Living Standards

Nick Raynsford Excerpts

Wednesday 30th November 2011 Commons Chamber

[Mr Nick Raynsford (Greenwich and Woolwich) (Lab)]

I draw attention to my registered interests. I was interested to hear the comments of the hon. Member for Dover (Charlie Elphicke). All I can say is that it would be nice to see some of the growth he talks about, but he must be aware that it is proving stubbornly resistant to the policies the Government have adopted.

I intend to focus my remarks on the housing market and associated benefits, which the Minister will be familiar with as his Department is responsible for them. I will do so for three reasons. First, the availability and affordability of housing is critical to people’s living standards. Secondly, housing and construction have a huge contribution to make to employment and the country’s economic performance, and currently they are underperforming. Thirdly, the Government’s policies in this sector provide in microcosm a rather telling illustration of incoherence, which is why their policies, not just in housing, but across the whole economy, are doomed to failure.

Like the wider economy, the housing market is in a fragile and parlous state. The recovery that was under way in the early months of 2010 has been halted in its tracks, output has plummeted and net additions to the housing stock in the latest 12 months are just 121,000, the lowest ever recorded and only half the level required to meet estimated need. New housing starts are even worse. In the latest 12 months new starts fell below 100,000 to just 96,000.

The Government have responded with some measures. The mortgage indemnity scheme announced in the autumn statement addresses one of the factors that are currently inhibiting the market: the availability of mortgage finance to people who cannot raise substantial deposits. I welcome that, with some reservations, but it does not address the other factors discouraging market recovery, particularly the wider economy; the fear of unemployment, which clearly inhibits people from taking the risk of purchasing a new house; and the considerable problems of uncertainty in the planning system, which are the product of the Government’s ill-considered meddling in planning rules. The scheme does not provide the rapid response that is urgently needed, because we do not yet know the full details, how lenders will respond or, critically, what interest rates are likely to apply on mortgages given with the indemnity. If they are high, that will largely undermine the potential benefit, thereby reducing potential take-up. We do not yet know when the scheme will come into operation. We think that it will be in the spring, but that is almost six months away and in the meantime the market is seriously underperforming.

The position in the rented sector is even bleaker. The Government have made huge cuts to the Homes and Communities Agency budget for investment in housing, essentially stopping social housing investment. There has been an overall cut of 60% in investment and in the latest six months only 454 new social and affordable homes were started in England. That is a measure of just what a desperate state the affordable housing market is in.

The Government’s new policy is based on the Orwellian concept of affordable rents. The previous Government’s policy of target rents was based on a formula that took account of earnings, so it generally delivered rents that were affordable to people on low incomes. The new affordable rents, however, are related to market rents, and the concept is 80% of market rent. In areas of high values, such as London and the south-east, that is a recipe for huge rent increases, and in some cases a doubling of rent levels.

The interesting question, to which I hope the Minister will give some thought, is how people on low incomes will meet those vast rent increases. Either they will go elsewhere, and probably the only option is the private rented sector, where rents will be even higher because, by definition, they will be market rents, or they will be dependent on housing benefit. Back in the 1980s and 1990s, the then Conservative Government talked about housing benefit being the solution to coping with higher rents. The problem now is that we have a Department for Work and Pensions that is hellbent on cutting housing benefit at the same time as the Department for Communities and Local Government is making people more dependent on it. That is inherently contradictory, and simply cannot work. It will result either in increased poverty, homelessness and deprivation, or in a huge increase in the housing benefit bill, which will no doubt spark further calls for it to be reduced. The policy is incoherent, and cannot deliver the new homes that are needed. It threatens serious social consequences, and I hope that the Government will reconsider.