The UK government’s Help to Buy housing scheme has helped lots of people. They are buying estates, yachts, divorces and almost anything their little hearts desire. They are the top executives at the 10 housebuilders that dominate this industry. The scheme has also been a gold mine for their shareholders.
This week, it was the turn of Redrow, Berkeley and Barratt Developments to throw cash at them, following Persimmon’s pledge to return “surplus capital” last month. This is Britain’s housing problem in microcosm: prices are high and there’s a shortage, so economic theory says the money should be flowing to fund construction to meet the demand rather than out of the industry.
The big builders are not in some sort of cartel or conspiracy against the wannabe homeowner but then they don’t need to be. Their financial firepower, their understanding of the planning laws and the increasing complexity of labour and construction regulations have done for the small local housebuilder.
It is not in the big companies’ interests to “solve” the housing problem. To produce these returns to shareholders, they aim for a steady supply that runs just behind demand and Help to Buy could hardly have been better tailored to their needs. One executive claimed recently that the scheme had allowed him to raise selling prices by 10 per cent, which would almost double the profit margin for most builders.
Help to Buy was a cynical crowd-pleaser from George Osborne’s reign at the Treasury. To make houses more “affordable”, he stimulated demand when the need was for more supply. As for the buyers paying 10 per cent more with the help of their 5 per cent deposits, they can only hope that house price inflation continues. The cost of the scheme rises sharply after five years and there is no help to buy the nearly-new homes they will want to sell.
Not a job for a yes-man, then
Do you have undisputed integrity, authority and discretion? Intellectual strength? Resilience in the face of resistance? An ability to think strategically? Then you could be the next chairman of the Financial Conduct Authority. HM Treasury would like you to apply for an application pack (sic) because John Griffith-Jones steps down next year. He honed all those heroic qualities in 37 years at KPMG, which just shows how far accountancy can take you.
Actually doing the work of regulating Britain’s 56,000 financial businesses is down to the chief executive, so a major task for Mr Griffith-Jones’s successor will be to ensure Andrew Bailey stays on track to become Governor of the Bank of England when Mark Carney leaves in 2019.
Candidates may be asked about the FCA splashing £5m on Arnie Schwarzenegger’s mug, urging still more of us to go for PPI mis-selling. Do not point out that there cannot be a phone anywhere that has not rung off the hook by the ambulance-chasing compensation hunters or that encouraging still more claims is hardly sensible financial conduct.
Assuming last Sunday’s job ad was not merely for show, the successful candidate should organise for his (or her) gong before agreeing terms and leaking the appointment to the Sunday Times, as tradition dictates.
Guess who’s paying the bill
Tricky business, pensions. Sally Hunt, general secretary of the University and College Union, believes that the Universities Superannuation Scheme is “a healthy scheme which makes more money than it pays out and is forecast to continue to do so”.
Some of this statement is true. More money is currently coming into the USS than is going out but, accounting for the cost of promises made to today’s contributors, the shortfall is £17.5bn. This requires at least another 6 per cent a year in contributions to bridge.
State employees contribute to what are, in practice, giant Ponzi schemes, where today’s contributions go to today’s pensioners, leaving the problems to tomorrow’s taxpayers. The USS is Britain’s biggest private scheme which, in theory, must finance itself but universities are intimately entwined in the state sector, as Ms Hunt knows. She is promising to fight both cuts in benefits and rises in contributions. Perhaps she has a pretty good idea of where the bill will end up.
neil.collins@ft.com