Theresa May has kicked off Conservative party conference with a swathe of policy announcements, intended to get both her and her party back on the front foot after the loss of their parliamentary majority in June. She promised an extra £10bn for Help to Buy, the government-backed scheme that provides 5 per cent mortgages, a new system of redress for tenants in the private rented sector, an increase in the threshold at which graduates start paying back their tuition fees to £25,000, a reversion of the abolition of maintenance grants, and a commitment to freeze tuition fees at their current level of £9,250.
The Prime Minister is a vicar’s daughter, so it’s appropriate that she has unveiled a policy platform that’s something of a curate’s egg: good in parts. To take the good bits first: strengthening the protections enjoyed by tenants in the private rented sector is a good thing, though much hinges on how sharp the new system’s teeth are.
One of the difficulties for any government that wants to tackle the United Kingdom’s housing crisis is that they need to make the private rented sector less financially lucrative, but not at a rate that sees private landlords going bust so quickly that they and their tenants both end up unable to buy or rent property. The government needs to gently smother the buy-to-let market, not throttle it overnight, and this could be one way of doing that.
Putting the tuition fee threshold up to £25,000 brings it where the £17,500 threshold was in real terms when Labour introduced the £3,000 fees back in 2004. U-turning on the government’s abolition of maintenance grants is, again, good policy. Converting maintenance grants into loans was a lot like introducing two higher rate bands: one, at 40p in the pound for those who have come from wealth, and one, at 41p for those who have not.
That’s the good, what about the bad? The Adam Smith Institute’s Sam Bowman likens Help to Buy as “throwing petrol onto a bonfire”, and he’s right. The crisis in housing is primarily one of supply and increasing the levels of demand through Help to Buy only makes things worse.
It’s even more irresponsible when you think about how much you could do to actually tackle the underlying problems with £10bn of government spending. The only attraction of Help to Buy is that it is off-the-books due to the government’s accounting rules. However, if what you really want is an off-the-books transaction, the government could lend more favourably to encourage innovative housebuilders like, say, Pocket Living, rather than just inflating the property bubble further. (Or they could, heaven forbid, deregulate planning and build more social homes themselves.)
But at least there is an electoral constituency – dual earner above-average income couples without children, who voted for David Cameron but preferred Jeremy Corbyn to Theresa May – who might be lured back to the Conservatives by Help to Buy. It’s also a boon to boomer landlords, another vital plank of the Conservative electoral coalition. It’s bad policy, but it is at least passable politics.
If only the same could be said of the tuition fee freeze. Freezing the total amount to be repaid at £9,250 is a novel combination of finding a policy that is both more regressive than Labour’s and less politically effective.
The problem with abolishing tuition fees is that it largely benefits affluent graduates, as the lowest-paid graduates won’t pay back their fees. But the problem with any policy tweak that lowers the headline rate is that it benefits only the highest-paid graduates as they are the only people who will benefit from the lower overall debt burden. This problem actually becomes more acute thanks to the good decision to increase the threshold at which repayments start, as the people who earn enough to pay off their fees will now be wealthier still. (Sam Moore explains the policy issues in greater detail here.)
And as well as being regressive the policy doesn’t make electoral sense. If tuition fees is what moves you as a voter, then you have a choice between Corbyn (offering tuition fees of zero) and May (tuition fees of £9,250). You don’t need a degree in electoral behaviour to be able to work out which one of those promises you’re going to choose. Nor do you need a degree in opinion polling to know just how well this set of proposals is going to go down overall.