Are chancellor and governor as one on housing?

House building in Derbyshire

Here is something I may or may not have mentioned before (brain like sieve, can't remember).

The chancellor believes he got the thumbs up (in private) for his ambitious mortgage-guarantee scheme, Help to Buy, from the newish Canadian governor of the Bank of England, Mark Carney.

More pertinently, George Osborne would not have pushed ahead with the plan, designed to support the provision of £130bn of new mortgages over three years, in the absence of an understanding that Carney is friend not foe on this one (or so Osborne's allies told me when he unveiled the scheme, months ago).

"Why should anyone give a stuff?" you may muse.

Well, with the UK's housing market recovering strongly in parts (London booming, North East England and Scotland still sinking), there are some who believe Osborne should think again about protecting homebuyers and banks from three quarters of the first 20% of losses on mortgages up to £570,000.

There are fears that an un-amended Help to Buy would pump up a new housing bubble, or perhaps a series of regional mini-bubbles, and will do little to stimulate the supply of new houses (although to be pedantic for a second, what we are talking up here is Help to Buy 2, launching in the new year, as opposed to Help to Buy 1, which already exists and has ushered in bumper times for house builders).

To be clear, Osborne ain't turning back on this before its official launch in January. Or so he said to me when I interviewed him last week.

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You might be surprised how rare it is for the residents of SW1 and EC2 to sing from the same ideological hymn sheet”

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Which is why I was intrigued to be told by a colleague of Carney that the governor doesn't believe he has (in fact) underwritten the chancellor's housing market support scheme at all - and that perhaps the biggest challenge facing Carney is how to signal his distance to the world, without embarrassing and alienating his patron, George Osborne.

Now to be clear, we are in the realms here both of practical policy - how to stimulate the more general economic recovery through reviving the housing market - and of fiscal religion.

Recall please what I've mentioned a few times, that the official Treasury - the putative technocrats, not the special advisers - have a horror of Help to Buy, largely because they see it as official support, to the tune of a £12bn contingent liability for potential losses, for a market that is far too prone to bubbles to require any such de facto subsidies (and see here for more on this).

So if the civil servants don't like Help to Buy, who on earth gave birth to it? Well it was the political Treasury, the special advisers, or Spads.

Which doesn't mean that it's bad economics. It is certainly plausible - and in keeping with tradition - that the career bureaucrats of the Treasury are being too fastidiously conservative.

Mark Carney Mark Carney

But it would be nerve-wracking for Osborne to press ahead with perhaps his most ambitious economic initiative in the face of scepticism from the entire technocratic class, whether housed in SW1 (HM Treasury) or in EC2 (the Bank) - and you might be surprised how rare it is for the residents of SW1 and EC2 to sing from the same ideological hymn sheet.

Against that background, I will (in one of my more obsessive guises) be making a close textual analysis of the first statement from the Bank of England's Financial Policy Committee since Carney's accession - which is due on Wednesday.

If it raises a note of concern about an incipient housing bubble, that will be seen as a warning to Osborne to exercise due care in his stimulus for housing transactions. And if the Bank of England comes over all trappist about conditions in the homes market, questions would then be raised about whether the Bank is as self-confidently impartial as it is supposed to be.

More than any Bank governor of my lifetime, Carney is a brilliant politician. He will need all his political skills to navigate around these rocks.

Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 273.


    Voting Tory is not going to change anything, mass immigration is a fact of life for any developed nation, rents will continue to only go in one direction - Upwards.

  • rate this

    Comment number 272.

    The government appear to be serious about easing the housing shortage, it's getting easier to convert commercial property into residential. But more could be done by way of investment and support for projects to convert deserted town centres into housing.

  • rate this

    Comment number 271.

    Sally the contrarian @269
    "The perfect prescription"

    You are motoring, as usual, on liberty, an excellent fuel that will give drive for your comments into infinity, even in lack of adequate definition.

    You pick-up on my mention of 'not too much corporate cheating', but as usual miss the means to preclude such, and to secure democracy, namely our equal liberty in equal partnership.

    Think on it?

  • rate this

    Comment number 270.


    I just meant as an example of house prices being unnecessarily high, and the reason I say so is because we got our house at a more reasonable price because the inheritors selling it were sympathetic to us as a young couple just starting out. Such kindness is rare, but when a house is lying dormant and people are struggling to buy, there is no reason why prices need to be high.

  • rate this

    Comment number 269.

    267.All for All
    The perfect prescription, liberty. Given of course... not too much of corporate cheating!
    Businesses can only 'cheat' us if either:
    Government doesn't enforce Fraud; or
    Government passes anti-competitive laws, regulating competition and choice to the consumer out of our market place, protecting their big businesses pals literally at our expense.

  • rate this

    Comment number 268.

    HTB1 is...not a conservative thing to be doing in my opinion. HTB2 is downright socialist. It goes way beyond what Mrs Thatcher intended to do. What we need is more houses. The question is. How do we do this without building on the green belt?

    What about these half deserted estates/run down areas/empty high streets that could be knocked down and built back up more creatively? Just an idea.

  • rate this

    Comment number 267.

    wijajo @265
    'Let demand & supply work'

    The perfect prescription, liberty. Given of course equal strength in the market, for all personal customers; and not too much of corporate cheating! Buckingham Palace is for the Queen (and her household-in-residence), not for Elizabeth Windsor's retirement. Without equal partnership your 'balance' will continue to swing, variable millions at any time unhappy

  • rate this

    Comment number 266.

    263-qwerty.... so it's all down to market forces and EA shouldn't be blamed for that? I've never heard of the vendor setting the price, otherwise why employ an EA? Market forces also dictate Gas, Electric and Fuel prices and we ALL moan when they go up, but when house prices go up everyone loves it! Browsing RM and EA's blatantly advertising to another region for profit are two different things.

  • rate this

    Comment number 265.

    Let demand and supply do their work, they will balance out eventually. It is a bubble already, if there are both buyers and sellers on the market but little interaction, it means the buyers find the sellers prices too high. Understandably they don't want to sell for a loss.

    In conjunction with this, build a sustainable city in SE, with integrated transport. Good for construction and buyers.

  • rate this

    Comment number 264.

    It is the industrial activity that is required. The supply of goods, services and employment within the economy. If it is neccesary to import houses now or have the work done by foreign business, then we should anc can all despair, turn out the lights and go back to sleep.

    Existing mortgaged properties are the bubble accumulated over the last 25 years, its funny. Ha ha.

  • rate this

    Comment number 263.

    258 Elmo 747. What is wrong with Selling a house to a buyer out of the area, this is what Rightmove does or are you saying you cannot promote your house. Sellers want the most money, don't blame that on EA. They have a lot to answer for but price increases is market forces. If they had that much control they would have stopped prices falling in 2008. HTB2 is daft, it creates a false market place.

  • rate this

    Comment number 262.

    This country has got to find an answer to the inflated property prices. I say that as a mortgage free house owner. You cannot continue inflating the inflated prices.

    All l can suggest is a clean sheet of paper and a class of property that undercuts the current market but which does not undermine it.

    It does not require genius, just cheap land, modern design to cost and a tempering of greed.

  • rate this

    Comment number 261.

    258. qwerty - What am I on about? Read my first line. Why should Estate Agents be able to advertise to the rich city boys in the South, (some 200 miles away) and in essence price locals out of the game? The whole industry of House building and selling/letting needs to be looked at? Unless of course you're an Estate Agent or Developer in which case you would rather it wasn't!!!

  • rate this

    Comment number 260.

    The sooner our market outfoxes Mr Carney, raises rates, and pricks his bubble machine, the better.

    259.All for All
    I'm discussing your views, not those of "chancellor &/or governor", and you know that. Repeatedly evading of direct questions implies you lack the courage of your convictions, common trait of Communists. I think I have your measure exactly.

    Good night
    "La Liberté guidant le peuple"

  • rate this

    Comment number 259.

    Sally contrarian @256
    "at what point precisely" might society be to blame
    For policies of chancellor &/or governor?

    The question of no interest outside society, only of interest given their official positions and powers. I doubt any decisive influence of genes, unless 'the balance of genes' within society is somehow determinative of 'community character', rate of evolution or liability to relapse

  • rate this

    Comment number 258.

    224 elmo747. What are you on about? Estate Agents have advertised they can sell your property via branches in London for years.The current scheme is only helping builders make more profit who then release more sites but only after putting up the prices. It is all madness. We need more housing not more demand. I thought the Conservatives believed in a Free Market-unless they have an election to win

  • rate this

    Comment number 257.

    So just who is suffering to enable the help to buy scheme work by creating protected profits for the banks and building companies?

    The savings on capping benefits to the poor was meant to help with the national deficit but instead its being diverted to pay for this. It will inflate house prices (yet again) so when that bubble pops the taxpayer (yet again) will foot the bill.

  • rate this

    Comment number 256.

    I agree, HTB is bad. I think also feel planning and zoning laws greatly restrict what can be done. Plus the Crown, a remnant of feudalism, holds the most land.

    253.All for All
    I asked At which point precisely... does a person not become responsible for their personal choices, and become able to pass them onto everyone else.
    A pity you ducked it. I'm genuinely interested in your beliefs

  • rate this

    Comment number 255.

    All new houses are awful

    Better off with a Georgian or Victorian, thicker walls, better for noise, warmth, more room, style etc

  • rate this

    Comment number 254.

    252.Sally the contrarian

    Which government program do you think is most harmful? Left to you, what would you do about it? Why?
    Don't know which is most harmful. I think HTB is a bad idea, unless you're looking to be reelected. But does anyone really know what is holding up house prices? Lack of building? But high prices should encourage building, but that doesn't seem to be happening.


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