MPs have criticised the Government over the way it set up Help to Buy, saying it broke Treasury guidelines by failing to look at alternatives before setting up the scheme.
In a report on Help to Buy 1 published this morning, the Public Accounts Committee also says the equity loan part of the scheme poses a “medium and long term risk” to the taxpayer.
It says the Government committed to spending £10bn without establishing whether it was the best value for money. The committee adds that in future the Government must follow Treasury rules, assess a range of options and present the analysis in its business case for the chosen option.
The report also calls on the Department for Communities and Local Government and the agency that administers the scheme, the Homes and Communities Agency, to set out how they will maximise repayment and protect the taxpayer.
PAC chair and Labour MP Margaret Hodge says: “The scheme creates a medium and long-term risk to the Department by building a £10bn portfolio of equity loans that will require careful management. Managing such a portfolio is new territory for both the Department and the Homes and Communities Agency, and the ongoing monitoring required will create a heavy administrative burden for both organisations, potentially over decades.
“There are also more immediate risks, particularly the fact that some buyers have accessed the scheme with deposits of less than 5 per cent, which increases taxpayers’ exposure to risk.
“The Department must be mindful of these risks – and it must demonstrate the scheme is value for money to the taxpayer.”
Under the scheme, the Government offers buyers of new builds a loan worth 20 per cent of the purchase price, provided they have a deposit of 5 per cent and the property costs less than £600,000. The government loan is interest-free for the first five years.
The report also said 13,000 home-buyers took advantage of the deal in the first nine months – mainly in northern England and the Midlands rather than the South East, where new home-building needs to be encouraged.
DCLG has committed to reviewing the scheme in 2015. The committee says this should must look at the scheme’s regional impact and potentially “tailor” the scheme so it is effective in all regions.
The report says: “The Department must develop a robust methodology to assess the scheme’s impact on both demand for, and supply of, new homes. To do so, it must collect sufficient data directly from buyers to quantify how many would not have bought a property without the scheme, and from builders on how many additional homes they are building because of the Scheme.”