Shadow chancellor Ed Balls believes the Government’s Help to Buy scheme will send house prices soaring without more housebuilding.
Help to Buy consists of a shared equity loan scheme for new-build homes worth up to £600,000, which launched in April, and a mortgage indemnity guarantee for all homes worth up to £600,000 which is set to launch in January.
Former Bank of England governor Lord Mervyn King, the International Monetary Fund and Business Secretary Vince Cable have all raised concerns over the scheme.
Speaking at the Labour party conference, Balls said: “Along with voices from the Bank of England and the IMF, we are right to be concerned the Government is boosting housing demand with a taxpayer mortgage guarantee while doing nothing about the supply of housing which has fallen to its lowest level since the 1920s.
“George, it’s basic economics. If you push up housing demand, but don’t act to boost housing supply, all that happens is you push house prices up and up and the end result is the very people your policy should be helping – young first time buyers – will find it even harder to get on the housing ladder.”
Balls also pledged to increase the bank levy by an extra £800m a year to pay for free childcare and to use the proceeds from the Lloyds Banking Group and the Royal Bank of Scotland sales to repay the national debt.