Bingo! Budget boon for home owners.

It famously takes time to assess the significance of a Budget. Yesterday’s Budget had a number of surprises and some popular announcements. It included a number of measures that CPRE welcomed.

But Budgets that look good on the day can quickly unravel. Much of the press attention has been on beer and bingo. The Metro’s front page headline is: ‘If the Pub Landlord did budgets.’ And a row has broken out about an alleged Conservative Party poster: ‘Bingo! Cutting the beer tax & beer duty to help hardworking people do more of the things they enjoy.’ This is clearly a spoof: I have too much regard for Grant Shapps to think he could be responsible for anything so fatuous.

But a rather bigger story was the Chancellor’s announcement that from next year “pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, any time they want. No caps. No drawdown limits.” Every year £14 billion worth of annuities are bought. Given their relatively poor performance compared with property, it seems likely that huge sums of money will now pour into property, rather than in pensions.

Gently challenged about this on the Today Programme this morning, the Chancellor said it was no concern of the Government’s how people spend their money. But coming on top of Help to Buy, this looks like a deliberate attempt to stoke house price inflation.

It matters for two reasons. The social consequences are obvious: those who have property or the means to buy it will get richer if house prices rise, those without will face rising housing costs and become relatively poorer.

But there are also environmental consequences, though these are less obvious. If the Government’s declared policy was to keep house prices high there would not be an immediate consequence for land use, whatever the other concerns. But of course, this government does not have an official policy of inflating house prices any more than the last government did – though that was the consequences of its policies and the source of much of its tax revenue.

So the Government will insist that it is desperate to build more houses in order to make them affordable. And house builders will continue to eke out supply, shunning brownfield sites and developing the greenfield land that councils are forced to release in order to accommodate fantasy housing numbers.

There will be crocodile tears over young people unable to get on the ‘housing ladder’, lots of attacks on the planning system, and lots of lucky people privately celebrating their own soaring house prices.  But we are unlikely to see the sort of bold measures necessary to tackle the housing crisis. These should include policies to contain demand (e.g. through revisiting council tax bands) and some sort of land value taxation to unblock stalled sites (as supported by dangerous hotheads on the Financial Times). It would also be good to see the Government getting behind the urban regeneration agenda, working with others to masterplan high quality urban extensions and developments on brownfield sites within cities, or to revive some of the sprawling and unsuccessful suburbs around our big cities.

There were some welcome announcements in the Budget on supply, including support for custom built housing (though the 20% VAT was not reduced); money for small builders; and a commitment to build 15,000 homes at Ebbsfleet in Kent (though it remains to be seen how sustainable this development will be: the local authority seems committed to building in car dependency).

But they pale into insignificance against the potential boost to house prices. I hope there is a serious debate on whether, as a country, we want to see ever rising house prices. It is unlikely that Coalition MPs will publicly criticise the Budget, but I looked to see what Labour was saying about all this, and could not find anything. I think that is a pity.

3 Responses to “Bingo! Budget boon for home owners.”

  1. 1 Arthur Franks March 20, 2014 at 11:42 am

    Yet again measures to inflate house prices. I have never been able to work out why rising house prices are seen as a good thing. The only beneficiaries are;- estate agents, conveyancers, the finance industry and and of course the government. Yes we do need more housing but they should be affordable to the majority and built within a reasonable commute of employment.

  2. 2 Tom Chance March 20, 2014 at 1:21 pm

    Not everyone buys into it, Shaun! Here is a candidate for the European Parliament elections…

  3. 3 Robert Flunder March 23, 2014 at 9:37 pm

    Looks like Labour are going to back the pension changes.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: