Savings (Government Contributions) Bill (Third sitting)

Debate between Peter Dowd and Kelvin Hopkins

Thursday 27th October 2016 Public Bill Committees

[Peter Dowd]

I welcome some of the Minister’s comments on both new clauses, and the spirit in which she made them. In the spirit of trying to move on, we will not push new clause 1 to a Division. We acknowledge that the Minister has said that there will be reviews of some fashion, though maybe not statutory reviews; we will take that away and consider it, and may come back to the question of reviews. Our concerns in relation to auto-enrolment can be appreciated. It has been a good product, to use the jargon, and we do not want to lose that. However, again, in the spirit of moving on, we will pull away from the new clause.

We will push new clause 2, on independent financial advice, to a vote, because this House has to lay down a marker when it comes to people’s future and making a significant investment in a product. The lifetime ISA is a significant investment, whatever way we look it. Importantly, it is also a significant investment by taxpayers; that has to be taken into account. If somebody wants a lifetime ISA, and rightly understands that the Government will put a lump sum towards it, it is not unreasonable for us to say that we expect that person to take independent financial advice.

[Kelvin Hopkins]

I absolutely support what my hon. Friend says, but is it not important to have that commitment in the Bill, rather than just rely on the apparent sympathy of the Government?

[Peter Dowd]

It is, and that is why I am trying to push that message home. To some extent, we need to draw a line in the sand.

--- Later in debate ---

[Peter Dowd]

New clause 3 would require the Government to conduct a review within a year of the Act coming into force of the potential impact of the lifetime ISA on house prices in the United Kingdom. The review must be made publicly available and laid before both Houses of Parliament. The Opposition recognise that many people want to own their own home. However, we are concerned that the Government’s housing policy will only inflate house prices further. We have concerns that the LISA will make things even more difficult in a housing environment that is already strained because of the limited number of houses being built nationwide, not to mention the huge cost of housing, particularly in London and the south-east; the average figure is £250,000.

Evidence to the Committee on Tuesday was cautionary. Martin Lewis from MoneySavingExpert.com, while acknowledging the potential popularity of the LISA, flagged up its potential impact on the housing market. He highlighted that

“Unintended consequences are possible—the lifetime ISA might pump the housing market, which is a concern”.––[Official Report, Savings (Government Contributions) Public Bill Committee, 25 October 2016; c. 50, Q95.]

The Institute for Fiscal Studies, referring to the Office for Budget Responsibility, made a similar point.

I do not want to over-emphasise the point, but it is worth noting—and perhaps assessing, as suggested in the new clause—the effect of the LISA on house prices overall. It is worrying that fewer homes were built in the last Parliament than under any previous peacetime Government since the 1920s. LISA may help—if that is the right word—to overheat a market that is already short of capacity. The Government’s priority should be to try to mitigate that, not to add to the problem. I do not think that is an unreasonable point to make.

The fact is that people are increasingly chasing a product in a market that has low supply levels. It so happens that the product is a house. The facts speak for themselves. Since I sat on the Housing and Planning Bill Committee around this time last year—it may well have been in this very room—the housing market has remained pretty tight, with supply remaining low. The national planning policy framework, which the Government were warned would create confusion, has done so. That all adds to the broth and is creating problems. By now, according to the plan, and the former Housing Minister, the right hon. Member for Great Yarmouth (Brandon Lewis), there have should been a better housing supply. Alas, he was wrong.

The lifetime ISA, which will in effect replace the help to buy ISA in due course, provides a Government bonus that can be used towards a deposit on a house—if one can be found. If I remember correctly, concern was expressed by a witness that the help to buy ISA had been poorly articulated, and that the current one was potentially being poorly articulated as well. There was the impression that an ISA could be used for a deposit. Of course, there was a smorgasbord of consternation, anger, disappointment, frustration and bewilderment when many young people found that that was not the case. The problem is that if people are encouraged to borrow money for a house in a tight market, the more house prices rises, the bigger mortgages they need, and so on. The fact that the Government are helping to do that is not helpful. The problem is exacerbated. When the growth of mortgage lending outpaces the supply of housing, prices just keep rising and rising, making it increasingly difficult for people to access the housing market at a reasonable rate. There is no doubt about that.

The Government have identified the right problem but are coming up with the wrong solution. We need to build more houses. That is the only way to solve the housing crisis. New products are fine, as far as they go. Lots of people welcome the LISA—I cannot argue against that—and many people do not, but the comprehensive solution is to deal with the continuing housing supply problem. It is worth noting that the house shortage is simply a physical manifestation of the shortage of skills in the construction sector in general and the housing market in particular.

The Government are almost two years through their five-year housing plan, not counting the previous five years, and we are still falling badly behind on targets. The question is whether the proposals really deal with the substantive issue of supply, and the answer is no. In that context, it is important to look at whether this policy will have an impact on house prices. If it will, in addition to there being a lack of action on housing policy in general, that is a concern. It is legitimate to ask the Government to review the impact on the housing market of this product.

[Kelvin Hopkins]

I rise to support my hon. Friend’s new clause. Many of us have long been concerned about the massive rise in house prices. I will give a simple example. When I bought my first house in Luton in 1969, house prices were three times average earnings. Now in Luton, they are 12 times average earnings.

Millions of people are seeing the possibility of home ownership disappearing. Owner-occupation is in decline; it is becoming a smaller sector, and we are seeing an opening up of major social divisions between owner-occupiers and renters. For owner-occupiers, equity will cascade down the generations, and their children and grandchildren will stay in the owner-occupied sector because they will inherit the equity. Those who are not in the sector and do not have sufficient income will remain outside the sector, as will successive generations after them—unless they win the lottery or become extremely wealthy for some other reason, but that will apply to only a small number. The great majority of people will find it very difficult to become owner-occupiers if they do not have equity handed down by their forebears.

Adding extra cash to help people who are already likely to be in a position to buy their own home will simply increase house prices further and take home ownership even further away from those who do not have equity and are unlikely to be able to afford a home. We have to see some action by Government over time at least to stabilise house prices, so that more people can get into owner-occupation, and so that those who aspire to be a homeowner have a realistic prospect of becoming one.

I support what my hon. Friend said. We have to build many more houses. The only way to stabilise house prices is to raise supply, not increase demand, which would just push house prices up. It is not the price of houses that is increasing, but the price of the land on which they are built. The cost of building a house does not increase by that amount; it is the land on which it is built. There is a case for land value taxation and doing something about the price of land.

It is a mad world. In 1969, I thought becoming an owner-occupier was a bit of an adventure, but I could afford it on one income—mine, which was not massively high, because I was a trade union research officer. Nevertheless, I could afford to buy a three-bedroom house with a garage and gardens back and front—a nice, typically British home, which we might all aspire to. If I were trying to buy the same house now, with the same sort of income, in the same town, I would have great difficulty. On my generous parliamentary salary, I might stand a better chance, but not on the salary that I had at the time, so I think my hon. Friend the Member for Bootle is absolutely right, and I support his new clause 3.