When asked this week whether the Bank of England could step in to end the divisive Help to Buy scheme in the event of it creating instability in the UK financial market, it has been made clear that the last word on the issue lies with the government.

The revelation comes after a letter sent to the Treasury select committee chairman, Andrew Tyrie, was revealed to the public today. In the letter, Mark Carney, the governor of the Bank of England, noted that while the financial policy committee could advise the government of any evidence that the scheme was the cause for fractures in the stability of the market, the decision to end the policy will rest in the hands of the Treasury.

It appears the letter has been sent to the Treasury in response to comments made by the Chancellor George Osborne that the BOE would be required to assess the mortgage and house-buying market on an annual basis to confirm whether there was any sign of a housing bubble developing. After Andrew Tyrie wrote to Carney to clarify the BOE position on any future decisions on the scheme, Carney responded to say in his own letter that, "The FPC has no power to require the Treasury to vary the terms of, or close, the Help to Buy scheme."

Carney also said, "The FPC only has the authority to make recommendations in connection with such matters … the FPC is not constrained by the government's timetable for any such advice; it could make recommendations at any time."

However, it would appear that these statements conflict with recent statements made by members of the Conservative party, and the Deputy Prime Minister Nick Clegg. Mr Clegg was quoted during a discussion on the risks of the scheme in October as saying, "Of course we need to moderate it, even turn it off if we think it is not appropriate and is providing inappropriate stimulation to the housing market. That is precisely why we have transferred the right to do that to the Bank of England so they can keep an eye on it – not politicians, not George Osborne, not the Treasury."

In addition, when the Conservative chairman Grant Shapps was questioned on the matter in September during an interview for BBC Radio he said that, "We put the Bank of England solidly in charge of this scheme. We've said to them: 'You look at this every year, and if you're not happy with this Help to Buy Scheme, then you'll be [able] to cancel it."

What Carney’s letter now suggests is that there appears to be a muddled stance on the adjudication of the scheme between the government and the BOE. With both sides clearly at odds with one another, it would seem that the urgency to push forward the date of the second phase of the scheme to 2013 by David Cameron has left many within the government scrambling to cover the cracks in the foundations of the policy.

In an apparent attempt to assuage fears of confusion between the BOE and the policy makers, Andrew Tyrie has said, "This letter is a step forward: it brings some much needed clarity to the government's Help to Buy Scheme. We now know who is responsible for what."

Article by: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy

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