The Help to Buy scandal shows that the cash-strapped next generation aren’t coming first after all
When former Chancellor George Osborne announced the Spring Budget 2016 as one that ‘puts the next generation first’, he simultaneously knocked the importance of “too complicated” pensions to younger savers, while acknowledging that a house purchase is their priority, launching the Lifetime ISA. But helping with mortgage saving is old Budget news.
It doesn’t need to be reiterated that buying a house has become a practically unattainable goal for cash-strapped, debt-ridden 18 – 39 year olds, with the average age of first time buyer now 38.
Unfortunately for the government, this generation also have good memories.
In the 2015 Spring Budget, Osborne launched the Help to Buy ISA, saying “For every £200 you save for your deposit, the government will top it up with £50 more. It's as simple as this - we'll work hand in hand to help you buy your first home.”
Great! The announcement was welcomed industry wide, with experts encouraging employers to work Help to Buy into existing remuneration packages.
Well as it turned out last week, it’s not so much help to buy, as a bit of cash after you’ve already made the significant part of your house purchase – the small print shows that the government bonus can’t be used for the deposit.
The deposit, ordinarily 10% of the value of the property you’re purchasing. The deposit, the large lump sum required before you can start the process of purchase. The deposit, to which a contribution would give you the most help to buy.
Many banks have already advertised the ISA as help towards that difficult-to-attain first deposit, and after The Telegraph raised the issue, the Treasury has claimed that the bonus was simply designed to reduce the size of mortgages post-completion.
It’s not helping anyone to buy anything – it’s more of an Extra Cash if You Can Already Afford to Buy ISA. Or a Too Little Too Late Perk After You’ve Already Broken Your Back Saving for a Deposit ISA.
I’ll agree that neither are particularly catchy. But the risk isn’t just to those who have already bought into a Help to Buy ISA thinking it would, well, help them to buy.
There is a far greater risk that yet again, rather than working “hand-in-hand” as Mr Osborne put it, the latest scandal will simply disenfranchise young savers. If they can’t rely on the government to follow through and help them with the saving that the Treasury has publically and repeatedly acknowledged to be of key importance to their generation, then what can they rely on them for?
Help to Buy ISAs were the first key step, this year followed up by the LISA, in engaging the hitherto disengaged with their savings journey: from getting out of debt, to saving for a house, all the way through to making those crucial pension contributions to secure a comfortable retirement.
With this failure to actually help, the golden opportunity to start people on that journey may well have fallen at the first hurdle.