Yorkshire Post  26 May 2005 John Meadowcroft
Gordon Browns proposals for helping first-time buyers and key workers to enter the housing market may well prove to be the policy that undoes the Chancellors reputation for competence and prudence. While the proposal to free more land for development is to be welcomed although it does not go far enough other measures announced yesterday are unlikely to achieve their stated objectives and may seriously undermine economic stability.
The shared ownership scheme announced by the Chancellor to help first time buyers is an extension of a scheme already in place in some parts of the country to help key workers. It is in effect a housing subsidy paid for by £1bn of taxpayers money, albeit a subsidy arrived at by a rather convoluted process. Like all subsidies, it is not guaranteed to achieve its stated aim: it may simply raise prices by the same amount as it subsidises home-purchasing, thus having no effect on those it is trying to help while making houses less affordable for those outside the scheme.
The long-standing provision of housing subsidies for key workers raises the question of just who is a key worker? Today, being a key worker often seems synonymous with being a public sector employee, but the impact of the blockades of fuel depots a few years ago demonstrated how dependent we all are on those private sector employees who transport fuel around the country, to give just one example. Why should a social worker be considered a key worker eligible for financial assistance but not the supermarket manager upon whom we rely to supply our food?
If only a small number of people take advantage of the extended shared ownership scheme its impact will be minimal but it will help few people; if a large number of people are allowed to go down this route, however, then the economic consequences could be severe. Under the proposals the government will fund 25% of the price of a home in return for a nominal rent after five years and the capital appreciation of its share.
The danger here is that a large amount of public money and hence government future spending plans may become tied to the value of this equity; the governments financial position may become dependent on house prices remaining at a high level. If it is true as many analysts believe that we are presently near the end of a housing bubble, which