We have a certain little disagreement with Sir Vince Cable here. We’re not arguing the facts in evidence, rather the implication of them.
Given that we’ve rather expensive housing in the UK the idea that we should subsidise people to buy housing does seem a little odd. As we’ve been saying - shouting - these years it would be better to increase supply, that thing which is known to reduce prices at any given level of demand. That’s not what the government decided to do, as we know, and as we argued against. The reason why we argued against being what would happen:
Housebuilder Persimmon made a record-breaking £1bn profit last year – equal to more than £66,000 on every one of the homes it sold – with almost half of its house sales made through the taxpayer-funded help-to-buy scheme.
Well, yes, stoking - subsidising - demand is going to cause that sort of thing:
Vince Cable, the Liberal Democrat leader, accused Persimmon of “pinching their profits from the public purse”, adding: “Far from benefiting first time buyers, the major effect of help-to-buy is to drive up demand while having no effect on supply. The result is not help for those who need it, but a boost to the profits of big developers.”
The blame attaches though not to Persimmon. Economic actors can only react to the incentives government puts before them. The blame attaches to the damn fool way the government decided to spend our money. Something we would prefer Sir Vince to have emphasised despite his general insistence that more of our money being spent is the solution to everything.
If we desire more houses, or lower prices for them, then we want to increase supply, not subsidise demand. Be worth pointing that out, no?