Penfold Associates

George Osborne’s Budget was controversial even before Iain Duncan Smith decided to resign over the proposed PIP cuts. The Chancellor was criticised for producing a Budget that had more to do with his stance on the EU referendum and his leadership ambitions than it did about the needs of the economy. Labour attacked the welfare cuts and the tax adjustments that they said favoured the rich and middle-income earners over those on low incomes. The Resolution Foundation stressed that those on the lowest incomes would lose most and the Institute for Fiscal Studies pointed out that the whole package was predicated on £3.5 Bn of cuts later in the Parliament that were as yet unspecified. On top of all this the Chancellor ran into serious opposition in his own party and eventually had to back-track on the proposed £4.4 Bn proposed cut in PIP. He never said how this would be achieved and we will have to wait until the Autumn Statement for an answer.

With all this going on it is not surprising that the Budget’s treatment of housing has not received much attention. The reality is that the Budget does very little for housing. The Chancellor has continued the focus on extending owner-occupation set out in the 2015 Comprehensive Spending Review with a proposed study to find ways to assist people who are not helped by existing schemes and is introducing a new “Lifetime ISA” for the under-40s to help them save for a home or for retirement. It is confusing that Buy to Let landlords will be excluded from the capital gains tax concession but at the same time hit by stamp duty increases and a reduction in mortgage tax relief. The combined effect might be to discourage them from leaving the sector while at the same time discouraging further investment. £115 M is targeted at preventing homelessness but this attacks a symptom of the problem not the cause. There is also a new fund (which may be a re-use of existing allocations) to provide affordable housing in rural or coastal areas with high proportions of second homes – a very specific local problem. The Budget provides some extra funding to help bring forward publicly owned sites for residential development and there is a “vision” for 100,000 new homes in garden cities, towns or villages. These are very small measures, however, compared with the scale of increase in the production of new homes that is needed. In the absence of anything to really boost production, all the Chancellor’s demand side interventions are pointless. He should be concentrating on the supply side.

This deficiency in the Budget did not go totally unnoticed. Labour’s housing spokesman John Healey said: “There was a big hole in this Budget where housing should have been”. The Guardian Housing Network reported its experts’ views that the Budget was disappointing for housing and planning. The Telegraph’s headline was: “How the 2016 Budget did nothing to solve the UK’s housing crisis”. It is a little unusual for those two papers to show such consensus!

The Budget talked a lot about infrastructure and making the investments that will promote growth. There was money for design and feasibility work for Cross Rail 2 and for HS3, money to turn the M62 into a “smart” motorway plus other road improvements and flood prevention works. Housing now warrants a chapter in the National Infrastructure Delivery Plan 2016-2021 (a document that collates previously approved proposals and longer term aspirations). But politicians do not really understand and accept that housing is a vital part of the country’s infrastructure and that it is a pre-condition for economic growth. Employers are saying that the shortage of housing is holding back growth. When politicians finally understand this we may get a comprehensive housing policy at last and the supply side boost that is needed.

Kim Penfold
March 2016