I have blogged about this before and yet strangely it would seem Dave (Mr Cameron to most)  has not read it so, in view of the speculation on the scheme in the press, I think it is time to make the point again.

This time I am using some statistics to prove my point. These have been obtained, in part, via government statistics stated in the press and statistics from a lesser known source called the Department of Guesswork.

I am aware (but can not recall who said it) that there are ‘lies, damn lies and then there are statistics’. I am no mathematician or economist but here goes…..

Under George’s (Mr Osborne to you) ‘new build indemnity scheme‘ - and assuming the average house price for a first time buyer is £140K (seems reasonable based on my experience and the fact that the average total value is only £160K) - then if the Government chips in £14K then that £14K goes into the economy. Given the percentage of foreign workers in the building industry we can assume that 20% of that leaves our economy (but doubtless helps out our friends in Europe) so rounding down that is the best part of £12K into the UK economy.

Now if you give this to first time buyers who puchase in the ordinary market what happens?

Assume the average chain length is 5 (it used to be higher) and the average price is £160K . Now lets assume that the top half pay 3% SDLT and the bottom half 1% and of course the First Time Buyer zero.

The SDLT received is £10,200 

Agents fees 2% again with the same split of values = £16.4 K VAT is £2,320 

Solicitors fees (This is depressing) say £5K VAT is £1,000 

Then based on recent experience of Mrs Bowen’s best friend, each of the people in the chain will spend at least £2,000 on various soft furnishings (as I understand they are called) I expect the real amount is much higher but lets assume £2,000 per transaction is £8K with the VAT element being £1,600.

Removal firms could add a bit to the VAT again based on Mrs B best friend its £5K plus in total so say £1,000 

That is a total revenue of over £16K (and I think my figures are conservative). That is £4K extra than the Government’s proposed scheme. So they could, if they wished, do both and still make a profit over their proposed scheme.

There would be other benefits too; the increased spending in the shops would increase employment as would the increased demand for removals and the land registry may need more staff. Solicitors and agents would probably need more staff thus increasing tax revenue and reducing unemployment.

In my not so humble opinion, giving first time buyers in the ordinary property market access to this type of scheme will have a much greater benefit to the economy than just giving the funding to new builds as not only does some of that money leave the country, the investors in the big building companies tend to be pension companies and they will not invest the dividends back into the economy again.

The above guess-timate of course takes no account of the money multiplier on the economy i.e. all those estate agents going out and buying new BMW’s (or whatever the latest ‘must-have’ car is). When I did economics many, many years ago the multiplier was about 3.5, so that is £150,000 back into the economy.

As Alexandar would say “Simples”.

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