A version of "Right to Buy" we can fully support

From the FT:

The UK government is set to book a loss of around £800m from its largest privatisation of student loans, raising questions over the valuation of tens of billions of pounds of remaining graduate debt.

The controversial sale of a batch of student loans this week is expected to raise around £1.7bn, according to a Financial Times analysis of deal documentation.

The loans, which had a face value of £3.7bn last year, are part of a total of £43bn in loans made to students up to 2012, which are currently on government books valued at just under £30bn, according to the Department of Education’s latest published accounts, as of the end of March this year.

Greater minds than mine have already pointed out, if the government happy to sell on the loans for 40p in the £1* to loan sharks, why not just give ex-students the right to buy back their own debts for 40p in the £1, i.e. pay 40% of the face value in cash and have the rest written off?

An MSP (can't track down who) said that this would be a good kind of "Right to Buy".

Bonus:

Barclays is acting as sole arranger for the sale, alongside bookrunners Credit Suisse, Lloyds and JPMorgan. Rothschild is acting as an independent adviser to the government.

If ex-students buy back their own loans, these middlemen won't earn their juicy commissions.

* The number is not plucked out of thin air, the loans being sold that cheaply are ones originally made between 2002 and 2006, so it's unlikely they'll ever be fully repaid. But let's gloss over that bit.

I really like this jacket, but the sleeves are much too long...

Spotted by Lola in The Telegraph:

[The couple has] no debts apart from a £40,000 mortgage on their home, which is worth £130,000. They bought the house for £50,000 through the Right to Buy scheme in 2013 and so they can’t sell it for another three years...

Georgina Partridge, partner at Plutus Wealth Management:

"Stuart’s goal to upsize to a three-bed house is certainly achievable on the couple’s current level of income. In three years, they expect the equity in their current home to be £70,000 [it's £90,000 already!]. This can be used as a deposit for their new property or split into a deposit for a new house and a buy-to-let.

A three-bed property in their area will cost around £160,000. If they put down the full £70,000 as a deposit, they will have access to good rates with most lenders. For a buy-to-let, they should be looking at a 25pc deposit. If they split the £70,000 equity, £40,000 could go towards the new home, leaving £30,000 for a buy-to-let."

Jeremy Corbyn on top form

Spotted by Random in The Independent:

The ‘Right To Buy’ policy that lets council tenants buy their homes at a big discount should be extended to the tenants of private landlords, a Labour leadership contender has said.

Jeremy Corbyn said Labour needed to go further in tackling the housing crisis and that extending Right To Buy could help more people find a secure place to live.

“We know that Generation Rent faces an uphill struggle simply to get into long-term housing. We have seen some good ideas from Labour to establish more secure tenancies for renters. Now we need to go further and think of new ways to get more people into secure housing,” he said.

“So why not go with Right to Buy, with the same discounts as offered by way of subsidised mortgage rates [this sentence is not entirely clear], but for private tenants and funded by withdrawing the £14 billion tax allowances currently given to Buy to Let landlords? I believe this idea could open up the possibility of real secure housing for many currently faced with insecurity and high rents.”

I attended a talk by Lib Dem leadership candidate Tim Farron recently. He said he opposed Right to Buy. I pointed out that he was on the back foot with that one ("You are preventing millions from achieving the aspiration of home-ownership" etc), so why didn't he change tack and say it was a brilliant idea, so brilliant in fact that he would extend it to private tenants. I actually got a laugh and a round of applause for that.

Unsurprisingly, he did not answer the question, thank God that Corbyn has picked up the slack.

Joined up government

From The Evening Standard:

A massive £12 billion of welfare cuts are needed in the two years after the 2015 general election, George Osborne announced today…

People living in council houses and earning more than £60,000 should be told to find homes in the private sector, he also suggested.

I wonder how long it will take them to update the DCLG's Right To Buy guidance to make it absolutely crystal clear that council tenants earning more than £60,000 won't be eligible for the tasty £75,000 or £100,000 discounts.

Handing taxpayers' finest to the financial services sector, just for the heck of it.

Exhibit One:

£482 million a year, almost a fifth of the £2.6 billion NHS budget for maternity services and an estimated £700 for every birth, is being spent on medical negligence cover. The most common reasons for compensation claims are management mistakes, problems after a caesarean section and errors resulting in cerebral palsy.

There is no point in the NHS paying medical insurance premiums to anybody, as they can self-insure. There's is some marginal point in paying for insurance against unusual but catastrophic losses, but there is no point insuring against frequent, small-scale losses.

The NHS knows that out of 700,000 births a year, they are going to mess up a few hundred and will have to pay out few hundred thousand each time, but the total amount is probably fairly stable and only a tiny percentage of the NHS' overall budget, so they might as well just pay the compensation directly. The premiums the NHS pays to the insurance companies will of necessity include the insurance companies' guaranteed profit element, and that is money which could easily be saved.

Exhibit Two:

The government will further support Right to Buy by introducing Right to Buy Agents to help buyers complete their home purchase, and provide £100 million to establish a fund to increase Right to Buy sales, by improving applicants’ access to mortgage finance.

There is absolutely no need for "access to mortgage finance" when somebody does Right To Buy.

Let us assume that at present, Council Tenant A is paying £5,000 a year rent.

The council now decides that he can buy his house at a massive discount for (say) £60,000. If that proud new Homey took out a mortgage for £100,000, the repayments would cost him (say) £3,000 (at current interest rates).

The council can act as the bank and "lend" him the £100,000 out of thin air. They just have to right it down at the top of a sheet of paper, then every year they add on the interest charge and deduct the amount he has paid until he has paid off the loan.

Bonus points to the first idiot who says: "The local council needs to get that money in so that it can build another council house." Firstly that is not true, the amount of council housing to be built (or indeed sold off) is purely a political decision, there are no financial constraints on the amount that can be built and it needs very little in the way of finance.

And even if they did need the cash up-front, the council can easily sell its loan book.

(Why it is considered better for the local council to have fixed income of £3,000 for a limited period rather than £5,000 a year, rising with inflation, in perpetuity is a mystery to me, bearing in mind it is the taxpayer generally who will have to make up the shortfall, but that's a separate topic.)