Merryn Somerset Webb
Housebuilder Redrow has just announced a record year. The number of houses it sold is up 9%. Revenues are up 16%. Pre-tax profits are up 21%. And the dividend payment to the firm’s lucky shareholders is up 65%. The chairman and founder Steve Morgan is pleased. He’s also keen for this fabulous money-making run to keep going. So he has an idea. He’d like the Help to Buy scheme – under which the government effectively underwrites 20% of the purchase cost of a new-build home – to continue forever. “If it ain’t broke,” he says, “why fix it?”
He has something of a point. H2B works brilliantly for the housebuilders: 30% of Redrow’s sales last year relied on it – a number that is typical across the industry. Without it the sales number above might be rather lower. But H2B doesn’t just help housebuilders shift stock. It helps them shift it at high prices, too – after all, anyone effectively getting an extra 20% worth of loan from the state to buy can clearly pay more for a house than otherwise (might that be part of the reason Redrow’s profits are rising rather faster than its revenues?).
You will remember that H2B was originally set up to solve the problem of high house prices. That it has instead stoked demand for hideously low-quality identikit houses, pushed up prices across the board (the average house price is up 30% since it was introduced), helped the well-off trade up at the expense of the taxpayer (32,000 H2B buyers used it to climb rather than get on the property ladder), and lined the pockets of housebuilder executives and shareholders might well mean “it ain’t broke” to Mr Morgan. To the rest of us, I suspect, it means “very broke indeed”.
The policy may be popular (as economically illiterate things so often are), but given the misery it is causing and the state resources it is wasting (“£9bn and counting”, says Simon French in The Times), the government’s review of it shouldn’t take long. If they look at this bonkers policy from an economic viewpoint rather than a political one they will see that if they ever want the UK to have a slightly less dysfunctional property market than the one it has now, it’s long past time for H2B to go.
To distract yourself from the incompetence of our leaders I suggest you now turn to our cover story on public gaming tournaments, something that are a source of endless confusion for the over-40s. Why on earth, we ask, would anyone ever want to sit in a stadium watching someone else play a video game? The answer is the same as the one to the question as to why anyone would want to watch anyone else playing snooker or darts. It might not be a traditional sport, but the level of skill is still incredibly high. And that’s exciting – for viewers, for venue owners, and crucially for game developers. See our cover story for some tips on what to buy with the cash you get from selling your Redrow shares.