Shadow chancellor Ed Balls is warning the Government’s Help to Buy scheme could push house prices “up and up” without more housebuilding.
Speaking at the Labour party conference in Brighton yesterday, Balls said more housebuilding was needed to boost supply and stop young people being priced out of the market.
The second part of Help to Buy starts in January when the Government will guarantee 95 per cent mortgages on all properties worth up to £600,000.
Former Bank of England governor Lord Mervyn King, the International Monetary Fund and Business Secretary Vince Cable have all aired concerns over the scheme but Chancellor George Osborne has pledged to press on.
Balls said: “That is why, along with voices from the Bank of England and the IMF, we are right to be concerned that the Government is boosting housing demand – with a taxpayer mortgage guarantee on houses of up to £600,000 – 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 that you push house prices up and up. And the end result is that 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 for all families in work from 15 hours to 25 hours a week.
He said: ”Over the last two years the Government’s bank levy has raised £1.6bn less than even they said it would. At a time when resources are tight and families are under pressure that cannot be right.
“So I can announce today, the next Labour government will increase the bank levy rate to raise an extra £800m a year.”
Balls also promised to use cash from the sale of Lloyds Banking Group and the Royal Bank of Scotland to repay the national debt.
In addition he is asking the Office for Budget Responsibility to independently audit each of Labour’s spending promises ahead of the next general election.