'No Bank Help To Buy veto': Carney
Bank of England governor Mark Carney has rebutted claims by coalition ministers that it has the power to "turn off" the flagship Help to Buy initiative, amid fears the scheme could lead to an unsustainable housing bubble.
In a letter to Andrew Tyrie, chairman of the Treasury Select Committee, Mr Carney confirmed that the Bank's Financial Policy Committee (FPC) "does not have a veto on the scheme", though it can make recommendations on it.
Last month, Chancellor George Osborne asked the FPC - which monitors risks to financial stability - to take part in an annual review of Help to Buy, starting from September next year.
The Bank's committee has also been asked to offer advice to the Treasury in the event that it wishes to extend the scheme after three years.
But Mr Tyrie wrote to Mr Carney to clarify what powers the Bank had, after Deputy Prime Minister Nick Clegg told a newspaper that it could "turn off" the scheme.
The MP also quoted Conservative party chairman Grant Shapps, who told the BBC that the Bank had been put "solidly in charge" of Help to Buy, to prevent any "housing bubble".
But in his reply to Mr Tyrie, Mr Carney said: "For the avoidance of doubt... the FPC has no power to require HMT (the Treasury) to vary the terms of, or close, the Help to Buy scheme.
"The FPC only has the authority to make recommendations in connection with such matters."
However, the governor added that the FPC was not "constrained by the Government's timetable for any such advice" which could be made at any time rather than only at the annual review
Help to Buy, designed to help aspiring home buyers struggling to find a deposit, began its latest phase last month, offering £12 billion worth of mortgage guarantees to encourage lenders to offer home loans worth up to 95% of the value of properties.
However, critics say that without improving supply, it will simply create a price boom that will increase difficulties for those struggling to climb onto the housing ladder.
For its annual review of the policy, the FPC has been asked to look at whether the cap on the price of any home bought under the scheme - currently set at £600,000 - or the range of fees charged to lenders to access the guarantee remain appropriate.
But in his letter, Mr Carney made clear that the FPC already had broad powers to give advice including "recommendations on Government policies" and that Mr Osborne's request had not extended its statutory role.
The Bank governor has previously said more generally that the Bank of England would intervene to restrict mortgage lending if surging property prices create an unsustainable housing bubble.
Mr Tyrie said Mr Carney's letter was a "step forward". He said: "It brings some much-needed clarity to the Government's Help to Buy Scheme. We now know who is responsible for what.
"The Bank of England has no power of veto over Help to Buy. Responsibility for it lies with the Government."