“Between a rock and a hard place” was how the Institute for Fiscal Studies (IFS) described chancellor Philip Hammond’s predicament as he contemplates his next budget later this month.
Real pressure is mounting on public sector pay while the demand for more infrastructure spending is coming from many quarters. The ‘northern powerhouse’ remains a slogan without a project. Crossrail 2 is still a distant prospect.
There is also a definite sense of the UK economy slowing, whether that’s car sales down by around 5% or house prices, which, while patchy, are certainly not rising in the way they have done in recent years.
So much of our economy is based on domestic consumption that when people feel even slightly anxious the impact is immediate. This might be anxiety about the way Brexit negotiations appear to be going or just cyclical.
It’s certainly been some time since anyone rushed to develop high-end residential in central London. I criticised the government for pumping money into Help to Buy on the grounds that rule 1.01 of economics is that when demand is increased and supply is static prices rise. Rule 1.02, of course, is that when there’s a surplus of supply and demand is flat prices fall.
The prospect of the economy being in balance is receding even further and the prospect of a rise in interest rates just when the economy is faltering looks frankly nuts. The last thing we need right now is another disincentive to spend.
The IFS also advised the chancellor to tackle stamp duty, which it rightly described as a tax on mobility, suggesting that he could recoup some of the lost revenue by increasing council tax revenue at the top end of the scale.
UK occupiers pay a tiny proportion of the value of their homes compared with abroad
I recently reported the proposal by the leader of Westminster City Council Nickie Aiken to give top ratepayers a chance to double their council tax contribution, which surely makes sense when you think that someone paying £50m for a home pays the same as someone with a home worth a fraction of that.
There is logical scope for very large increases in at least three or four higher bands. Paying for local services according to market value makes good sense but not if governments are too scared to revalue on a regular basis.
It’s a fact that occupiers pay a tiny proportion of the value of their homes to the local council in the UK compared with most countries around the world.
Green-belt policy review
The Housing & Finance Institute, chaired by City Corporation’s former leader Sir Mark Boleat, issued a report last week on housing supply that is well worth a read. It joins a long list of advocates for reviewing green-belt policy.
Having argued that London still has plenty of developable brownfield land and is generally a low-rise city, I was always against relaxing it, but my view has changed. It’s clear that in some places around London and elsewhere there is a strong case for relaxation where the land is not green or the best way of meeting housing demand is to build an entirely new settlement, especially in a country whose population when the green belt was established in 1947 was about 15 million less than now.
Ministers must stop fudging the issue and show that they mean business. The report argues for reform of the planning system to lessen the impact of nimbyism and, more controversially, against dogmatic insistence on undeliverable percentages of affordable housing.
We all know what the report meant. As one leading developer has been heard to exclaim: “Fifty per cent of naff all is naff all.”
The case for a standard tariff is more nuanced. Set at the right level it might well be a useful tool but only if there’s a recognition that viability assessments are a fair way forward during those years when developers are bringing forward land bought well before the new limit.