Despite a widespread condemnation of the Help to Buy scheme and an already overheating property market, George Osborne has now gone on record stating that “the Office for Budget responsibility has estimated that during the three years the scheme will be running, there will be over 3.4 million property transactions. Of these only 2% will be with the support of the Help to Buy Equity Loan scheme and therefore it is unlikely that the scheme will have a material effect on house prices.”
However, during the first five months of the scheme, over 12,000 households have already reserved a new home using the Help to Buy Equity Loan scheme. At the current rate of take up there will be 18,400 more buyers using the Equity Loan scheme, 27% more than Mr Osborne’s forecast. With house builder’s average prices rising around 7.6% over the last 12 months and outstripping price rises in the general housing market, as house prices get even further out of reach, even more buyers will need to use the Help to Buy Shared Equity Scheme.
When asked about a Windfall Tax Levy on excessive house builder’s profits generated by the government’s Help to Buy scheme he said that:
“A windfall tax on profits could undermine business confidence and have a negative impact on business investment and growth.”
He confirmed “the government is committed to creating the most competitive tax regime in the G20 to show that the UK is open for business and to increase business investment and profitability that drives economic growth. As part of this commitment, the main rate of corporation tax has been reduced from 28% in 2010 to 23% from April this year and will be further reduced to 21% next year and 20% in 2015”.
So whilst house builders are ‘filling their boots’, with some reporting pre tax profit rises of up to 74%, Mr Osborne does not feel it is in the best economic interests of UK plc, to rein in some of this state-generated excess profit for the benefit of the UK taxpayer via windfall tax levy. No doubt he has one eye on the 2015 election and big company contributions to his party’s funding for the coming election campaign. So much for “we are all in it together” – no doubt the British voter will express their opinion of this government in the polling booth.