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October 1, 2013 9:55 am
David Cameron mounted a robust defence of the government’s widely criticised Help to Buy scheme on Tuesday saying that it was needed because of a failure of the “banking market” rather than the “housing market”.
Mr Cameron, who addresses the Conservative conference on Wednesday, said his plan to intervene in the housing market through Help to Buy was different to Labour’s plan to freeze energy prices for two years.
“The mortgage market today isn’t working,” he told the BBC’s Today radio programme. “The reason is because of the damage done to the banks in the crisis. This is a market failure.
“This is not a housing market problem. It’s a banking market problem.”
Under the newly launched second part of Help to Buy, people buying a property worth less than £600,000 can get a loan of up to 95 per cent of the property price with 15 per cent of the borrowing guaranteed by the government.
Mr Cameron said it was different to the situation during the market boom of the last decade because it allowed neither mortgages of more than 95 per cent nor self-certified mortgages.
“I don’t want to be the prime minister who stands aside and says you can only buy a flat or a house if you’ve got rich parents,” he said.
The prime minister also underlined that the Conservatives would eliminate the deficit through spending cuts rather than higher taxes, emphasising another stark difference with Labour.
At its conference last week, Labour said it planned a series of spending measures, including an increase in corporation tax. But Mr Cameron said that Labour was wrong to want to spend more.
“I don’t think you tax your way to a strong recovery,” Mr Cameron said. “We need to recognise that hard-working people need more of their own money in their pockets to spend as they choose.”
He declined to say where spending cuts might come from but said the six additional years of fiscal austerity that George Osborne announced on Monday were crucial to prevent a future crisis.
Alluding to the US government shutdown that begins on Tuesday, Mr Cameron said: “It is a reminder to all of us that we need to have properly planned public expenditure systems, properly planned tax, properly planned arrangements for getting our deficit down.”
I don’t want to be the prime minister who stands aside and says you can only buy a flat or a house if you’ve got rich parents
- David Cameron
He also cautioned that once the years of austerity were over the government could not afford to go on “another spending splurge”.
Analysts say that the Conservatives’ determination to deliver a budget surplus without raising taxes or cutting capital spending suggests there will be deep cuts to welfare and other public programmes.
Asked about the possible return to parliament of Boris Johnson, mayor of London, who delivers his conference speech later on Tuesday, Mr Cameron said it was “a matter for him”. “He’s a massive asset to the country, a massive asset to the Conservative party,” he said.
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