When the Chancellor announced his two-part Help to Buy scheme in the Budget last month it was met with a chorus of disapproval. Representatives from the mortgage and construction industries – who, of course, have a financial interest in seeing the scheme implemented – were positive about it. Pretty much everyone else thought it was a pretty dumb idea.
When I reviewed the scheme at the time I noted:
Just about the only perspective from which this initiative makes sense is carrying through on an absolute determination not to add directly to the public sector deficit, but not minding too much if the guarantees get lost amongst everything else in the public debt.
So it probably makes perfect sense to the Treasury.
Otherwise, the scheme has almost nothing to commend it. The economic illiteracy it displays is remarkable. The fact that, coming from the current occupant of No 11, this is no great surprise is perhaps equally remarkable.
The debate has now been joined by the Treasury Select Committee in its report on the 2013 Budget. What comes through clearly from the paragraphs of the Select Committee’s report is that they are not hugely impressed with the Help to Buy scheme. But it is perhaps even more clear is that the Committee is not at all impressed with the quality of thought – or lack of it – that underpins the scheme. They finish their discussion of the scheme with a list of 17 questions they would like the Treasury to answer (para 182). These questions address topics of an absolutely fundamental nature. They are the basics that need to be in place before it is possible to conduct a sensible appraisal of the wisdom of spending more than £15 billion under the Help to Buy scheme. You get the unmistakeable sense that the Select Committee is frustrated, and not a little alarmed, that the Treasury is as yet unable to provide clear answers to even the simplest of questions (Para 177: “As far as can be understood from the Chancellor’s evidence, …”).
Most of the issues covered by the Select Committee report have already been discussed. And the pattern of industry support for the scheme contrasted with scepticism elsewhere repeats itself.
One important further dimension the Select Committee adds to the debate – apart from further weight behind the criticism – is a form of the slippery slope argument. Continue Reading →