Comment: How the Treasury can lend a hand to builders

ANY offers of help to get the housing market moving have to be a step in the right direction, but it seems the latest initiatives could struggle to have the desired impact unless they are matched by support from the banks.

The housebuilding industry has embraced measures introduced by both the Westminster and Holyrood governments to help homebuyers secure a deposit.

Take-up, however, has been limited, with Redrow yesterday reporting that only 63 customers opted for a mortgage backed by Westminster’s NewBuy scheme, largely because the trade-off with the lower deposit is a higher interest rate. NewBuy kicked off six months ago and a worry must be that the MI New Home scheme launched in Scotland last week could hit similar problems.

Redrow has a low profile in Scotland, but its experience south of the Border is echoed by builders operating across the UK. Keith Miller, chief executive of Miller Group, and Mark Clare, his counterpart at Barratt Developments, said last week that government help was clearly a good thing. But the real sticking point for the industry continues to be the subdued levels of lending and until loans are more widely available the market will remain sluggish.

This is not, or not yet, developing into a dispute between housebuilders and lenders because the former understands the problems faced by the latter. Unlike governments, which want lenders to simultaneously conserve and lend money, the industry knows that the lenders are struggling to attract deposits and cannot access wholesale markets which remain largely closed.

The industry has been showing signs of recovery, with several companies reporting robust profits, though it is from a low base and is less to do with growth in demand and more due to cutting costs and shifting their portfolios towards building larger family homes.

Clare wants the Treasury to direct a large chunk – as much as 25 per cent – of the £80 billion Funding for Lending programme into the housing sector. This new money is offered in the form of cheap loans to the banks to pass on to businesses. Directing such a large proportion of it to the housing market would be a bold commitment when there are so many other deserving recipients, not least the small firms sector that is supposed to be its main target.

But it might be worth the Treasury taking the chance. If it can free up the lending log-jam then the benefits for the housebuilding industry might just cascade into other parts of the economy.

Pubs are a sensible control on drinking

In the debate over Britain’s binge drinking problem, one argument that caught my attention was the case for encouraging more revellers to visit pubs.

This might sound a little counter-intuitive but it makes a lot of sense. The argument goes that cheap drink from supermarkets encourages people to get well-oiled on as much booze as they can consume before going out on the town. In other words, the bingeing has already taken place before they even hit the pubs.

By encouraging them to head straight for their local they would be in a controlled environment where drink is sold in determined measures and at a price that would restrict consumption to what drinkers can reasonably afford. The argument is raised again today by Molson Coors in a report on the future of Scottish pubs.

This is not to say all pubs are responsible at controlling drinkers, but they are licensed premises, after all, and a licence can be denied.

Pubs are not just an important part of British culture, they are a cornerstone of the economy. In Scotland alone, they employ 50,000 and a further 25,000 in the supply chain. The effects of reckless government policy, particularly on tax, are revealed in statistics on he rate of closures. No wonder the brewers are demanding a re-think.