A host of independent economists have criticised the Coalition’s decision to push ahead with a controversial mortgage guarantee scheme.
George Osborne confirmed on Monday that the Help to Buy subsidies, which will offer state insurance for 15 per cent of the value of new mortgages, will be put into operation next week. The scheme was originally not scheduled to be introduced until January. “We are the party of home ownership and we’re going to let the country know it,” said the Chancellor. But writing here in The Independent today figures affiliated to institutions ranging from the Trades Union Congress to the Institute of Economic Affairs call on the Chancellor to reverse course.
Philip Booth, Cass Business School and Institute of Economic Affairs
My greatest fear is not so much the Help to Buy scheme stoking another housing boom but that the British Government will become exposed to the housing market just like the US was before the financial crash. The taxpayer will be guaranteeing the top slice of credit risk on some of the country’s riskiest mortgages. People who cannot obtain loans on commercial terms will get them guaranteed by the taxpayer. The Government is increasing regulation of the banking system, the Help to Buy scheme is a bizarre way to prevent banks going bust and leaving their liabilities with the taxpayer. The Government is directly exposing itself to risks that should be left to the judgement of banks. The Government wants to make houses affordable, so it should not pump more finance into the market but liberalise planning laws so more houses will be built.”
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