Chancellor Alistair Darling is betting £20 billion that he can spend his way through the worst of the economic downturn. Here is our quick guide to the proposals.
Of that cash, £1.8 billion has been set aside to support the housing market. Here are the key areas where that money will be spent:
Investment in social housing
Mr Darling is bringing forward £775 million of housing and regeneration investment. This includes:
- £250 million for decent homes, to improve 24,000 homes
- £150 million to build up to 2,000 more social homes
- £175 million for repairs to council housing stock
- £100 million to support key regeneration and housing infrastructure work.
Regional Development Agencies will also consider investing £100 million to encourage economic development.
The government has decided there is scope for further cost-cutting within government departments. It is now seeking to up its efficiency savings from £30 billion to £35 billion over three years, by saving £5 billion during 2010/11.
The focus for the Communities and Local Government department is on a forthcoming regeneration framework, which will try to ‘improve the efficiency of regeneration spending’.
In September the government announced a mortgage rescue scheme to help struggling homeowners avoid repossession. It has now extended that support to people who are facing problems due to second charge mortgages.
It has also set up a lending panel, to report to the chancellor, which will monitor lending to businesses and households. Among its duties will be raising awareness of government support for people facing repossession of their homes.
Major lenders have agreed to delay initiating repossession proceedings until at least three months after an account goes into arrears, and to work with homeowners to seek alternatives to repossession.
Support for homeowners who lose their jobs has also been extended, with eligibility extended from loans of up to £100,000 to up to £200,000.
Mr Darling said the package of support to help people avoid repossession was £200 million.
Employment and benefits
To help people facing redundancy the government is extending its Train to gain scheme to cover people who are in employment, but feel they need to retrain.
It is also investing £1.3 billion in Jobcentre Plus over the next two years to help the unemployed move back into work.
The pre-budget report also confirms that the local housing allowance it to be capped at the five bedroom rate. A wider review of housing benefit is ongoing, and the government is ‘urgently looking at the scope to constrain these costs’.
Energy efficiency and pricing
An extra £100 million is being put into the Warm Front energy efficiency scheme, with another £50 million brought forward. Coupled with decent homes funding, this is expected to aid 76,000 low-income households.
The government has also confirmed it is prepared to legislate to tackle the variation in the tariffs energy companies charge customers depending on the type of meter they use, and that it is looking at energy prices in general.
It has asked the market regulator Ofgem to provide quarterly reports showing whether energy companies have passed on cuts in wholesale gas and electricity prices to customers.
VAT has been cut from 17.5 per cent to 15 per cent. The cut comes in on 1 December, and reduces the rate to the lowest allowed under European rules.
It will mainly benefit housing associations that spend a lot on repairs and other types of work where VAT is paid and cannot be claimed back.
The Crosby Review
Sir James Crosby’s review of mortgage finance was published alongside the pre-budget report. It argues that there is a strong case for the government to provide £100 billion of backing for the mortgage market to revitalise lending.
Mr Darling said such an intervention would require state aid approval from the European Commission, but that he would ‘work up a detailed scheme based on [the] recommendation and seek state aid approval to proceed’.