Budget Resolutions and Economic Situation

Graham P Jones Excerpts

Friday 22nd March 2013 Commons Chamber

[Mr Duncan Smith]

I thought the right hon. Gentleman would have avoided this issue because it is like walking into a large hole of his own making. Let me quote something from his right hon. Friend the ex-Prime Minister. This is how much he thought of house building:

“Housing is essentially a private sector activity...I don’t see the need for us to continue with such big renovation programmes”.

He cut spending, and I remind Labour Members that house building under his Government fell to the lowest levels since the 1920s—[Interruption.] No, absolutely not. Housing construction orders are up by 32%, and our plans will outstrip the house building figures of the previous Government.

[Graham Jones (Hyndburn) (Lab)]

Will the right hon. Gentleman give way?

[Mr Duncan Smith]

No. The reality is that under the previous Government, house building fell to the lowest level since the 1920s.

--- Later in debate ---

[Mr Duncan Smith]

The reality—the right hon. Gentleman needs to get his head around this—is that those who engage with universal credit, all the way up the scale, will be better off than they would have been going back to work under all the measures in place at the moment.

[Graham Jones]

On the Secretary of State’s list of things that will be beneficial to constituents, does he agree that we probably do not need to include figures on the VAT measures, because everybody in every constituency will suffer from them?

[Mr Duncan Smith]

I seem to recall that, under the previous Government, the then Chancellor had to admit that his changes to VAT were a complete disaster and made no difference to anybody. Most companies ended up spending more money trying to make alterations. The reality is that the previous Government should have increased the personal tax allowance threshold to £10,000, but they never did. I would love to hear the Opposition welcome that measure rather than carp about it.

--- Later in debate ---

[Graham Jones (Hyndburn) (Lab)]

I want to concentrate my comments on local government and, in particular, housing, although I appreciate that Monday is the allocated day for that.

This Government’s housing stimulus fails to recognise that the economy in the regions is not just stalling but in recession, and that rebalancing the economy is about boosting the construction industry in places like east Lancashire. This Budget fails to achieve that. It does nothing to tackle the shocking state of much of the housing stock in constituencies such as mine. It is worth putting it on the record again that there are wards in my constituency with over 70% non-decent homes in the private sector. Cutting VAT on property refurbishments would have been a much better move in these areas, because it would have boosted the construction industry where there is already an over-supply of housing.

The Government’s record on housing so far is a confetti of failed announcements. I think it was said of the previous Housing Minister that if a house had been built for every announcement he made or press statement he released, we would not have a housing crisis. As a result of all these Government announcements, house building has fallen, rents are rising, home ownership is becoming a harder, not an easier, goal for young families to achieve, and homelessness has risen. The new homes bonus announced by the Government in 2010 was supposed to unleash growth and build at least 400,000 additional homes, but it has failed to deliver. Housing starts fell by 11% last year to below 100,000—less than half the number required to meet housing need, which stands at about 230,000.

Next up was the Prime Minister, who claimed that the latest scheme, NewBuy, would assist 100,000 people to buy their own home. To date, however, this Government scheme has helped just 1,500 people to realise their dreams—1.5% of the target. Then we had the Government’s £10 billion guarantee scheme, which has yet to deliver a single penny of support for house building. The Government’s record on house building so far is abysmal.

On Wednesday, we got the latest wheeze—the announcement of the Help to Buy scheme, which is in fact the NewBuy scheme dressed up because that has not been particularly successful. The new scheme has already been met with caution. The Chartered Institute of Housing is concerned about any success simply fuelling another housing bubble: a supply side failure and an over-leveraged mortgage market. The Financial Times described the rebranded scheme, Help to Buy, as the right to default under a headline “Housing plan parallels US home loans system”, and commented that the Chancellor

“has not learnt the lessons of the credit crunch”.

This scheme will encourage people to overstretch their finances and max out their mortgages to take advantage of the offer. In short, read Fanny Mae and Freddie Mac, whose lending precipitated the 2007 financial crash. We have the irony of a Government who have forced banks to tighten their lending criteria now enabling a relaxation of mortgage lending terms, with taxpayers on the hook.

The criticisms come not only from Labour Members and from the industry: I note that in this morning’s press it has come from the Chancellor’s own Benches, with the hon. Member for Spelthorne (Kwasi Kwarteng) stating:

“Having a system where you are giving mortgages without increasing supply will lead to price inflation. We”—

the Government—

“could have announced something bolder that increased supply”.

Alas, that is not the case. Worse, in the equity loan element of the scheme, the Government have only a second charge against the property. I am deeply concerned about that, because it will leave the taxpayer with all the risk and the mortgage lenders with all the profits. Fathom Consulting says that the plans amount to “sub-prime lending” and:

“Suffice to say that had we been asked to design a policy that would guarantee maximum damage to the UK’s long-term growth prospects and its fragile credit rating, this would be it.”

The overwhelming barrier to the housing market is the spending review’s 60% cut to the budget for affordable housing, which is affecting the state of the economy. The Chancellor has failed to deliver a real plan for growth; all he can offer is more of the same.

Criticism of the Help to Buy scheme has continued in this morning’s press. Nick Pearce of the Institute for Public Policy Research has said that the Government

“continues a strategy based on propping up—indeed inflating—prices rather than getting additional homes built. This suggests that the lessons from the housing bubble that contributed to the financial crisis have not been learnt and that orthodox thinking on housing policy remains entrenched in Whitehall.”

David Orr of the National Housing Federation added:

“the danger is that if we don’t tackle the fact we’re still not building enough homes, we’ll just create another housing bubble that will continue to push house prices up and out of reach of the majority.

Our housing market has long been weakened by the lack of new houses being built, which are forcing up rental and house prices—leaving millions of people struggling to get on the property ladder or pay their rent.”

Duncan Stott of Priced Out said:

“The only thing that will genuinely help first-time buyers is for house prices to fall back to an affordable level. Pumping government debt into the housing market will just push house prices further out of reach.”

He also said:

“Help to Buy is bad enough on its own, but to also open it up to second homebuyers would really rub salt in the wounds of Generation Rent.”

The criticism does not end there. CentreForum says that

“it is difficult to see how today’s demand side measures under the ‘Help to Buy’ scheme will help. These measures could actually increase the cost of housing and may also mean that any significant fall in house prices results in big losses for the taxpayer.”

It has called for more supply-side answers, but the Chancellor’s Budget has failed to come up with any such solutions. CentreForum also states:

“Far better would have been a rejuvenated effort to introduce community land auctions…or a scheme to give housing associations the ability to issue government backed bonds for the construction of new homes”.

Shelter has also called for limits on council borrowing to be lifted in order for more social and council housing to be built.

In a constituency where house building is flat for many reasons—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order.