I’ve blogged in the past, here, here and here about the UK housing bubble and how it is caused through reckless, irresponsible and malevolent policy. There will eventually be a crash leaving hundreds of thousands if not millions in negative equity and its all by design. I’ve said it before and I’ll say it again, a speculative real estate bubble validated as the key driver of nominal economic growth…what could possibly go wrong?
Courtesy of The Independent:
Ministers are refusing to publish the Government’s own risk assessment into its flagship housing policy, it emerged last night – triggering suspicions that they are trying to cover up official warnings that the scheme will endanger the British economy.
A string of independent housing experts have publicly warned that Help to Buy, launched by George Osborne in this year’s Budget to give people a lift on to the property ladder, will overheat the housing market and “detonate a bomb” under the British economy.
Ministers have refused for months to say if any official risk assessment has taken place, insisting only that the independent Office for Budget Responsibility (OBR) was responsible for housing forecasts. Yet in a Freedom of Information (FOI) response to the Shadow Local Government Secretary, Hilary Benn, officials have revealed that the Government does indeed hold details of a risk assessment into Help to Buy, but that publication has been blocked by ministerial veto. The risk assessment was carried out before the policy was announced in March, meaning that the Chancellor ignored any warnings in it.
In a letter to Mr Benn’s office, an official at the Department for Communities and Local Government (DCLG), where Eric Pickles is in charge of housing policy, acknowledged that publication would “lead to greater transparency, making government more accountable to the electorate and increase trust in steps the Government is taking on housing policy”. But he added: “Disclosure of information related to the formulation and development of policy would impede the effective conduct of government and good policy-making, as ministers and officials need to be able to conduct rigorous and candid assessments of their policies and programmes, including considerations of the risks, pros and cons without there being premature disclosure, which might close off better options. The release of the information would also inhibit officials from … thinking the unthinkable and considering a wide range of scenarios and their potential impact.”
Despite being in classic Whitehall language, the comments suggest the risk assessment contains information that would undermine confidence in the Help to Buy policy.
Mr Benn said last night: “Ed Balls and I have warned the Government that, while we support Help to Buy, in the absence of increased house-building the scheme threatens to increase the number of people bidding for an insufficient number of houses, thus driving prices up and making it more difficult for young people and families to get a foot on the housing ladder.
“The Government is presiding over the lowest level of house-building in peacetime since the 1920s.
“Eric Pickles and George Osborne need to come clean urgently and publish their risk assessment in full so that the public can understand how their money is being spent and see what the impact will be.”
Help to Buy offers first-time buyers and people moving into newly built homes government-backed loans on properties worth up to £600,000. The Government will offer equity loans of 20 per cent.
Since its announcement in March, however, there have been warnings that the scheme will fuel property prices and create a new housing bubble. In its latest forecasts for the Autumn Statement, the OBR described the housing market as “notably strong”, particularly in London and the South-east, and forecast annual house price rises of 7 per cent by 2015.
It emerged last week that Alex Morton, David Cameron’s new No 10 housing adviser, wrote in the summer while at the centre-right Policy Exchange think tank, that Help to Buy risks “detonating a bomb both under the British economy and [Osborne’s] political career” and could lead to a repeat of “boom and bust”.
Spencer Dale, chief economist at the Bank of England, warned that the housing market could turn “from lukewarm to scalding hot in a few economic seconds” because it had a “microwave-like quality”.
Yet Mr Osborne defended Help to Buy before the Treasury Select Committee last week, and dismissed talk of a fresh property bubble. He said: “Of course we have to be vigilant, and we have a system for that, but there is not that issue today.”
Ed Miliband and Mr Benn will tomorrow launch a commission into Britain’s housing supply, led by the economist Sir Michael Lyons.
In its FOI response to Mr Benn, the DCLG official said that because Help to Buy would involve only 2 per cent of the 3.4 million transactions in the housing market over the next three years, “we do not expect the scheme to have a measurable impact on house prices”.