Beleaguered prime minister promises ‘revolution’ – but cabinet minister admits impact will be ‘modest’
But he was hit by a wall of criticism that the ideas betrayed a lack of understanding of how the mortgage market works, as well as being hugely expensive – threatening promised tax cuts.
Mr Johnson admitted the extension of Right to Buy to housing association tenants would be “capped” amid fears of a £3bn annual bill, with only a few further pilot schemes expected.
No 10 also acknowledged the “benefits for bricks” scheme – offering government help to allow Universal Credit claimants save for a deposit – would not work in property hotspots.
A third strand of the package floated cutting the required deposit to buy a home from 10 to 5 per cent of a home’s value, but is merely a review at this stage.
The prime minister also cast doubt on his own flagship pledge to build 300,000 new homes a year by 2025 – admitting there was no “guarantee” it will be hit.
And Therese Coffey, the work and pensions secretary, asked how many people would be able to divert housing benefit into buying a home, replied: “Our initial thoughts are that it will be quite modest; several thousand.”
Housing groups argued few benefit claimants would be helped and raised fears of a repeat of previous broken promises to replace homes sold under Right to Buy “like for like”.
Polly Neate, head of the charity Shelter, called the ideas “baffling, unworkable and a dangerous gimmick”, warning they would “put our rapidly shrinking supply of social homes at even greater risk”.
Miatta Fahnbulleh, of the New Economics Foundation think-tank, said the policy was “totally detached from reality”, warning that people on benefits are already struggling with soaring living costs.
“Social security has been cut so much that those receiving benefits can barely feed their kids, let alone save for a deposit or afford a mortgage when house prices are sky high,” she said.
Jonathan Rolande, of the National Association of Property Buyers, said of Right to Buy for housing association tenants: “This policy will do nothing to help anybody affected by the housing crisis.”
And Dan Wilson Craw, deputy director of Generation Rent, said: “Neither the review of low-deposit mortgages, nor extending right to buy to housing associations will address the shortage of homes we need.”
Property finance specialists warned the package would “go against all sensible lending practices” and attacked a “headline grabbing announcement with no detail”.
Mr Johnson also issued a stark warning that workers will have to settle for real-terms pay cuts if Britain is to avoid 1970s-style “stagflation” and soaring interest rates.
“We cannot fix the increase in the cost of living just by increasing wages to match the surge in prices,” he said, in the speech billed as the latest reset of his leadership.
“If wages continually chase the increase in prices, then we risk a wage-price spiral such as this country experienced in the 1970s. Stagflation – that is inflation combined with stagnant economic growth.
“When a wage-price spiral begins, there is only one cure and that is to slam the brakes on rising prices with higher interest rates.
“That has an immediate impact on mortgages and rents. It puts up the cost of borrowing for business, it is bad for investment and growth, it is bad for jobs – it is bad for everyone.”