The Best Governments Don’t Spend Money.

By Michael G. Healy

One of the quietest stories in this weekend’s Sunday Times may turn out to be one of the most important. Buried inside the business pages was a report that George Osborne’s much-criticised Help to Buy scheme has generated an unexpected financial return for the Treasury. According to figures published by Homes England, the Government has already made a capital gain of around £1.24 billion on equity loans that have been repaid, in addition to earning roughly £500 million in interest. In total, nearly £1.75 billion has flowed back into the public finances.

For years, Help to Buy was presented as a textbook example of government intervention gone wrong. Critics argued that it inflated house prices, subsidised developers and distorted the housing market. There was truth in some of those criticisms. In areas where housing supply was constrained, additional purchasing power undoubtedly contributed to higher prices.

Yet the latest figures should inspire policymakers and citizens to see the scheme as a sign that government thinking can evolve. The taxpayer did not simply hand out billions of pounds. In many cases, the taxpayer became a co-investor in the purchase of a home. As property values increased, the public shared in the upside. That distinction matters enormously. Because this is not really a story about housing, it is a story about how governments think. Or, more accurately, how they often fail to think.

For decades our political debate has been trapped inside an increasingly sterile argument. One side believes every problem can be solved by higher public spending. The other believes every problem can be solved by cutting taxes and reducing the size of the state. Elections are fought as though these are the only two levers available to government. But there is a third possibility. Government can redesign the operating system. That phrase has appeared repeatedly in my recent essays because I believe it describes the challenge Britain now faces more accurately than any conventional political language. An operating system does not determine what people do. It determines the environment within which they make decisions. Recognising this can empower readers to believe change is possible.

Windows does not write your documents. It makes writing possible. The rules of football do not determine who wins the match. They determine how the game is played. Likewise, governments should spend less time trying to control outcomes and more time designing the incentives that shape behaviour. Viewed through that lens, Help to Buy looks rather different. Instead of asking, “How can we subsidise first-time buyers?”, George Osborne’s Treasury asked a more interesting question. How can government participate alongside the buyer rather than simply giving money away?

The answer was an equity loan. Instead of issuing a grant that disappeared forever, the Government invested alongside the purchaser. When the property was eventually sold, taxpayers recovered not only their original investment but also a share of any increase in value. That is not consumption. It is investment. More importantly, it is system design.

Of course, Help to Buy was never a complete solution to Britain’s housing crisis. No demand-side policy can solve a supply shortage. If planning restrictions prevent enough homes from being built, increasing the number of buyers will inevitably place upward pressure on prices. Economists have pointed this out for years. But that criticism is aimed at Britain’s planning system, not necessarily at the financial architecture of Help to Buy itself.

Once again, we discover that the apparent problem is deeper than the policy. The operating system is faulty. This distinction matters because Britain repeatedly mistakes symptoms for causes. When productivity stalls, politicians argue about tax rates. When NHS waiting lists grow, they argue about budgets. When economic growth slows, they argue about interest rates. When housing becomes unaffordable, they argue about developers. Yet underneath each argument lies the same neglected question. Is the system itself producing the outcomes we want? If not, why not? Recognising this can motivate readers to see their role in systemic change.

This is where ideology becomes increasingly unhelpful. Markets are extraordinarily good at allocating resources—provided the incentives are well designed. Governments are uniquely capable of designing those incentives—provided they resist the temptation to micromanage every outcome. The future will belong to those societies that understand the difference, and artificial intelligence will accelerate this transition dramatically.

Throughout the twentieth century, governments relied heavily on broad ideological assumptions. Policies were often designed using incomplete information, historical precedent and political instinct. Feedback arrived months or years later, usually after an election. The Intelligence Age will be different.

For the first time, governments will be able to model the likely consequences of policy before implementing it. Housing demand, planning delays, demographic change, migration, infrastructure capacity, mortgage availability and regional employment can all be analysed together as components of a single dynamic system.

Politics will not disappear. Human values will always matter. But decisions will increasingly be judged by whether they improve the performance of the system rather than whether they satisfy a particular ideology. That represents a profound shift in the way nations govern themselves, which brings us back to George Osborne.

I have no interest in rewriting political history or pretending that every aspect of Help to Buy was a success. It wasn’t. Like all policies, it involved trade-offs. It benefited some people more than others, and it operated within a housing market already constrained by decades of planning failures. But history should also be honest enough to acknowledge when an idea contains an important insight. The insight was this: Government does not always have to choose between spending money and doing nothing. Sometimes it can redesign incentives so that public and private interests move in the same direction. That is a far more sophisticated way of governing. Indeed, it may be the defining characteristic of successful governments in the Intelligence Age.

For too long Britain has behaved as though politics were primarily about distributing wealth. It isn’t. Politics is increasingly about designing systems that create wealth in the first place. That is a very different conversation. And until we begin having it, we will continue arguing over yesterday’s politics while tomorrow’s opportunities quietly pass us by.