EDITOR'S LETTERMerryn Somerset Webb
A ludicrous electoral bribe
Last month, George Osborne came up with a silly idea – the help-to-buy Isa. These would allow hopeful first-time buyers to save up to £200 a month into a special account. Taxpayers would top that up by 25% (so every £200 becomes £250) to a total of £15,000. The money would then be used as a house deposit.
I can see how this might look reasonable. The young are having trouble saving for houses. This gives them a helping hand along the painful path to the great British dream – homeownership. But it isn’t reasonable at all. The core problem is that houses are too expensive. And they are too expensive because the market has been fiddled with by governments for decades.
We have, as MoneyWeek columnist Matthew Lynn puts it, seen hidden subsidies added to distorting policies and rules and regulations piled on top of each other until their original purpose is long lost. Every bad housing policy has side effects (mostly rising prices). And every side effect is met with another bad policy (mostly to help people pay those prices, pushing them even higher). The ludicrous electoral bribe of the help-to-buy Isa is an obvious example.
It never occurred to me, when listening to Osborne talking about his new Isa, that there was an idiot out there who could make the policy worse. But there is. Ed Miliband has said that, should he end up as PM, help-to-buy Isas won’t be abandoned. Instead, the funds saved into them will be funnelled into a £5bn Future Homes Fund to finance the building of 25,000 houses a year for five years.
• Read the full editor’s letter here: A ludicrous electoral bribe