The Bank of England has revealed the limits of its control over the second part of the Help to Buy scheme, insisting that it does not have a veto.
In a letter responding to Treasury select committee chair Andrew Tyrie’s questions over its role in controlling Help to Buy, Bank governor Mark Carney said it has no powers to alter the scheme if stability is threatened.
The second phase of Help to Buy, which started last month, has provoked fierce criticism from economists and policymakers over fears it could spark a house price bubble.
It enjoys lukewarm cross-party support with Liberal Democrat Business Secretary Vince Cable and Shadow Chancellor Ed Balls both questioning the scope of the scheme.
Chancellor George Osborne asked the Bank’s financial policy committee to review the scheme annually from next year in an attempt to appease critics.
Labour has called for the FPC to launch an immediate review into the impact of Help to Buy.
Carney said the FPC will have no powers to vary the terms of, or close, the Help to Buy scheme and can only make recommendations.
The FPC says it is not constrained by the Government’s timetable for any such advice and could make recommendations at any time. It can only make recommendations in the context of financial stability.
Carney wrote: “I can confirm the FPC does not have a veto on the scheme….. The FPC of course has powers to make recommendations on the scheme at any time in the light of the scheme’s impact on financial stability.”
Carney said the only advisory role for the Bank of England regarding Help to Buy was as part of the Prudential Regulation Authority negotiations over capital relief.
Tyrie says: “The Bank of England has no power of veto over Help to Buy. Responsibility for it lies with the Government.
“The Bank has clarified that it will offer advice only with respect to any risks that may be posed by the scheme to financial stability, and to the safety and soundness of firms. The Bank could already, and should, offer such advice whenever appropriate.”