A "help package" for households? Hardly! But definitely an electoral ploy!

08 September 2008

Who really stands to gain from the government's "help packages" for housing and fuel?

Obviously Brown hopes that they will help - to revamp his electoral credit, after Labour's dramatic losses in the Crewe and Glasgow East by-elections.

So, one would expect these packages of measures to be, at least, meaningful for hard-up households. But are they?

No protection for the poorest

Ministers claim that these measures will help households threatened with repossession.

Instead of being forced into homelessness by the banks, they will be able to get their debt paid by a Housing Association (or, most likely, a profit-making "licensed social landlord") which will take over ownership of their homes and keep them as tenants.

At first, although not ideal, this may sound better than losing one's home - except that there is the small print. The total budget for this measure is £200m, which, according to ministers, should allow them to bail out 6,000 families. But this is assuming an average debt of just over £30,000, which is peanuts compared to the size of a mortgage for even the most modest home, these days. In other words the odds are, that the number of households which will actually be helped out by this scheme will be much lower - possibly no more than 3,000, if even that!

Yet, official figures show that the number of repossessions in the first half of this year was just under 19,000 (a 48% increase over the first half of 2007!). And the total number for 2008, is expected to reach 45,000, at least!

Worse, the number of households which have been in arrears for more than 3 months is increasing rapidly due to rising unemployment. And since it is now virtually impossible for them to borrow on their homes, repossession orders may well increase even faster than announced. Given this situation, the funding set aside by the government against repossessions is a pitiful joke!

As to the jobless, they are supposed to be grateful due to another measure which will bring forward payments for their mortgages (of course, only the interest, not the debt itself!) to 13 weeks after becoming unemployed, instead of today's 39 weeks. However, this will only come into force next April - as if the problem was not already bad enough! Moreover, in a cynical twist, ministers used the opportunity to introduce a limit on the duration of these payments - no more than 2 years. So what if you don't find another job and what about the long-term unemployed?

A package for business too

On the day following the announcement of this housing package, the share prices of house-building companies went up sharply on the stock market, by as much as 10% for some.

Obviously, City operators believe that this package will boost the profits of construction companies! And they are probably right.

As some commentators pointed out, the increase in the stamp duty threshold to £175,000 will allow property developers to increase their prices by the amount saved on stamp duty by buyers.

Likewise for the new shared-ownership scheme launched under the HomeBuy Direct label. It allows buyers to borrow up to 30% of the home's value from the government to use as a deposit, and pay no interest on it for 5 years. But this is specifically tailored to boost property developers' business. Indeed, these loans will only be available to buy newly-constructed homes. And given the price of new properties, this will definitely do nothing to help working class families to find a home!

Much the same applies to the £400m announced for what the government calls "affordable houses". In fact, this is not new money, but planned spending which has now been brought forward. Like the funds previously allocated to such programmes by the government, these are, in fact, subsidies to construction companies and developers, which will not produce the homes urgently needed.

Today, 1.9 million households are stuck on local council housing lists, waiting for a home, and the lists can only grow faster due to the credit crisis. Yet, this government's only response is to increase its handouts to the profit sharks! So much for Brown's self-proclaimed "generosity" to the poorest households! Especially when it is compared to the £200 billion that the banks have been able to borrow from public coffers as part of Darling's bail out of the banking system!

When, in fact, what would be needed is a vast programme to build hundreds of thousands of homes for rent within the coming year - but a programme organised directly by the state recruiting building workers and engineers to do the job, without wasting public money on shareholders!