out of a possible 197. Instead, it has shown how much further it has to go before it can truly claim to be a "one nation" force. The only consolation for Ed Miliband is that the Tories' humiliation means all the attention will be on Cameron.

The big winner of the evening was UKIP, which saw its share of the vote dramatically increase from 3.6 per cent to 27.8 per cent, and finished just 1,771 votes behind the Lib Dems. The party still hasn't won a seat but it is getting closer and many will reasonably ask whether, had he stood, Nigel Farage would now be Westminster's newest MP.

Here's the result in full.

Mike Thornton (Liberal Democrat) 13,342 (32.06%, -14.48%)

Diane James (UKIP) 11,571 (27.80%, +24.20%)

Maria Hutchings (Conservative) 10,559 (25.37%, -13.96%)

John O'Farrell (Labour) 4,088 (9.82%, +0.22%)

Danny Stupple (Independent) 768 (1.85%, +1.56%)

Dr Iain Maclennan (National Health Action Party) 392 (0.94%)

Ray Hall (Beer, Baccy and Crumpet Party) 235 (0.56%)

Kevin Milburn (Christian Party) 163 (0.39%)

Howling Laud Hope (Monster Raving Loony Party) 136 (0.33%)

Jim Duggan (Peace Party) 128 (0.31%)

David Bishop (Elvis Loves Pets) 72 (0.17%)

Michael Walters (English Democrats) 70 (0.17%, -0.30%)

Daz Procter (Trade Unionists and Socialists Against Cuts) 62 (0.15%)

Colin Bex (Wessex Regionalist) 30 (0.07%)

Liberal Democrat majority 1,771 (4.26%, -2.94%)

Turnout: 41,616 52.8% (-12,034, -16.5%)

Swing: 19.34% Liberal Democrat to UKIP

UKIP candidate Diane James is joined by party leader Nigel Farage as they celebrate beating the Conservatives to second place in the Eastleigh by-election. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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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.