Like Budgets and Comprehensive Spending Review announcements, Autumn Statements (AS) tend to spin well on the day – when no-one else has seen the documents or looked at the detail or reworked the figures – but then begin to unravel as the work of scrutiny gets done.
George Osborne’s Statement this year was drowned out by the huge coverage given to the death of Nelson Mandela and by the storm-induced tidal surge, but the criticisms that are gradually emerging have also been relegated to the less-read pages. As always with Osborne, the Statement was highly political and an exercise in smoke and mirrors. His arrogant smirking grin just adds to the feeling that he is up to no good. Given how much stick he has received about his performance, it turns out that what Ed Balls said in response was pretty much spot on.
The key message was made strongly by the Guardian’s Larry Elliot – that Osborne’s austerity plan has delayed the recovery and made sure it is weaker than it would otherwise have been. To make growth look good he has ‘repeated the sins of the past’ by easing credit for house purchase through ‘incentives for banks to lend for property purchase and state-backed incentives for people to take out home loans’. In the subsequent commentary, Osborne has failed to allay fears that he is encouraging a house price bubble to help create a ‘feel good’ factor in the run up to 2015. The increase in stamp duty from more sales at higher prices (but not more production) is also a helpful boost to the Treasury. The bubble is not evident in large parts of the country, and is being led once again by London and the south east. Even so, the Halifax national index shows that house prices are rising at nearly ten times the pace of average earnings. Even the AS revised the Government’s estimate of house price growth substantially upwards.
As the full effect of Help to Buy has yet to be felt, Colin Wiles made the interesting observation that it has already changed the psychology of the housing market, with people rushing to buy in case they are priced out further down the line by the new bubble. So, the fear of the bubble helps create the bubble. Help to Buy is therefore, Colin says, ’no friend of the priced out generation’.
On council housebuilding, Osborne probably got the headlines he wanted although his initiative may not be what it seems. He gave the appearance of responding to calls from the housing world to ‘lift the cap’ that prevents councils from making the most of the ‘headroom’ in their Housing Revenue Accounts to borrow to build more homes. In the documents the increase in borrowing seems less than he announced, and is small beer anyway.
Councils have called it ‘a small win’ – they wanted the cap abolished – and the Chartered Institute of Housing has said it is ‘far too modest’.
With Osborne, nothing is ever what it seems: to get access to the modest additional loans, Councils will be ‘encouraged’ (I think that means it is a requirement) to sell ‘expensive properties’ to enable them to build on cheaper sites. Each council will have to do this individually and they will be required to demonstrate that they are making best use of their assets. This is code not only for having plans to sell off more valuable property as it becomes vacant but also to convert many more social rented homes to the much higher ‘affordable rent’. As Jules Birch commented: ‘what seems like a major concession to council housing is actually an acceleration of the conversion of social housing to affordable rent.’
Surely it is good to do anything to build more affordable homes? Yes and not necessarily. There are two important measures of affordable housing provision. The first is the number of new homes that are built, the second is the flow of lettings, from existing as well as new homes, to people in housing need. By selling off expensive property, ‘converting’ social rents to affordable rents when homes become vacant, and increasing the right to buy, the Government and especially the Mayor of London are putting all the emphasis on the former, to get the numbers up to save face, and none on the latter. They are aided and abetted by some of the development-obsessed housing associations, and some councils, that get excited about being good ‘asset managers’.
The affordable homes programme is proceeding at the expense of the existing stock of social rented housing. High rents will also put further pressure on housing benefit at a time when the Government’s new cap on total benefit spending can only be delivered by making large further cuts in housing benefit. The policy might just limp through until 2015 but there will be a terrible crunch shortly afterwards.
The Autumn Statement contains no definition of the ‘expensive housing’ that councils will be expected to sell. In his blog, Jules Birch sources this policy and warns people not to believe it only affects London:
‘the inspiration clearly comes from a 2012 report by Policy Exchange called Ending Expensive Social Tenancies. It defined ‘expensive’ as meaning valued above the regional median adjusted by bedroom size.
It estimated that 818,600 social tenancies worth £159 billion are ‘expensive’ when judged on this basis: 21.8 per cent of England’s council and housing association stock. Of those 339,000 are council (18.7 per cent) and 479,000 housing association (24.3 per cent).
If you’re assuming this is mainly to do with London, you’re wrong: almost one in three social homes in London are ‘expensive’ but so too are 26 per cent in the East of England, 22 per cent in the South East and 20 per cent in the South West. The least affected region, the North East, still had 15 per cent of properties classed as ‘expensive’.”
The AS also announced a new initiative to increase the right to buy through the introduction of agents to help people negotiate their purchase. Trotters Independent Traders come to mind. The Tory promise that council sales would be replaced ‘one for one’ is looking increasingly sick as the latest figures show that only one council home is being built for every seven sold. Not just smoke and mirrors. Deception as well.