Thursday, 17 April 2014

Writing on the wall

From: Inside edge

Put the Autumn Statement and the housing strategy together and we’re left with a mystery.

Put simply it’s this, if housing is so important that it merits a strategy of its own, why was there nothing more in George Osborne’s statement a week later than the end of the stamp duty holiday for first-time buyers?

Because, as the National Housing Federation points out, investment in housing is easily the best way to deliver the ‘biggest bang for the taxpayers’ buck’.

The NHF argues that a public investment of £1bn could be matched by £8bn from housing associations to build 66,000 shared ownership homes, create 400,000 jobs and save the taxpayer £700m in job seeker’s allowance into the bargain.

It might have added that housing schemes could be ‘shovel ready’ far quicker than the other infrastructure projects that the government wants pension funds to finance (they won’t be ready to start until 2013/14).

So you have something that’s ready to go quicker, is more labour-intensive (though a good case can be made that housing repair and maintenance or energy efficiency or empty homes work would create even more jobs) and yet does not merit anything beyond what was in the strategy last week. 

As I blogged earlier this month, the government could have been even more radical with a quantitative housing scheme funded by buying bonds in a public interest company that could fund construction of new homes for future sale to the social and private sectors.  Even a modest programme would deliver jobs and growth. 

But the government does not appear to see housing as ‘infrastructure’ and appears to be leaving growth to an untried arrangement with pension funds to deliver a list of big road and rail schemes that make handy soundbites.

Instead you can already see the writing on the wall for the next spending review. The detail of the Autumn Statement reveals that the squeeze on public sector gross investment will continue to fall into the next spending review period. Brian Green has more on the construction funding gap on his Brickonomics blog. 

Perhaps the solution to the mystery is that unspecified further spending cuts are looming to go with the two extra years or public sector real terms pay cuts because the recession is costing more than the Chancellor thought? 

To give just one example, the independent Office for Budget Responsibility says that a higher claimant count means that housing benefit will cost £1.9bn more over the next five years than it was forecasting in March this year (£200m this year rising to £600m by 2015/16).

What price more housing benefit cuts to come? And what price the next affordable homes programme - if there is one? 

Perhaps it’s not such a mystery after all. 

 

Readers' comments (6)

  • Joe Halewood

    Where is the rationale for this extra £1.9bn on the HB bill?

    The OBR rationale is more numbers from what was known in March 2011 and this was the December 2010 figure of 4.8m when now it is 4.9m and the increase in numbers is 91000 or less than 2 per cent

    Yet the latest overall HB cost (August 2011) is not £1.9bn more than the December 2010 figure it is just £1.3bn more

    Is the extra £600m their estimate of the added HB cost of affordable rent perhaps?

    Or is it the OBR project more numbers coming on to HB in the near future?

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  • Jules Birch

    It's £1.9bn over five years - £200m this year rising to £600m in 2015/16. As I read the OBR Economic & Fiscal Outlook (p147) this is mainly due to increase in claimant count (does not mention AR).

    'Housing benefit caseload changes have resulted in a £0.6 billion increase to the forecast in 2015-16. This is mainly due to changes in the population
    eligible for housing benefit. Recent survey information suggests that the proportion of people likely to be eligible for housing benefit continues to
    grow and we have reflected this in our assumptions about caseload growth.'

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  • Shouldn't that read housing "misery" rather than mystery?
    Shouldn't the shovel reference include "s***" in it somewhere?

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  • Joe Halewood

    Jules - just re-read a blog I updated on 18 October after announcement of RPI figures for September. This said next April (2012) the HB bill would increase by £1.875bn alone as a result of this - so £1.9bn in next 5 years seems a chronic underestimate by OBR

    The blog is http://wp.me/p1vuvL-3H and the pertinent paragraph is:

    "Average HB payment to each 4.9m+ HB claimants is currently £87.37 and rent levels for social housing rise by the formula of ((RPI+0.5%) plus or minus £2). The £87.37 figure would rise to £94.70 if social landlords followed the formula and if private landlords did the same. Both of these are likely to happen and extrpolated this add £1.875 billion per year to the HB bill."

    And the HB bill has risen by over £600m already in this financial year too - the OBR figures are a nonsense and a chronic underestimate

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  • Joe Halewood

    I've quickly computed my view of the full cost of the HB bill by 2016. My conservative figures suggest it will rise from the current £22.3bn to over £30bn by this time and it wouldnt be stretching the imagination to see it reach £34bn.

    http://wp.me/p1vuvL-5k

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  • Sadly,the tories want to move about 2 million households who they consider to be
    overhoused / overpriced, but they are not
    providing any dedicated housing strategy
    to assist those people to moove home.

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