Austere generosity

20 March 2013 By Ian Campbell

Finance Minister George Osborne is making new savings to fund investment projects and tax cuts for business and low earners. That’s the right policy. The moves are marred by a plan to boost construction by risking taxpayer funds on new homes. But overall, his budget does no harm.

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The UK government is to assist homebuyers via two schemes, collectively called “Help to Buy”. The “equity loan” component of the scheme, available from April 1, will see the state lending up to 20 percent of the value of a new-build house. The “mortgage guarantee”, available from next January, will incentivise commercial banks to lend to first-time buyers and existing homeowners with small deposits of between 5 and 20 percent.
The government intends to make 12 billion pounds of guarantees available, sufficient to support 130 billion pounds of mortgages on house values up to 600,000 pounds.
The government is to also increase the rate of the UK bank levy from 0.13 percent to 0.142 percent from the beginning of 2014. From 2014/15 this is forecasted to bring 2.9 billion pounds a year.

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