Budget: George Osborne Defends Economic Plans
George Osborne has defended his flagship Budget plan to boost the housing market, amid warnings it is already "unravelling" and risks pushing up prices.
The Chancellor put a "Help-to-Buy" scheme and mortgage guarantees at the heart of his financial statement in the hope they will kick-start an economic recovery.
People without a large deposit will have loans underwritten by the state, with interest-free loans also available for new-build properties.
The scheme will be open to those with as little as a 5% deposit and worth up to 20% of the value of a property costing up to £600,000.
Amid fears the moves could spark a new debt-fuelled boom, Mr Osborne was forced to deny they will encourage people to buy homes they cannot afford.
Speaking on Sky News, he insisted: "It doesn't mean a return to five or six years ago when you had those big 125% Northern Rock mortgages.
"It is just saying to people if you can get together a decent deposit, we are going to help you buy a home. People are being robbed of that at the moment because of the problems in our financial markets."
Amid confusion about the limits of the scheme, shadow chancellor Ed Balls claimed it could help the rich buy a subsidised second home worth up to £600,000.
He asked: "Surely people struggling to get a mortgage and those who want to own their first home must be the priority for help, not the small number who can afford to buy a second one?
"We will only tackle the housing crisis and help first time buyers if we finally build the new affordable homes we have said should be at the heart of any proper plan for jobs and growth."
Earlier on Sky News, he warned: "The devil is in the detail."
Housing minister Mark Prisk later clarified people would have to sell their existing home before taking part and that buy-to-let mortgages would be excluded.
"You would first have to divest your existing property prior to being able to proceed with any Help to Buy sale. This is about family homes. It is not about second homes," he said.
But there was fresh confusion about how this would work in practice because people would not usually be able to sell their existing home before starting to buy a new property.
Meanwhile, Tory MP Kwasi Kwarteng expressed concern that flooding the mortgage market would increase house prices because there would still be little stock.
"Obviously if the amount of supply remains the same and you are making credit easier, the tendency would be for the prices to go up," he said.
Former Bank of England economist Erik Britton, of Fathom Consulting, said: "I think it's nuts. I think it's the opposite of the right solution.
"What I fear will happen is that house prices will go up from an already overvalued position and households will take on even more debt from a position where they are vastly over-extended already.
"We will be back on the addiction to cheap credit which was the whole problem that pushed us into the crisis that we are already in."
New figures showing public borrowing fell to £2.8bn in February - the lowest for the month since 2008 - provided a chink of light for Mr Osborne.
And during a string of interviews to defend his Budget, he insisted Britain's problems "could be a lot worse" - pointing to Cyprus.
On Sky News, he claimed his drastic austerity measures had the public's support despite the recovery taking far longer than expected.
"I think the British public understand there is not a simple or easy answer to our country's problems but just the painstaking work of putting right what went wrong," he said.
However, research for consumer group Which? carried out immediately after the Budget showed 59% want the Government to rethink its economic plan.
Alongside the radical mortgage plans, Mr Osborne also cut the price of beer and cancelled a fuel duty hike in a bid to ease the cost-of-living.
He moved to boost small businesses by creating a new employment allowance which will save employers £2,000 on their National Insurance bills.
And plans to raise the income tax threshold have been brought forward to 2014, meaning earnings up to £10,000 will be tax-free.
But those announcements could not disguise the dismal economic figures and forecasts that showed the austerity era will last a decade.
Official growth forecasts for this year have been cut in half to 0.6% because the recovery is so weak, and next year's figure has also been downgraded.
The independent watchdog the Office for Budget Responsibility (OBR) also warned that the decline in borrowing seen in the first years of the coalition "no appears to have stalled".
Public borrowing predictions for every year to 2017/18 have been revised upwards, putting the total £55.7bn higher than it was just three months ago.
The OBR expects Britain to narrowly escape an unprecedented triple-dip recession, predicting a small increase in GDP in the first quarter of this year.
But debt is not set to fall as share of national income until two years after Mr Osborne's original 2014 target.
It is due to peak at 85.6% of GDP - equal to a massive £1.58tn - in 2016/17 - an increase of 6.4% on previous forecasts.
what do you think?
These guys have their own agenda and things will never get better whilst we are still haemorrhaging money to the EU and in foreign aid to Govts more wealthy than ourselves, pointless foreign wars and allowing our benefits money to be paid out to those not even living in this country. If we go down the tubes then to them that is neccessary as they don't answer to us and are too global and EU focused.
As bad as things are I know full well they'd be a lot worse if Labour were still in power. It is only now, whilst in opposition, with no policies that they have started to admit some of the mistakes they made during their 13 years.
Name the leaders of the Tory and Lib Dem parties who voted through Labours economic errors. Give you two guesses....
They should have cut some pensioners payments.some of these pensioners should be means tested but the present goverment hasnt got the guts to do this as would lose the grey vote.
What grey vote? Go out and speak to them, they are scared of the lack of help with care fella!!! You will be old at some point, we lost our way with looking out for the older pensioners. They have paid into a system that pledged "cradle to the grave". You will find a lot of people will not vote Tory because they do not see any difference between the two parties still!
Neil read my comment i said it should be means tested.as it stands at the moment alan sugar will get £ 250 this month for cold weather allowance.some have even tried to refuse this payment such as peter stringfellow.also we will be paying pensioners the same payment who live in spain and and abroad around the world.this is plain stupid when were cutting back on health and welfare to the disabled.do we really need to give alan sugar a bus pass and a christmas bonus, i think not.
The pensioners who have worked hard from leaving school at 15years of age and paid into the system since then???? What makes you think they all vote Tory? I despise the phrase 'means tested' too. For my Mom and other people in her age group who know the true humiliation of what that entails.
I do agree with you to a certain extent Shaun, but part of me still thinks, especially with regard to the winter fuel payment, that if you've paid tax and Ni for 40+ years then you more than deserve to get that bit. I'd remove benefits from all immigrants, stop foreign aid and put a stop to immigrants sending money overseas. We're losing money to foreign economies that should be spent here.
im so angry with your comment.shaun, my dad is 85 still pays tax. better if the drug abusers and wasters had their money "" means tested". grrrrr
Get your facts right Shaun, the winter fuel allowance is 200 not 250 it was the first thing the coalition cut when they gained power also you are not given a bus pass you have to apply for one so i dought Sugar has one. Also of cource, never mentioned by the way, is that the pensioners personal tax allowance has been frozen and folk retiring from next month will not get the higher ammout at all so leading to thousands of new pensioners paying higher tax if on over 181 pw hardly the wealthy.
I am uncomfortable with the idea that the government "should cut some pensioners payments" or that "some of these pensioners should be means tested". How would we identify those who should have their benefits cut, or who should be means tested? What would we do if we wrongly identified some of those people? How would we even know? If means testing were to be introduced, it would have to be for all pensioners. The party responsible would be out on their ear at the next general election, and they know it. They would be unelectable for a generation. Any party that side-stepped means testing by simply cutting pensioners' benefits would be in the same cart. I can only speak for myself and my wife, but I suspect that other couples may be in the same situation. Because we have savings a little over the limit and a small personal pension, we get the minimum amount of state pension, after which the local council comes in and raids what is left after our living expenses, for council tax. We are penalised over £1500 per annum for living in a modest semi that we bought through our own efforts. If any government or local authority thinks that they are going to walk in and help themselves to the benefits we have paid for over and over again, they had better think again. The will find me, and a lot of "grey voters" like me, waiting for them. They may also find that younger people who are expecting these benefits after they retire, to be waiting for them.
Well when a recent tv programme interviewed six retired millianare golfers who all lived in spain the other night they quoted the winter fuel payment at £ 250.when asked what these golfers spent their money on they said, it paid towards their golf membership.this just doesnt seem right when other pensioners are struggling to make ends meet.the money would be better off spent on the poorer pensioners in this country.
Shows how greedy people are when they agree that people like alan sugar should get a £10 christmas bonus..
Nigel google winter fuel payments for pensioners on their it says you can claim between £100 - £300 winter fuel payment.
Winter fuel allowance is 200 single person - 100 each for a couple or for over 80's 300 single - 150 each for a couple.
Winter fuel payment is 200 single person - 100 each for a couple or for over 80's 300 single - 150 each for a couple.
Imperialism and colonization is what has built Europe. No longer are those cash cows brining the bacon home. Much trouble ahead. This is just the beginning.
Totally untrue, British brains and British hard work are what made this country.
Agree pj, in a sense. The old British had an identity. They were hard workers and did not mind gettin their hands dirty. The new breed burn their houses.in order to get more income support and bigger housing. The labour markets here are over priced and lazy. The finance and city sector is finished. I could go on and on.
no just the same that has happened in the past!
With the rich getting richer (massive bonus payouts) I rather think the British public do not understand why his policies have to continue. The latest plan, if that's what you could call it, consist of providing a relative few a means of getting into home ownership and nothing that will promote the rebirth of our industry. Look aroud your house and see just how much of it is imported. All of those things were and could be made in this country. It's called inward investment Mr Osborne.
What kind of wages would a person need to be on to get a £600,000 mortgage? Really don't think they would need a government gurantee scheme, it's just disturbing yet strangely quite comical.
Chancellor 'tax payers can't afford to keep paying for the sick the poor and the elderly'' but can still find money for the MP's the bankers and the parasitic royal's. I want that arrested for embezzlement of public money.
Way to go jimmy.
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How on earth can this idiot say that that he has the support of the public with regard to his 'austerity measures'? He's obviously living on a different planet to the people I speak to (mind you, him living on a different planet might be the answer!).
shaun spencer: Why should an OAP be means tested? They have paid in their share of taxes for 50 years only to be given what they were promised. Over the years they have probably struggled to buy their own home and out of this pension of £107, they still have to pay their mortgage and rates. On the other hand, a lazy scrounging shyster who has never worked in his life, never paid in a penny can also get a pension, have it made up with pension credits to around £140 and also get free rent and rates in a council home.
Totally agree PB, never before in the history of this land has scrounging been so lucrative. You can do it from your own home, no need to go outdoors. The more they scrounge, the more they get. Saw a programme on TV last week showing a single mother + 3 kids who had moved to Hemel Hempstead and she was put into 3 bed temp accommodation by the Council costing over £250 a week paid for by housing benefits. She was complaining that now the Council had found her & her 3 kids a council house she was refusing to move because it was a lower standard and the estate was "full of druggies."
Spot on . And here lies the problem. You are better of scrounging from day 1, then working.
Im talking of the richer pensioners peter, then the poorer pensioners would be better off.
If the jobs were available then the scroungers would have no excuses.but these people are very much a minority most people currently out of work would rather have a job then live £ 65 a week.
Take your choice guys - Osborne or Balls?? Preferably neither, but I am as sure as h*ll that Balls and Labour can never ever be trusted with the UK economy. Balls and Miliband do not have a single policy between them.
This will only push up house prices, ban the ownership of more than one house or tax it at 80%. this will release houses and the price will fall. Houses are for living in and a couple on minium wages should be able to afford to buy one. The real challange is for this Country to make things that we can sell to bring back growth, not Sack and Tax which is just digging a bigger hole. The EU is only 14% of the world Market, forget it save £50M a day and go after the 86%.
nothing earth moving,the usual tripe from another world.