Comment: Clegg’s help for homebuyers is going to pot

By MARTIN FLANAGAN
Published on 15/01/2013 00:00

NICK Clegg firmly advocated Britain joining the euro, getting it wrong on arguably the most fundamental economic decision we have made as a country in a generation.

Then the deputy PM said that the Lib-Dems would not raise university student tuition fees, but inhaled when the aroma of power beckoned.

However, arguably close behind in such questionable judgment was his statement at the Lib-Dem party conference last autumn that he wanted to help younger homebuyers raise deposits by being granted access to their parents’ pension pots.

This seemed instinctively odd at the time. And it seems that time for reflection has simply allowed more considered analysis of the idea by the banking and pensions industries to buttress that initial scepticism with more entrenched doubts.

While Whitehall is not officially saying Clegg’s plan has been rejected, the word is that Britain’s banks, building societies and pension funds have snubbed the plan to such an extent that it is no longer on the drawing board.

It is probably only for reasons of political sensitivity allied to Clegg’s elevated position within the coalition government that a more explicit rejection has not been forthcoming.

The plan’s basic flaw was that it raised the prospect of eating away at the point of a pension: to put money aside to safeguard one in old age; not to dilute that income by allowing the lump sums of parents’ pensions to be accessed before their retirement.

Possibly, the youngsters could later earn enough to pay a substantial amount of the money back. But perhaps not. And this is at a time when Britain is said to be woefully under-resourced as far as pension provision is concerned and more generous final-salary pensions are almost as dead as the dodo in the private sector.

Apart from that, the scheme faced a technical morass in order to be implemented. The banks have apparently persuaded the Treasury that regulators would need to change pension rules, and only a relatively small number of first-time homebuyers would benefit from such a change, anyway.

It is very harsh that first-time buyers are said to be having to wait up to eight years for a realistic chance of putting a deposit together. Further initiatives should be looked at. But Clegg’s was misconceived.

Housebuilders growing on firm foundations

ON A related subject, Taylor Wimpey is the latest housebuilder to suggest that 2012 saw the most significant headway in the sector since the 2008 financial crash. Wimpey, whose extensive UK footprint includes developments from West Lothian to Ayrshire, says group operating profits rose 40 per cent last year and that profit margins are heading northwards.

Average selling prices are up 6 per cent and its order book at calendar year-end was up 14 per cent. It follows similar upbeat statements over the past few months from the likes of Barratt and Persimmon in the housebuilding industry.

We are still a good way off the sector’s halcyon pre-2007 days. But we are also now beyond the “one swallow not making a summer” territory.

Mortgage loans-to-value are also coming down, which should stimulate the market further.