HIPs U-turn cost firms £139m - papers 20th July

SHARES IN companies preparing to be involved in Home Information Packs took a nasty knock after a government U-turn on what the packs will contain.

According to The Daily Telegraph, property website Rightmove and estate agent Countrywide saw £139m wiped off their combined value after Housing Minister Yvette Cooper said further testing of one part of the HIPs was required.

The price falls came after Cooper admitted the controversial Home Condition Reports would not be included in the HIPs, which will now be delayed until 2007. Cooper said further testing of the reports was needed to ensure they provided the intended benefits.

Rightmove, led by chief executive Ed Williams, admitted the overall value of each HIP would be lower than previously thought, with a knock-on effect expected on revenues and earnings. Broker Numis Securities said HIPs could now cost just £150 compared with an original estimate of £1,000.

Williams added future spending on the HIP product would be reviewed given the latest developments. But he reiterated its outlook for revenue and pre-tax profit in the current year, saying it would beat analysts estimates.

And Countrywide said it welcomed "the degree of certainty that the announcement brings", adding, while it had spent considerable executive time preparing for HIPs, "there has been no significant direct expenditure or capital investment this year".

PROPERTY WILL become less affordable than at any time since the last recession if interest rates rise, according to figures released yesterday, reports The Scotsman.

Someone on average earnings buying an average-priced property with a 20% deposit can expect to spend nearly half their take-home pay on mortgage interest repayments if the cost of borrowing rises.

Lender Cheltenham & Gloucester (C&G) said a 0.25% rise in interest rates to 4.75% before the end of the year would mean a typical UK buyer had to spend almost half of their salary on interest repayments alone - the highest level since 1991, when falling prices and unemployment led to record repossessions.

The Bank of England has not increased interest rates for two years, but this week's news that inflation has jumped to 2.5% has prompted renewed rumours of a 0.25% rise. The widely-expected increase in rates would push average monthly mortgage payments up from £795 to £854.

With lower prices, affordability remains best in Scotland, with buyers spending an average of just 36% of their take-home pay on mortgage repayments compared with 56% in south-east England, 53% in south-west England and 51% in London.

The C&G said even if interest rates did not rise, affordability was still set to worsen during the final three months of the year, with interest payments taking up 48% of take-home pay UK-wide if house-price growth continues to outstrip earnings growth as predicted.

The increase would come despite affordability improving slightly during the first three months of the year, according to its data which takes into account house prices, earnings, interest rates and tax.

SIR DAVID Varney is to step down from the top job at Revenue & Customs to become a senior adviser to Gordon Brown just two years after he arrived from the private sector, reports The Financial Times.

From September, Sir David will work full-time as the chancellor's senior adviser on an initiative to use information technology to transform the running of public services, the Treasury announced yesterday.

Sir David has been chairman of the tax authority at a tumultuous time. As well as leading the merger of the Inland Revenue and Customs & Excise last year, he has grappled with the department's huge overpayment of tax credits and a growing, Europe-wide problem of value added tax fraud.

The government's political opponents criticised the timing of Sir David's move. George Osborne, shadow chancellor, said: "Given the mess in the tax credit system and the problems with VAT fraud, it is a surprise Gordon Brown is moving the head of HMRC at this time," while David Laws, the Liberal Democrat MP, said: "The concern must be he is being made something of a scapegoat for the problems of the tax credit system."

But tax experts were more positive about Sir David's move. Chris Sanger, a partner at Ernst & Young and former Treasury adviser, said Sir David had already achieved real change at Revenue & Customs, making it unsurprising that the chancellor was eager to secure his characteristically frank advice on other parts of the public sector.

Sir David said he was leaving the department with a clear plan for further improvements and a successful new management team in place. "I am delighted to have the opportunity to contribute to the improvement of public services across government."

Treasury officials indicated Brown wanted a strategic approach to IT projects and was particularly interested in Sir David's private sector experience, which included top roles at mm02, the mobile telecommunications company, and BG Group, formerly British Gas, and senior roles at Shell, the oil company.

Sir David, whose role advising the chancellor on "transformational government" was flagged up in the Budget, has been asked to report to Brown by next year's comprehensive spending review.

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