Vince Cable’s concerns about Help to Buy

Vince Cable - Some rights reserved by Liberal DemocratsOn the Andrew Marr Show yesterday Vince Cable expressed concerns about the Government’s Help to Buy scheme. He claims that the government’s mortgage guarantee scheme could inflate the market, leading to another housing bubble.

Under Help to Buy, launched earlier this year, anyone purchasing a newly built home costing less that £600,000 will be able to apply for a 20% government guaranteed loan with just a 5% deposit. This is clearly intended to boost the housing market and to create new jobs in the building and related industries, such as furniture manufacture.

Jeremy Vine referred to Vince Cable’s prescient warnings about house price inflation back in 2000, and Vince agreed that there was some risk involved if the government doesn’t get the system right this time. He added that the underlying problem was one of supply, especially for social housing, and referred to a policy motion on housing that will be on the agenda in Glasgow.

* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.

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  • Paul in Twickenham 29th Jul '13 - 1:35pm

    As I (and many others) have said on this site since literally the day that this scheme was first announced, it has absolutely nothing to do with creating jobs in construction or furniture making. It has everything to do with a cynical effort to manufacture a housing bubble in order to create a “feel-good factor” in property-owning middle-englanders that will peak at the time of the next general election and thus encourage them to vote Conservative.

    It is pleasing to hear Mr. Cable acknowledge the risks created by Mr. Osborne’s crass electioneering. It is similarly pleasing to hear him criticise the “go home” campaign (which is clearly more about assuaging white working-class opinion than actually dealing with the problem), and to hear him oppose zero-hour contracts and pay-day lenders. One would almost think that Mr. Cable had an agenda in making so much noise during the holidays.

    But to coin a well-worn Liberal campaign slogan “actions speak louder than words”. And I await with interest to see whether Mr. Cable’s fine sentiments can be translated into meaningful actions.

  • jenny barnes 29th Jul '13 - 2:43pm

    There’s absolutely no reason why the government shouldn’t be building stacks of social housing. There are idle builders, suitable sites, money can be printed to pay for it, housing benefit would be reduced… apart from ideology ofc. I’d like to see some ikea/ boklok houses – and there’s plenty of places to build. Look at a google satmap of London and see all the low rise sheds: plenty of room for 2 or 3 storeys of apartments on top.

  • Jonathan Brown 29th Jul '13 - 4:48pm

    I agree Jenny. Simon Hughes has been expressing an interest in doing this for several years, but it appears to have come to nothing. I think the failure to even begin to sort out the country’s housing crisis is one of the biggest failures of this government.

  • Peter Hayes 29th Jul '13 - 6:31pm

    Jenny, there are idle builders and available sites but there is no incentive to build either affordable or expensive homes, they just sit on the planning permission until the economics look right. The only solution is planning permission should be revoked after say 3 to 5 years if not developed and the land value should revert back to farmland. Expect Tories or Yellow Book liberals to enforce the policy?!!!

  • Peter Hayes, the government/council could hire people to build homes directly? Too obvious perhaps?

  • A Social Liberal 29th Jul '13 - 8:00pm


    Surely Jenny is advocating that councils and housing associations hire builders to construct social housing. This way builders are just contractors for them and therefore have no say in what gets built, nor have they any excuse for sitting on their hands.

    By building social housing the government will nullify both the housing bubble and the high rents charged by landlords. However, by forcing HAs and councils to charge 80% of the markets rents and use that to build their new stock they have effectively stymied new projects being started.

  • While it is good to know that Vince Cable has concerns about the Help to Buy scheme, however as so often it is a shame that Nick Clegg didn’t veto it. I understand that the Treasury says it will cost £3.5bn this money could have been used to build say 29,000 houses for rent, which would have been a better use of the money. Maybe if the government lent it to housing associations it might even build more.

  • John Carlisle 30th Jul '13 - 10:14am

    The question is why BIS has not been creating the conditions to build these houses? Was it not one of our promises? Macmillan made his name in the 1950’s delivering 300,000 homes in a year for a penurious UK as Minister of Housing. Churchill prophesied that the nation would “bless him” if he did. Macmillan became prime minister in 1957 and was re-elected.
    In case anyone thinks that was then, in New York city in 2006 Commissioner for Housing Donovan created and implemented HPD’s New Housing Marketplace Plan to build and preserve 165,000 affordable homes, the largest municipal affordable housing plan in the nation’s history. He is now Obama’s Secretary of Housing and Urban Development.
    What is the link. Fancy words do not pract ice make. The LibDems do not get that one man and his adviser cannot get big things done. Macmillan was a Minister, Donovan a Commissioner, with organisations underneath them. Why did Vince not set this up if we were serious about the meeting this need, which would have been a golden opportunity for recognition from the public of both real job creation and roofs over heads?

  • Andrew Colman 30th Jul '13 - 1:54pm

    Vince is right to question GO s plan to support mortgages.

    Much of the UKs economic problems in the last 40 years is down to housing bubbles and the failure of governments to deal with them

    In my view, had a sensible fiscal stabiliser been in place to control house price inflation in 2000 (eg stamp duty that went up when house prices increased to reduce demand) , then the credit crunch and subsequent debt crises could have been largely avoided (as it has in Germany).

  • David Allen 30th Jul '13 - 5:33pm

    “This scheme …has everything to do with a cynical effort to manufacture a housing bubble in order to create a “feel-good factor” in property-owning middle-englanders that will peak at the time of the next general election and thus encourage them to vote Conservative.”

    Dead right, but it’s also bigger than that. Osborne has stumbled across a major economic lever, which might rescue our economy if handled with care, but will assuredly wreck our economy if it isn’t. The feel-good factor means moving away from negative equity, gaining the confidence to go out and spend, increasing personal debt, and kick-starting the economy. It’s a private sector equivalent of Keynesianism – and if Cameron and Osborne think that Keynesian economics is a reckless gamble, well, it’s nothing compared to their own little wheeze.

    That’s what I’m trying to say in:
    which, though written as black humour, is deadly serious. How the parties deal with this new form of Osbornomics could well be their biggest challenge at the next election.

    It won’t be easy.

    The right thing to do, for both Labour and the Lib Dems, would be to condemn it as a cynical and dangerous election manoeuvre. In much the same way, the right thing to do would be to condemn Osborne’s new dash for cheap fracked gas as putting short term gain ahead of longer term planetary disaster. If we (and Labour) do these things, the Tories will just say that they have created prosperity and that their opponents would destroy it. It sounds like an election winning line to me.

    Or we could instead take the cynical approach, hide away our qualms about bubbles and (similarly) about climate change, and attempt to win popularity on the back of Coalition policy. However, the Tories will have no problem showing the voters that it was they who took the lead and brought the unenthusiastic Lib Dems along with them. They will say, why vote for the monkey when you could vote for the organ grinder?

    It’s a b*gger, politics, isn’t it?

  • Julian Dean 30th Jul '13 - 6:35pm

    Vince Cable has concerns about many policies but when push comes to shove he will always side with the etonion mess.

  • @ John Carlisle

    BIS does not have responsibility for housing, the Department for Communities and Local Government does. So Cable and BIS couldn’t get 300,000 houses built. However the point is valid that building houses for rent would create jobs and are needed.

    @ David Allen

    Using government money to part buy houses could be seen as Keynesian in itself. If David’s two scenarios are correct then maybe the solution is to get the government to use the money to lend to housing associations to build houses for rent and cutting VAT on home improvements to stimulate demand.

  • Paul in Twickenham 31st Jul '13 - 1:37pm

    @David and @amalric – you are quite right to highlight the building of social housing as a sensible alternative to Osborne’s scheme to inflate the price of existing property. It is entirely within the remit of the BOfE to buy good quality bonds from (for example) social housing providers as a QE strategy and this would carry much lower risk than arises from the state underwriting speculation while also helping to make homes more affordable for younger buyers.

    It seems to me that a “feel good factor” that helps boost economic activity cannot come from creating an unsustainable bubble in the form of a zero sum game where for every winner there is a loser. Banning zero hour contracts and increasing job security for all those affected would be a much better idea.

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