Sunday, 23 September 2012

That's The Big Idea?

Brace yourselves. The Liberal Democrats have had an idea. Somebody has brought it to their attention that the high price of housing, combined with the very large deposits that mortgage lenders have demanded ever since the financial crisis, have made it more or less impossible for first time buyers to get on the property ladder.

In response, Nick Clegg has announced a plan (to Andrew Marr, not Parliament) to allow parents to sign over 25% of their pension pot as a housing deposit for their children. This plan is flawed on a number of levels.

It will only benefit the children of parents wealthy enough to have built up a pension pot of around £40,000. This will include some teachers and nurses, but obviously not everybody. It is a pure middle class subsidy. It does nothing to help young people from lower income backgrounds, even if they themselves are working in relatively well paid jobs. As such it is a move away from meritocracy and social mobility. I thought those were desirable characteristics in society?

It does not address the root cause of the problem, namely that there are not enough houses to go round and we are not building any more. If housing is to become affordable, prices must come back in to alignment with people’s incomes. The high house prices that we have seen in the past 10-15 years are a bubble, not the natural order of things. This policy serves to sustain that bubble, in the interests of existing homeowners, but at the expense of those who rent. What’s liberal about that?

Perhaps most worryingly of all, how can it possibly be a good idea to reduce the value of people’s pensions? We are living longer, and old age is becoming more expensive. We are not saving enough to cover these costs as it is, let alone if older people use the savings they have to prop up the house price bubble that is preventing their children securing adequate housing.

Housing is one of the most pressing issues facing the UK today. Any solution must involve building more houses, and realigning the cost of housing with people’s incomes. It seems that the Liberal Democrats lack the vision required to address these problems. What a surprise.   

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