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Help to Buy scheme increases ‘risk’ for taxpayers – PAC

The government has yet to demonstrate that its Help to Buy scheme provides value for money and it increases taxpayers’ exposure to risk, the Public Accounts Committee (PAC) has stated.

Under the Scheme, the DCLG makes equity loans available to buyers financing up to 20% of the purchase price of newly-built properties that cost £600,000 or less, which supplements the buyers’ own deposit of, normally, at least 5%.

However, PAC says that the Scheme  creates a medium- and long-term risk to the Department by building a £10bn portfolio of equity loans that will require 2careful management”.

In a new report the spending watchdog says the scheme was introduced smoothly and quickly in 2013 and helped 13,000 home-buyers within nine months. But the DCLG does not understand the “overall impact of its housing strategy and the combined effectiveness of its different initiatives”.

Housing minister Kris Hopkins rejected the report, arguing that the plan had supported the economy.

Margaret Hodge, chair of the PAC, said: “In the case of Help to Buy, the DCLG did not carry out any assessment of alternative, potentially more effective options before going ahead with the Scheme – a violation of Treasury guidelines.

“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.”

Housing minister Kris Hopkins stated, though, that 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, house building 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.

Hodge added: “So far the Scheme has had less traction in London and the South East despite the fact that these are the regions with the greatest need for new housing. Only 6% of equity loans made had been for properties in London at the time of our hearing.

It has been suggested that the Department should assess the Scheme’s effectiveness in different local and regional housing markets and tailor the Scheme so it is effective in all regions.

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