Help to Buy: Is another property bubble really a good idea?

This Government loves exciting fresh ideas, so they’ve announced an extension of their plan to boost the economy, the Help to Buy scheme that makes it easy for people to borrow more than they can afford to buy a house, so that house prices will go up, making us all feel better off.

If only someone had tried before to inflate an economy by lending huge amounts to people to buy houses, even if they couldn’t afford it, then it might be possible to predict how this might end. Already the banks have made it clear they love the idea, and their judgement has been impeccable in recent years.

The genius of the idea, apparently, is it will solve the problem of so many young people being unable to find a place to live. Simplistic people might suggest that if there are more people than can fit in all the houses, the best solution would be to build more houses. But that’s because they’re idiots.

That way could, I suppose, result in people having a house of sorts, in which they could “live” and sleep and raise kids and that sort of nonsense. But it wouldn’t push the prices up, enabling people to sit in restaurants saying “We looked on Zoopla and our side of the street is worth 2 per cent more now than it was last Tuesday, which makes me a wonderful human being,” in which case there’s no point in having a house in the first place.

If you find it confusing to work out whether the Government’s Help to Buy scheme will actually help the housing situation, it might be worth reading the views of the think- tank, The Adam Smith Institute. These are the people who delight in dreaming up glorious free market schemes, such as privatising the sea and charging rent to whelks, or making schizophrenics pay for their treatment by selling sponsorship to the voices in their heads. So they tell the psychiatrist: “The man in the cloak keeps telling me, ‘We buy any car, any car, we buy any car’”.

Yet even the Adam Smith Institute says the Help to Buy scheme “will only drive prices up, making housing more unaffordable for most people.” Once the Adam Smith Institute says something is too uncaring, that’s like suggesting an idea to Abu Hamza and him saying “I don’t agree with that, it’s too extremist for me.”

As keen followers of economics, they must have worked out that creating no extra houses will result in there not being any more houses. So if more people are able to buy a house, the price of the houses that already exist must go up. But the Government seems determined to consider any solution rather than build them.

If the Help to Buy scheme doesn’t work, they’ll change the rules again, so the payday loan companies can give you a mortgage. You’ll be able to ring Wonga, buy a two-bedroom flat 20 minutes later, and by 5.40pm owe them 70 billion quid and get evicted, but at least you’ll have had somewhere to call your own for an hour and a half.

One clue as to whether the main objective of this scheme really is to help first-time buyers, is that the loans they plan to back up are for properties worth up to £600,000. Maybe in George Osborne’s world that makes sense, as he wants nothing more than to help young couples starting out in life, to get a foot on the property ladder with just a modest castle, until later, when thoughts of babies are in the air, when they’ll need something more substantial with an en suite airport.

Maybe other ministers have tried to explain to David Cameron the complicated mathematics around housing, looking him in the eye and saying slowly “If there are more people than fit in the houses, we need more houses”. This is possible, as he appears to have the same difficulty with the issue of jobs, believing that if there are more people than jobs, you can get everyone into work by yelling “get a job” at people without one.

This means he’d be a fascinating man to have a game of musical chairs with. After the first chair was taken away, he’d inform everyone “I’ll make it easier for the chair agencies to sell the chairs that are left, then there’s no reason for anyone to be left without one.” And when this still left someone standing up he’d tell them “Well, don’t think I’m going to let you sit on the floor sponging off the rest of us. You can spend all day looking for a chair or get out of this house.”

Perhaps the most impressive side to this strategy, of imagining the economy is on the up because house prices are being encouraged to rise, is it doesn’t ignore the lessons of old economic history, it ignores the lessons of about five years ago. Usually it’s considered polite to wait a century before repeating a catastrophic mistake, but this lot are going for it straight away.

So we await his next scheme, a plan to boost the economy by buying an Italian ferry, calling it the Costa Concordia, and announcing “We’ve even found an ideal captain, strangely out of work this last couple of years.” This is the sort of radical fresh thinking that will confirm Britain’s recovery.

Twitter: mrmarksteel