Tackling Intergenerational Unfairness (Select Committee Report)

Lord Bishop of St Albans Excerpts

Monday 25th January 2021 Grand Committee

[The Lord Bishop of St Albans [V]]

My Lords, the decrease in the rates of home ownership for the younger generation is a major issue and not one of their own making. As this excellent report demonstrates, it is an important factor in addressing issues of intergenerational fairness. For many years, there has been a failure to supply housing adequately—an issue exacerbated by a cycle of stagnation fuelled by low market absorption rates and stalled developments.

The Letwin report suggests that one of the most important reasons for this is that developers will build new homes only at a rate that the market can absorb and that, by diversifying housing products, rates of absorption will increase. However, when I put down Written Questions to Her Majesty’s Government on this topic, never once has it been acknowledged that it might be in the interest of developers to land bank, as increased supply is likely to reduce house prices. While I believe that this has contributed to the lack of supply, I agree that low absorption remains a real issue. However, I do not think that diversification alone will solve it.

Since the 2008 financial crisis, like many other nations, we have pursued a monetary policy that increased asset prices. Quantitative easing has proved to be an effective mechanism for announcing budget deficits but, like any policy, it has both its benefits and its costs; in this case, it inflates assets. Of course, for those with assets, such as property, this is a very agreeable state to be in. It tends to benefit the older and the wealthier. However, for many young people, it has made property increasingly unaffordable. This report recognises that a decline in home ownership is partly due to house prices being inflated by monetary policy. This problem has been made worse by negative real interest rates and high rental costs, particularly in the more popular areas, making it almost impossible to save for a mortgage deposit. I acknowledge that tightening monetary policy may not reduce house prices, as there would be higher interest rates on mortgages, yet even the possibility of putting down a deposit and getting a mortgage is difficult when the monetary system is pitted against you.

The key point is that quantitative easing is not a win-win policy. Indeed, it is having a significant negative impact on many young people. I was therefore surprised when I asked the Government about this and received a Written Answer that said:

“The separation of fiscal and monetary policy is a key feature of the UK’s economic framework, and the Government does not comment on the conduct and effectiveness of monetary policy.”


This is not entirely correct as quantitative easing requires authorisation from the Treasury. If house prices are becoming unaffordable as a result of decisions made by the Government, they should not hide behind this separation. House prices have outstripped wage growth consistently over the past 20 years; I believe this to be the reason for lower ownership rates among our young people. Rising house prices are very lucrative for asset holders and corporate developers, but if Her Majesty’s Government genuinely want to help young people to get on the housing ladder, they need to be honest about the situation regarding corporate land banking or quantitative easing. It is therefore disappointing that the Government’s response to recommendation 6 focuses on inputs instead of setting out an ambitious programme based on outputs. I hope that Her Majesty’s Government will revisit this vital area as we try to work towards more intergenerational fairness as we emerge from the Covid pandemic.