MPs cast doubt over government housing scheme

14 Jul 09
A £50bn government scheme to support the construction industry and increase the supply of housing is ‘doomed to fail’, according to the Commons’ communities and local government select committee
By David Williams

14 July 2009

A £50bn government scheme to support the construction industry and increase the supply of housing is ‘doomed to fail’, according to the Commons’ communities and local government select committee.

The MPs applauded the government’s efforts in setting up the Treasury’s Asset-Backed Guarantee Scheme intended to stimulate the housing industry by safeguarding mortgage lending. But they said it had not worked.

In the Housing and the credit crunch report, the committee called on the government to do more to increase the flow of mortgage finance. ‘It is evident that the ABGS is not providing the necessary impetus,’ it said.

The MPs did note that government action had helped prevent a complete collapse in house building in the short term.

However, their July 14 report urged ministers to ensure that capacity in the construction industry is retained, to enable the sector to flourish when the economy recovers.

The committee supported the government’s decision not to abandon its house-building targets of 240,000 new homes per year, saying they still reflected housing needs.

But progress towards meeting that target has been reversed by the recession. The committee said the use of public money was not enough to make up the difference.

Committee chair Phyllis Starkey also welcomed the measures introduced in the government’s Building Britain’s Future strategy, increasing investment in social housing.

But, she said, ‘the key to unlock private mortgage finance is the Treasury’s ABGS.

‘In its current form [the scheme] is a leap that reaches across only half the chasm: impressive, but doomed to fail.’

Starkey also called for a ‘vigorous debate’ on wider housing policy, focusing on the need to invest in rented housing rather than simply promoting home ownership.

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