Thanks to Help to Buy, builders are the new bankers

 

Outlook Recognise this story? An industry in difficulties, a hefty dose of public sector support, and then big bonuses for the management. But this time we’re not talking about bankers, but some of the UK’s biggest housebuilders.

Howls of outrage from the public would normally ensue, but the housebuilders have gotten away with it. Since the Government’s Help to Buy support scheme was introduced last year the results of our quoted builders have been looking much healthier – along with the remuneration packages of their top bosses. Bovis Homes delivered a cool 166 per cent rise in pre-tax profits for the first half of this year – as well as plans to increase the dividend by almost three times as it cranks up the number of homes being built. Persimmon, in the process of returning £1.2bn to shareholders, posted a mere 57 per cent rise.

When the equity loan part of Help to Buy was introduced in April 2013, it pushed wide open a door that had been barely ajar to first-time buyers, by offering Government loans of 20 per cent of a property’s value to buy a new-build home. But even at the time there were Cassandras, including the former Bank of England governor himself, Lord King, who warned it was “very important that we don’t see this as a permanent feature of the landscape”. Less than a year later, the Chancellor extended the equity loan part of the scheme to 2020. As one boss put it over lunch – barely able to contain his delight: “We’re going to have to try very hard to fuck this up.” It’s a five-year free lunch for the industry.

In the first 15 months of Help to Buy there were 27,167 properties bought using the equity loan scheme. This is small in the context of a million-plus transactions in the overall market, but not in terms of the biggest housebuilders’ results. Bovis chief executive David Ritchie said HTB accounted for around 30 per cent of sales and called it “an important part of the sustainability of the market”. Taylor Wimpey sold 11,700 homes last year, and just over 2,900 of them were transacted using HTB. Persimmon sold 2,203 of 11,500 homes last year through the scheme.

The FTSE 350 housebuilders’ index is up more than 20 per cent since March last year, and so are annual bonuses. Mr Ritchie’s rose from £360,000 to £440,000, Persimmon’s Jeff Fairburn’s rose from £540,000 to £832,500. Taylor Wimpey’s Peter Redfern’s edged past the £1m mark, but (bearing in mind that nearly a quarter of sales came from HTB) the remuneration committee said there was “no significant distortion of incentive target performance”. So that’s alright then.

Helping first-time buyers is a laudable aim. But should it also be a state crutch for bosses’ bonuses and shareholder dividends? Unless boards take a tougher look at pay and cash returns, the Government might have to take action itself. How about excluding sales achieved with Help to Buy when working out bonuses?

Start your day with The Independent, sign up for daily news emails
News
A poster by Durham Constabulary
news
Arts and Entertainment
books New York Times slammed over summer reading list
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine