5.25 More on those council tax incentives for new homes - and it will worry those warning about the dangers of the gap between scrapping the old planning system and the new.
A white paper ‘later in the summer’ will set out plans to replace regional development agencies with local enterprise partnerships in areas around major cities and other natural economic areas. Their role will be ‘to enable improved coordination of public and private investment in transport, housing, skills, regeneration and other areas of economic development’.
It will also ‘consider the most appropriate framework of incentives for local authorities to support growth, including options for business rate and council tax incentives, which would allow local authorities to reinvest the benefits of growth into local communities’.
Meanwhile, local development orders could be used in areas ‘where there is potential or need for business growth’ to simplify the planning consents process’.
3.05 The housing benefit reforms are forecast to save £220m next year, £600m in 2012/13, £1.6bn in 2013/14 and £1.8bn in 2014/15.
The detail seems to make it clear that this is not really about those bumper pay-outs that take all the headlines. The caps on maximum local housing allowance rates for each property size will only save a maximum of £70m a year.
From April 2011, the caps will be £250 a week for a one-bed property, £290 for a two-bed, £340 for a three-bed and £400 for four bedrooms or more.
The biggest saving (£490m) will come from restricting working age entitlements in the social sector to reflect the size of the family from 2013/14.
Setting the local housing allowance at the 30th percentile of local rents from 2011/12 will save £65m in that year rising to £425m in 2014/15.
Other annual savings by 2014/15 include £340m from unfreezing deductions for non-dependents and £390m from switching to CPI indexation for the local housing allowance.
Jobseekers allowance claimants who fail to find work after 12 months will have their housing benefit award reduced to 90% from 2013/14 to save £100m.
2.55 Unemployed homeowners will feel the pain too. The rate at which support for mortgage interest is paid will fall from the current 6.08% (where it’s been frozen since late 2008) to the Bank of England’s average mortgage rate from October 2010. It’s true that interest rates have fallen considerably since then - but the borrowers in most trouble (especially those with sub-prime mortgages) tend to pay much more than the average.
2.40The Budget red book has a bit more detail on those housing benefit cuts: ‘The Government will remove payments that trap benefit claimants in poverty instead of providing incentives to work as well as being unfair to the millions of families on low income who do not depend on welfare,’ it says.
The package of reforms to be introduced in April 2011 is going to affect far more than just the highest claims:
- Full housing benefit will be time-limited for ‘ciaimants who can be expected to look for work’.
- Social tenants of working age will have their housing benefit restricted where they ‘are occupying a larger property than their household size warrants’.
- The maximum local housing allowance will be capped for each property size
- the percentile of market rents used to calculate local housing allowance rates will be changed.
1.39 Housing benefit was singled out as a prime target for cuts after a 50% increase in the total cost to £21bn over the last ten years. ‘Costs are completely out of control,’ said the chancellor. ‘We now spend more on housing benefit than we do on the police and on universities combined.’ Some families (er…their landlords?) were receiving £104,000 a year.
It only took him about 10 seconds to detail the measures to save £1.8bn a year by the end of the parliament:
- Re-setting and restricting Local Housing Allowances;
- Up-rating deductions;
- Reducing certain awards;
- Re-adjusting Support for Mortgage Interest payments;
- Limiting social tenants’ entitlement to appropriately sized homes;
- And, lastly, we will for the first time introduce maximum limits on housing benefit – from £280 a week for a one-bedroom property to £400 a week for a four-bedroom or larger.
1.30 The big question on capital investment is whether new homes qualify as ‘projects that offer a significant economic return to this country’ or does the coalition think that only applies to business-friendly transport schemes?
Osborne said:’Well-judged capital spending by government can help provide the new infrastructure our economy needs to compete in the modern world. It supports the transport links we need to trade our goods, the equipment we need to defend our country, and the facilities we need to provide quality public services. I think an error was made in the early 1990s when the then Government cut capital spending too much – perhaps because it is easier to stop new things being built than to cut the budgets of existing programmes.
‘We have faced many tough choices about the areas in which we should make additional savings, but I have decided that capital spending should not be one of them. There will be no further reductions in capital spending totals in this Budget.But we will still make careful choices about how that capital is spent. The absolute priority will be projects with a significant economic return to the country. Assessing what those projects are will be an important part of the autumn spending review.’
1.20 Capital gains tax for higher rate taxpayers will go up to 28% from 18% in a move that will hit buy-to-let investors and second home owners. The Lib Dems wanted it to go up to the same 40% (or 50%) rate as for income.
1.10 A range of cuts to housing benefit will save £1.8bn a year by the end of the parliament. Osborne says the £21bn budget has to be cut and payments of up to £104,000 have to go. Detail to include maximum limits.
1.00 Osborne has confirmed plans to protect capital investment. He says cuts made in the early 1990s - by the Conservatives - were a mistake. That resulted in big cuts in the new homes programme that continued under Labour in 1997. But departmental expenditure limits in non-protected departments will be cut by 25% over four years.
11.45: There’s good news and bad news for housing in the media speculation ahead of the Budget.
The good news is that several papers (including the FT and The Guardian) have clearly been briefed that George Osborne will stick to Labour’s plans for capital investment. That sounds like a positive sign for the spending review in the Autumn.
The bad news (in case anyone’s forgotten) is that those plans already implied massive cuts. Independent analysis by the Institute for Fiscal Studies (IFS) last year showed that capital-intensive departments like Communities and Local Government and Transport faced the biggest cuts.
It’s not at all clear whether sticking to Labour plans would include filling in any black holes the Conservatives have discovered along the way either. And even bigger cuts would presumably have to be found in non-capital programmes to contribute to the government’s aim of bringing the deficit down faster.
More immediately the big Budget questions for housing include what happens to:
- the funding that was frozen at the end of May including kickstart and local authority new build
- housing benefit
- capital gains tax - what exemptions and allowances will there be for buy-to-let landlords and second home owners?
- tax breaks for institutional investment in the private rented sector
- VAT - if it does rise to 20% that will make refurbishment even more expensive relative to new build.
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