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Help to buy value for money warning as DCLG told it violated Treasury rules

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Help to buy value for money warning as DCLG told it violated Treasury rules


Published by Anonymous for in Central Government and also in Housing

Help to buy's value for money warning as DCLG told it violated Treasury rules Help to buy's value for money warning as DCLG told it violated Treasury rules

Image: Housing via Shutterstock

A group of MPs has raised concerns that the government's help to buy scheme is creating a £10 billion risk to the taxpayer.

The Public Accounts Committee has concluded that the policy - which sees the government guarantee mortgage loans on homes worth up to £600,000 - is yet to demonstrate value for money.

Though the committee found that the scheme was up and running quickly, and has been used for nearly 13,000 home purchases, it says that the Department for Communities and Local Government didn't carry out any assessment of alternative, potentially more effective options before instigating it – a violation of Treasury guidelines.

The committee says that this means the DCLG, headed by Eric Pickles MP, has committed to spending up to £10bn on supporting the scheme "without establishing whether it represents the most effective way of using taxpayers’ money to achieve its objectives".

The DCLG will not carry out a comprehensive evaluation of the Scheme until 2015 - by which time, the committee notes, billions of pounds will already have been spent.

The committee says that the evaluation needs to ask three things:

  • Whether more people purchased properties than would have done without help to buy.
  • Whether builders built more houses than they would have built otherwise.
  • What effect the scheme could be having on house prices. 

Help to buy has proved popular in the North and the Midlands, but has so far had less traction in London and the South East - despite the fact that these are the regions with the greatest need for new housing, the committee says.

Only 6% of equity loans made had been for properties in London at the time of the committee's hearing.

The DCLG has been told that it should assess the scheme’s effectiveness in different local and regional housing markets and tailor it so it is effective in all regions.

According to the committee, help to buy creates a medium and long-term risk to the DCLG by building a £10bn portfolio of equity loans that will require "careful management".

The committee has warned that managing such a portfolio is new territory for both the DCLG and the Homes and Communities Agency, and the ongoing monitoring required will create a "heavy administrative burden for both organisations, potentially over decades".

Margaret Hodge MP, committee chair, concluded: "There are also more immediate risks, particularly the fact that some buyers have accessed the Scheme with deposits of less than 5%, which increases taxpayers’ exposure to risk.

"The Department must be mindful of these risks – and it must demonstrate that the Scheme is value for money to the taxpayer."

The committee has recommended that the DCLG should:

  • Maintain downward pressure on the scheme’s costs
  • Make full use of the skills and experience it has gained from running this and other similar schemes when implementing its future programmes.
  • In future, follow the guidance in the Treasury's Green Book, by assessing a range of alternative options and presenting this analysis in its business case, to ensure it selects the best option when launching new schemes.
  • Develop a robust methodology to assess help to buy's impact on both demand for, and supply of, new homes.
  • Both the DCLG and the HCA must set out how they will protect the taxpayer and ensure they have the skills and capacity both to monitor and manage the loan portfolios effectively in the short and the longer terms.

Responding to the committee's report, Housing Minister Kris Hopkins said: “The help to buy: equity loan scheme is helping build more homes and support the economy – in fact we estimate the wider economic benefits of the scheme could be as much as £1.9bn.  So it is offering excellent value for money for taxpayers, and to suggest otherwise is simply absurd.

“Since the scheme’s launch, housebuilding is up a third and now at its highest level since 2007. Over 27,000 people across the country have used help to buy to get on the property ladder with a fraction of the deposit they would normally require, with cities including Leeds, Durham and Manchester seeing some of the biggest numbers of sales.”


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