The Chancellor of the Exchequer, George Osborne, today announced in the Commons he was setting up a scheme to help millions of people get on the property ladder. Importantly for young professionals like my wife and I the Chancellor also opened up the possibility of help for so-called “second steppers”. These are people who bought a home some years ago and now want to move up the property ladder but because of banks demanding a 20 per cent deposit or higher they are unable to afford to move.
The Help to Buy scheme will see the Government underwrite up to 15 per cent of people’s mortgages for old and new houses, enabling the banks to safely demand a deposit of just five per cent rather than, say, 20 per cent. This scheme is primarily about giving confidence to lenders that up to 15 per cent of a deposit is as secure as it can get – because the Government is backing it. Therefore, it should unlock the desired mortgage lending of £130 billion easily. The scheme will start from 2014 and last three years.
Another part of the initiative is an extension of a shared equity scheme – formerly called FirstBuy – to include all purchasers of new-build homes. If eligible, the buyer will put up a five per cent deposit and the Government will pay a 20 per cent share of the home. The £3.5 billion scheme will be available for homes worth up to £600,000. The 20 per cent Government stake in their house will be paid back to the taxpayer when the house is sold. The loan will be interest-free for the first five years but then borrowers will have to pay a 1.75 per cent annual fee, which will then rise by 1 per cent above the Retail Prices Index (RPI) measure of inflation.
There was other good cheer with Mr Osborne scrapping the 3p rise on fuel duty in September and instead of raising beer duty in April by 3p he will be cutting it by 1p. The “beer duty escalator” of year-on-year increases in the duty was scrapped all together. However, the increases of +2 per cent annual inflation for wine, cider and spirits will remain.
Families will receive a 20 per cent tax break on child care up to £6,000 per child from 2015 which will equate to a saving of £1,200 per year although higher-rate taxpayers (of which far from wealthy families have now been pulled into) will lose out compared to the existing voucher scheme.
A big headline grabber was no one will be taxed on the first £10,000 of their income from 2014 lifting 2 million workers out of paying income tax at all. And a boost to growth and investment was unveiled by the Chancellor with Corporation Tax to be slashed by a further 1 per cent to 20 per cent in 2015.
The good news – for today only – hid the dreadful economic landscape: the Government’s growth forecast for 2013 has been halved to 0.6 per cent from 1.2 per cent as only predicted in December. Debt is increasing at a rate of knots with the national debt as a share of GDP set to increase from 75.9 per cent this year to 85.6 per cent in 2016-17. Borrowing continues at £120 billion a year; some of it is being used to boost the economy with spending on roads and construction projects but the vast majority is being used to keep public spending high with some budgets such as the NHS – where 3,000 people were killed through appalling treatment by nurses and doctors – being ring-fenced. This is despite the average voter thinking NHS spending is being CUT! Why does George Osborne bother ring-fencing over one hundred billion pounds on an institution which causes more harm than good, in the cases of thousands of needless deaths, when the voters give him zero political credit?
But today I want to be mainly positive. The Chancellor did a good job this afternoon and has helped millions of people who want to get on in life – the same people who pay for the £120 billion of borrowing a year spent keeping the undeserving benefit-claimants at home playing X-Box all day or to help a wealthy baby boomer pay their bar bill with their winter fuel allowance. Thanks for finally thinking of us, George, even if it will be for only three years!