Row over Budget home loans plan

[Bald Bouncer]

Ed Balls: "On every measure, compared to what they said they would do, they've failed".

Labour says a Budget initiative designed to help homebuyers obtain mortgages amounts to a "spare homes subsidy" for the better-off.

Chancellor George Osborne has said the Help-to-Buy scheme will underwrite £130bn in loans over three years, aimed at those seeking to get on the housing ladder or move to a larger home.

But Labour suggests it could be used by the wealthy to buy second homes.

Shadow chancellor Ed Balls said there was "absolute chaos" over the plans.

The chancellor said on Thursday he would consult with lenders on the details of the plan, due to come into force next year, which would see the Bank of England guaranteeing loans for people putting down 5% deposits to buy homes up to £600,000.

The aim of the policy is to reinvigorate the housing market, which has been hit by banks demanding bigger deposits from homebuyers.

Mr Osborne has acknowledged the plan, attacked by some economic commentators, was a "big new step" but argued it was needed because the mortgage market was "not functioning properly".

"The mortgage market is an extremely complex thing," he told BBC Radio 4's Today Programme.

"The intention of the scheme is absolutely clear - it is for people who want to get their first home or have a home and want to move to a bigger home because perhaps they have got a bigger family."

Amid warnings that the scheme could simply inflate prices further, Mr Osborne said the Bank of England would be able "to turn off the tap" on the finance after three years if the market was over-heating.

'Taxpayer guarantee'But Mr Balls said there was total confusion over the plans in a debate on the Budget in the House of Commons.

He challenged Mr Osborne to confirm funding would be limited to first-time buyers and owner-occupiers and to pledge that second homes and buy-to-let properties would be excluded.

He suggested high-earners set to benefit from the cut in the 50p top rate of tax next month could potentially use the "taxpayer guarantee" to buy another property, and he contrasted the plan with reductions in housing benefit for those with spare rooms in social housing.



George Osborne: "We're on the side of people who are trying to work hard... to raise their kids in the right way"

The government has said it is clamping down on "spare room subsidies" but Labour have dubbed the move a "bedroom tax".

"It now seems his mortgage scheme will help people no matter how high their income to buy a subsidised second home worth up to £600,000," Mr Balls told MPs.

"From what I can see, the government is basically saying if you have got a spare room in a social home, you will pay the bedroom tax but if you want a spare home and you can afford it, we will help you buy one."

He added: "That is not just tax cuts for millionaires, it is - dare I say it - a spare homes subsidy."

Lib Dem Business Secretary Vince Cable said the impact of the "massive" scheme had yet to be worked out but he said Mr Balls had presided over an unprecedented housing bubble while in government and accused the shadow chancellor of hypocrisy over the issue.

The Help-to-Buy scheme was one of a number of initiatives announced in Wednesday's Budget - in which growth forecasts for 2013 were halved to 0.6% and the Office for Budget Responsibility suggested the government's efforts to cut the deficit - the difference between money spent and earned in a year - have stalled and it will remain stuck at about £120bn for three years.

'Borrowing for failure'

Mr Balls told MPs there had been no growth in the economy in the past year, living standards were continuing to fall and the chancellor was set to borrow £245bn more than he originally planned.

"It is a Groundhog Day Budget from a failing and out-of-touch chancellor," he said. "The only reason he will not change course is to avoid his own political humiliation."

Mr Osborne told the BBC the public understood progress was being made on the public finances and job creation, despite difficult economic conditions.

But he added: "We have not made as much progress as anyone, including myself, would have liked because the environment we are operating in has got much more difficult."

Using an analogy of scaling a mountain, he said: "We can see where we need to get to but the weather has got worse."

Citing initiatives on mortgage finance, childcare and raising the income tax threshold to £10,000 a year earlier than planned in 2014, Lib Dem leader and deputy prime minister Nick Clegg said the government had "displayed a real willingness" to help people in tough times.

'Magic wand'Speaking on his weekly phone-in on LBC's 97.3 FM, he said ministers could not "wave a magic wand" but they had taken "the most reasonable steps" possible at a time when there was little money around, continuing instability in the eurozone and the UK economy was still recovering from the legacy of the 2008 financial crisis.

The chancellor ignored pre-Budget calls by Business Secretary Vince Cable and others to borrow more to boost growth with a big building programme.

But he did announce £2.5bn of spending on infrastructure paid for by a fresh public spending squeeze. Details of where the axe will fall will be announced in June when the government unveils its spending review.

Meanwhile, after the Evening Standard tweeted details of the Budget before Mr Osborne had delivered it, the chancellor has asked his top official to conduct a review of the practice of releasing Budget information in advance of the speech.

And Speaker John Bercow, who accepted apologies from the newspaper, has asked the chancellor to explain why the details of the Budget were pre-briefed to the newspaper.

BBC News