RBS bonanza should be used to pay for seismic reduction in house prices
I read the IPPR report “A Citizens’ Wealth Fund for the UK”, the source of this week’s “sell RBS and give £10k to every 25 year old” headlines “Scotsman, April 3).
It’s a very sensible document and the debate it has sparked about how the £10k is given away will hopefully mature from the current “they’ll blow it all/it will just put house prices up” level.
UK national debt is currently £1,600 billion. The UK Government’s 71 per cent stake in the Royal Bank of Scotland worth £25bn. The fund is estimated to grow to £180bn by 2030, when it would start paying “dividends”. The additional £155bn will come from new capital and wealth taxes, diverted current spending, for example scrapping the Help to Buy scheme, and assumed 4 per cent p.a. growth. It doesn’t say sell RBS and give each 25-year-old £10k.
The biggest problem young families have is housing cost. The average rent or mortgage on a three-bedroom property is £900 a month, so both parents work, and pay for childcare. Full time childcare can cost £800 per week, per child.
So one parent’s average monthly take home pay of £1600 (based on £24k a year average pay) could be swallowed up onhousing and childcare.
If the cost of housing was drastically reduced, to, say £500 per month, perhaps one parent could stay at home, because £1200 in mortgage and childcare cost could be saved. At least they would be £400 a month better off.
The Wealth Fund should be used to finance and subsides a fundamental transformation of the UK housing market, for example to pay councils to provide public land for free, compulsory purchase land and build good infrastructure and fund tax incentives and penalties to stop builders hoarding land. It could also be used to encourage builders and self-builders to use new building methods and materials. Prefab houses can be built for £50k.
The result would be a liberalisation of the construction industry and a seismic reduction in house prices that would dwarf any £10k grant and go a long way to solving household costs and childcare issues. And get family life back to normal.
ALLAN SUTHERLAND
Willow Row, Stonehaven