Progressive conservatism: does their big proposal for the poor make sense?
A big eye-catching proposal from Demos’s Progressive Conservatism project today: roll-up five years worth of future housing benefit into one lump-sum payment of £17,000 and give it to people in poverty to use as a deposit on a house. Sounds neat – the average price of a terraced house is about £170,000 (thus requiring a deposit of £17,000) and it would give poor people some asset based wealth.
In reality, I can see lots of potential problems with this but one big issue immediately strikes me: how will these proud new homeowners service the mortgage costs?
Demos suggests that people in receipt of the lump sum should be offered cheap mortgages from the state owned banks with fixed rate interest of 4%. That would cost around £10,000 pa on a repayment mortgage or £6,500 pa on an interest only mortgage for a house costing £170,000.
Given that someone working full-time on the minimum wage is only bringing in around £10,500 pa this looks completely unaffordable. Chances are they wouldn’t even get a mortgage approved in the first place, sub-prime being rather out of fashion at the moment. As for those on benefits, such costs are obviously out of the question.
My feeling when I read a lot of the progressive conservatism stuff and its emphasis on providing the poorest with asset backed wealth is that it is ignoring the obvious problem: the poor don’t have enough income to live decently day to day. I’d resolve that problem first and then start worrying about asset wealth. That latter issue is, as highlighted in the recent Touchstone pamphlet, actually a more pressing problem for middle earners not the poor.