Natalie Bennett’s incredibly awkward interview on LBC suggested either that the Greens don’t know how to fund their proposal to build 500,000 social homes by 2020 or that their leader hadn’t done her homework. Which is it?
In fact, the proposal is helpfully spelled out in a policy briefing issued this month which must have been unaccountably missing from Ms Bennett’s briefcase. Let’s look first at what the policy might cost. First, it’s clear that the homes are to be social rented (not let at the coalition’s higher Affordable Rents). Second, the promise appears to be to build them over the five years 2016-2020, i.e. 100,000 per year. Third, they estimate the cost in grant to be £60,000 per unit, or £6bn per year. This compares with current grant investment which they put at £1.5bn per year. So an extra £4.5bn is needed.
Are the costings correct? On the face of it, they are. The last Labour government’s programme was funding social rented homes at an average cost of £51,000; work by PwC for L&Q suggests that grant would now need to be £60,000 per unit if homes were to be let at social rents. There is a quibble about the phasing in of the extra investment though: the Greens suggest the full £6bn will not be available until 2017 which suggest that the 100,000 annual target won’t be met until at least 2018, so delivering half a million social rented homes by 2020 looks nigh on impossible (quite apart from capacity issues and lead-in times within the sector). However, let’s give them some leeway and focus on the 100,000 annual target and the extra £4.5bn it would require.
The Greens want to fund this principally from ending landlords’ tax relief on their mortgage interest payments (MITR). Generation Rent recently put this as worth £6.6bn although earlier estimates have suggested it’s more like £5bn. However, this is the size of the tax relief, not the loss to the Treasury in unpaid tax. The Intergenerational Foundation assessed the total cost to the Treasury of all landlord income tax reliefs to be a maximum of £5.2bn, assuming all landlords pay a marginal tax rate of 40% (and clearly not all do). Under half of this figure is due to MITR, so being optimistic the savings on this might give the Greens £2.5bn towards the £4.5bn extra they need. The problem is that ending MITR would be very unpopular and would probably drive a proportion of landlords out of the market.
So the potential tax savings have a number of question marks against them, not least because the Greens’ policy paper seems to miss the points made above. It’s true that they could get closer to and perhaps reach their £4.5bn target if they attacked other landlord tax reliefs such as the ‘wear and tear’ allowance, but their case would no longer benefit from the neat argument that owner-occupiers can no longer claim MITR so why can landlords do so?
The Greens also throw in modest savings from cuts in housing benefit spending. The problem here is that – as work by both PwC and John Healey MP has shown, while the savings are real they don’t clock up into significant figures unless you look ahead over 30 or 40 years, which doesn’t help to balance the books in cash terms now.
Finally, the Greens also want to remove borrowing caps on local authorities (hooray!) and expect more tax revenue to result from a bigger building programme. They’ve clearly been influenced by reports like Let’s Get Building, and this is all to the good. Overall, though, I conclude they deserve seven out of ten for their arithmetic, but it needs brushing up if they really do want to influence the next government.
However, there are two wider points to be made. One was well put by Colin Wiles when he argued that at least one party had read the SHOUT manifesto and wants to act on it. However we get there, the 100,000 social rented homes target is clearly a very good thing and deserves Red Brick’s support.
The second is that if Natalie Bennett really wants to advocate the policy she’d better read her own policy briefing and be able to answer a few simple questions on it (this post may help). She tripped up on basic points like whether Greens could really build houses for £60,000 each (answer: that’s just the grant needed), and indeed whether 500,000 of them wouldn’t cost rather more than £6bn (answer: that is the five-tear target while £6bn is the annual cost). The LBC presenter may have gone for Bennett’s jugular when he asked whether this meant the houses would be built of plywood, but who could blame him? The danger is that poor arguments don’t just ridicule the Green Party. They also damage the case for a very worthwhile policy that should, indeed, be adopted by Labour on the basis of a more rigorous assessment than the Greens have so far been able to do.