Lobbying scandal spreads to House of Lords

Lord Cunningham, Lord Laird, Lord Mackenzie accepted cash for lobbying.

And now the House of Lords has been dragged into the lobbying scandal. Following an investigation by the Telegraph and Panorama that has just ended Patrick Mercer's career, three members of the House of Lords were filmed offering to lobby ministers for cash. Lord Cunningham, Lord Laird and Lord Mackenzie told undercover reporters from the Sunday Times they would ask parliamentary questions to benefit a ficticious firm, and set up an all-party group as a lobbying vehicle. They also revealed that some peers were hiding conflicts of interest via job-swap deals, pulling strings for each other's clients in parliament. However all three deny any wrongdoing.

“The rules are very complex, but let’s not accuse all members who were involved in all this of being corrupt when in fact they aren’t," Lord Mackenzie told Radio 5live. "They’re simply trying to find their way through the morass of rules – it’s very difficult at times. But I’m quite clear I’ve broken no rules, I’ve asked no questions for money, and I’ve lobbied no ministers and nor would I do.”

He called for a reform of parliamentary rules to make them clearer.

As they stand, the rules for House of Lords members ban them from acting as advocates, hosting functions in the Lords or attempting to influence parliament, and, since 2009, "seeking to profit from membership of the house" in any way, even if they declared a financial interest. During the secretly filmed conversation with reporters, detailed in today's Sunday Times, Mackenzie explained how one could work round them:

“There is a rule that you shouldn’t host a reception in parliament where you have a pecuniary interest,” he said. “I thought that’s bloody nonsense. Nonetheless ... how would you get round that? “I just say to a colleague who has nothing to do with it, would you host a function for me?” He added: “Of course, I do the business anyway, but that gets round it.”

Jack Cunningham with Tony Blair and Bill Clinton. Photograph: Getty Images
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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.