Help To Buy is in a mess - here's how Osborne can rescue it

To avoid a "second home subsidy", the government must limit the scheme to first-time buyers.

The government’s Help to Buy scheme - a handout to the big beasts of the construction industry wrapped up as a fluffy social policy giving the hard pressed a leg up - has had an inauspicious start to life.

The scheme will share out £3.5bn in interest-free loans to buyers who can rustle up a mortgage deposit of just 5 per cent, each loan offering up to 20 per cent of the value of a new-build property worth £600,000 or less, and taxpayer backing for up to £130bn of mortgage lending.

From the off, the policy faced criticism for artificially stimulating the housing market, threatening another disastrous cycle of boom, bubble and bust.

Even the Treasury select committee felt moved to share its concerns about the risks of channelling public money into an investment whose value - like all good property speculators know - could go up as well as down.

But the biggest problem with Help to Buy is the loophole in the mortgage guarantee scheme that will allow existing home owners access to a loan. Parodying the government’s own 'spare room subsidy' (or 'bedroom tax'), shadow chancellor Ed Balls found a new moniker for the policy: "the second home subsidy".

On BBC1’s Sunday Politics show this week, Conservative MP Nadhim Zahawi was challenged on this issue yet again. He gave a halting and stumbling response, which cleared absolutely nothing up and raised new fears about the perverse impact these loans might have.

Asked what the government could do to stop the policy being used to buy second properties, Zahawi said:

One of the things we have to look at is the detail. How do you decide? If parents want to help get [children] to get a 5 per cent deposit in place or if someone is selling a smaller property to help their family into a bigger place?

Clear as mud. But look again at what he asking us to consider: how do you decide if a parent purchasing a second home to help their child onto the property ladder - buying it for them, or with them, or using their existing owner occupied property as leverage - is using or abusing equity loan scheme?

It’s worth remembering that, when he unveiled Help to Buy in the Budget, chancellor George Osborne said that home ownership was now "beyond the great majority who can’t turn to their parents for a contribution. That’s not just a blow to the most human of aspirations, it’s a setback to social mobility."

What is this fudged idea over public funding for second homes if not a double-bolted cap on social mobility?

Allowing parents to purchase a second home through to the scheme to support their younger family members removes the opportunity of government support from the children of those who could never offer them an independent leg up, and uses public funds to consolidate wealth in the hands of those who already have it. And if that’s the case, it must be stopped. Immediately.

Writ large, a policy like this only exacerbates social inequality, with its disastrous consequences for us all (no need to rehash the excellent work of Richard Wilkinson and Kate Pickett here). It’s not clear that this is exactly what Zahawi meant in his fumbled answer to Andrew Neil’s forensic questioning; perhaps he was just having a bad morning, or feared falling foul of the party machine. Either way, a vacuum will be filled with speculation, so government must clarify exactly how, and by whom, Help to Buy will be accessed.

Another dangling question for the coalition is whether Help to Buy has actually pushed the construction industry to develop more homes? We know there is demand for decent housing; the problem is with the lack of supply. Builders aren’t building, and where they are they’re not building the right sort of homes.

As David Orr, chief executive of the National Housing Federation, explained in his response to Help to Buy: "Our housing market has long been weakened by the lack of new houses being built... the government should be focusing on unlocking investment to build more new homes as a way of managing down the housing benefit bill and boosting the economy."

If the policy has only managed to put down the foundations for £600,000 Barrett ‘dream homes’, what is its value to first time buyers?

But listen up, Osborne, because you can rescue Help to Buy with three simple measures:

1. Reduce the limit to 20 per cent of any property valued at the national average of £238,293, rising to £350,000 for London and the South East.

2. Only allow first-time buyers to access the mortgage guarantee scheme.

3. Only open the scheme up to properties with three bedrooms or less, forcing developers to build the type of affordable housing that is so desperately in demand for first-time buyers.

The Chancellor may feel reports that house prices are on the rise for the first time since 2010 confirm that his policy is working. I believe it demonstrates quite the opposite.

George Osborne meets with a couple at the Berkeley Homes Royal Arsenal Riverside development in Woolwich. Photograph: Getty Images.

Hannah Fearn is contributing editor of the Guardian local government, housing and public leaders networks

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Jeremy Corbyn vows not to resign. What next for Labour?

The leader's decision to fight the rebels sets the stage for a new leadership contest or a protracted legal battle.  

Throughout Sunday as the shadow cabinet resignations mounted up (reaching 11 by the evening), Jeremy Corbyn's allies insisted that he was unfazed. "He's not wavering," one told me, adding that Corbyn would seek to form a new frontbench. At 21:54pm, the Labour leader released a statement confirming as much. "I regret there have been resignations today from my shadow cabinet," Corbyn said. "But I am not going to betray the trust of those who voted for me - or the millions of supporters across the country who need Labour to represent them."

Corbyn added that "those who want to change Labour's leadership" would "have to stand in a democratic election, in which I will be a candidate". The shadow cabinet, he said, would be reshaped "over the next 24 hours" ("On past experience, 24 hours to pick a shadow cabinet is ambitious," a Labour source quipped in reference to January's marathon reshuffle). 

Any hope that Corbyn would retreat without a fight has been dispelled. Tom Watson will meet him tomorrow morning to "discuss the way forward", a statement regarded as "ominous" by some of the leader's allies. Labour's deputy failed to back Corbyn's leadeership and warned of the need to be "ready to form a government" following an early election. But even if Watson calls on the leader to resign (which insiders say is far from guaranteed), few believe he will do so. 

Corbyn retains the support of his closest allies, John McDonnell, Diane Abbott and Jon Trickett, and has been backed by shadow defence secretary Emily Thornberry and Andy Burnham ("Those who put personal ambition before the party won't be forgiven or forgotten," a senior MP declared of the Manchester mayoral contender). He will look to repopulate the shadow cabinet with supporters from the 2015 intake, such as Clive Lewis, Richard Burgon, Cat Smith and Rebecca Long-Bailey. 

The Parliamentary Labour Party will meet on Monday at 6pm and discuss a motion of no confidence against Corbyn, tabled by veteran MPs Margaret Hodge and Ann Coffey. This will likely be followed by a secret ballot on Tuesday between 9am and 5pm. The rebels are confident of winning a majority (though dismiss reports that as many as 80 per cent will oppose Corbyn). But the Labour leader is still unlikely to resign at this juncture. Having entered office with the backing of just 15 MPs (now 14 following the death of Michael Meacher), he is untroubled by losing support that he never truly had. "He's an oddity. Very gentle but very robust," an ally told me. 

At this point, Corbyn's opponents would be forced to launch a direct leadership challenge, most likely in the form of a "stalking horse". John Spellar, a veteran of Labour's 1980s strife, Hodge and Barry Sheerman have been touted for the role. A matter of fierce dispute on Sunday was whether Corbyn would automatically make the ballot if challenged. Labour's lawyers have told the party that he would not, forcing him to win 50 MP/MEP nominations to stand again (a hurdle he would struggle to clear). But Corbyn's allies counter that their own legal advice suggests the reverse. "It could get very messy and end up in the courts," one senior rebel lamented.

Some take the view that natural justice demands Corbyn is included on the ballot, the view expressed by Tony Blair to MPs. In a new leadership contest, Watson and/or Angela Eagle are regarded as the likeliest challengers, though there is still no agreed alternative. Many argue that the party needs a "Michael Howard figure" to achieve party unity and limit the damge at an early election. He or she would then by succeeded by a younger figure (a "Cameron") such as Chuka Umunna, Dan Jarvis or Lisa Nandy.

But a Labour source told me of the potential contest: "Don't rule out Yvette. The only grown-up candidate and I believe she wants it". He emphasised the need to look beyond the task of "unifying the party" and towards the forthcoming Brexit negotiations. Cooper, an experienced economist, was best-qualified to lead at a moment of "national crisis", the source suggested. Watson, he added, wanted "the leadership handed to him on a plate" with backing from grandees across the party. John McTernan, Blair's former political director, said that he would be "very happy" to have the Brownite as leader. Despite Watson's leading role in the coup against Blair in 2006, many from Labour's right believe that he is best placed to defeat Corbyn and unite the party. Some point to Eagle's fourth-place finish in Labour's deputy leadership election as evidence of her limited appeal. 

McDonnell, Corbyn's closest ally, who MPs have long believed retains leadership ambitions, insisted on Sunday that he would "never stand". Most believe that the shadow chancellor, a more abrasive character than Corbyn, would struggle to achieve the requisite 37 MP/MEP nominations. 

The Labour leader's allies remain confident that he would win majority support from members if challenged. Rebels speak of an "unmistakable shift" in opinion since Brexit but concede that this may prove insufficient. They are prepared to mount repeated challenges to Corbyn if necessary in order to "wear him down". But an early general election, which Boris Johnson is expected to trigger if elected Conservative leader, could deny them the chance. 

As the PLP assembles in Committee Room 14 at 6pm, the activist group Momentum will assemble in Parliament Square for a #KeepCorbyn protest. It is a fitting symbol of a party fatally torn between its members and its MPs. Unless the two can somehow be aligned, Labour will remain united in name only. 

George Eaton is political editor of the New Statesman.