Alex Morton: Why new Homes for Heroes proposals can be a win for all

17 Sep

Alex Morton is Head of Policy at the Centre for Policy Studies, and is a former Number Ten Policy Unit Member.

During the height of the pandemic, the country came together on Thursday evenings – led by the Prime Minister – to clap for our carers. But the debt we owe isn’t just to NHS staff on the front line of the pandemic.

It’s to care workers, public transport workers, delivery drivers, supermarket staff – all those forced to stay working even as Covid raged.

This group who put themselves at the most risk are also the most exposed to another ongoing crisis – the housing crisis. Such key workers tend to earn less than others. They also have little choice about where they live and work. These factors combine to often make it hard for them to rent or own a decent home.

To curtail the ongoing housing crisis, the Government is working up a substantial package of reforms based on last year’s Planning White Paper.

Helping key workers was already one of its priorities, even before the pandemic: the Conservative manifesto set out plans for councils to prioritise vital local workers for discounted housing. Yet in the wake of the social care and tax rise saga, there is little scope to spend more on housing, or anything else.

But what if we could solve a multitude of these problems at once?

As I’ve argued in recent work on housing policy for the Centre for Policy Studies, we are never going to fix the housing crisis if our only solution is making more land available for the large house builders. Not only does this often result in Identikit (and often poor-quality) housing, which increases local opposition to further development, but it means what does get built gets built more slowly.

As our report ‘The Housing Guarantee’ showed, the large house builders’ control more than a million strategic land plots. The speed they build out those plots is governed by the speed they can sell homes.

The best way to ease this bottleneck is to diversify the kind of housing that is being built, and the market for new homes – to appeal to more than just the moderately affluent first-time buyers who are the industry’s bread and butter. Greater market diversity becomes even more important if other aspects of the planning reforms are shelved, as has been recently reported.

Our new report, Homes for Heroes, tackles all three of these key issues:

1) Helping to build more homes by diversifying housing supply

2) Supporting key workers into good homes and home ownership

3) Avoiding upfront spending when money is tight

Helping to build more homes by diversifying housing supply

The report argues for expansion of existing and proven ways to deliver homes outside the typical large house builder build-to-sell model. Core to this is more shared ownership. Shared ownership allows a buyer to purchase their home in partnership with an investor. They pay a mortgage on the share they own, and a cheap rent to the investor (usually 2.75 per cent of the capital value the investor owns).

As the purchaser only needs a mortgage for their share, they need a smaller deposit. Rent to buy or other low cost pathways to ownership (helping a tenant build a deposit to put down on a home) are also an opportunity here.

Another key opportunity is build to rent, which offers professional property management and, most importantly, allow for the creation of long-term stable tenancies. While uncommon in the UK, this model is very successful elsewhere: in the Netherlands almost half of all institutional property investment is in residential. More self- and custom-build, already popular in comparable countries, could also be part of the mix.

Supporting key workers into good homes and home ownership

Our report calculates that monthly housing costs on a £300,000 Home for Heroes property would be just over £1,000, several hundred pounds cheaper than private rent or outright purchase.

Supporting key workers into good homes and home ownership. We argue that at least 75 per cent of homes on any Homes for Heroes site should encompass a low-cost pathway to ownership, with the remainder built to rent with longer tenancies.

We propose that these homes should be offered first to local key workers – in both the public and private sectors. This would be a fitting way to reward the heroes who kept the economy moving during the darkest days of Covid. This is not about preventing other people from getting on to the housing ladder. It is about diversifying and expanding the market, to accelerate build out.

Avoiding upfront spending when money is tight

The best part of this proposal, at least from the Government’s point of view, is this requires no extra grant.

Currently there is a real lack of opportunities for long-term institutional funding, such as pensions. The investment industry is actively seeking long-term projects with stable returns for investors, especially given gilts’ low returns and the uncertainty facing sectors such as commercial property. As the Prime Minister has frequently said, there is a vast pool of private sector investment that can be used to tackle the nation’s problems, and building Homes for Heroes is the perfect example of such a win-win.

For this to happen, we propose two main policy reforms:

1) Letting developers of this housing – which is by definition affordable and socially useful – draw on the £5 billion of government housing guarantees currently sitting unused

2) Ensuring land is allocated towards this new type of housing

Short term, we suggest that the Government should unlock an existing £5 billion in unused existing housing guarantees at the forthcoming Autumn Spending Review. As this is money that has already been pledged and set aside, this asks for no new money from hard-pressed taxpayers – indeed, it likely means spending no money at all, since these are guarantees rather than grants.

The successful precedent here is build to rent, where similar (cost free) guarantees signalled to investors that the Government supported the creation of such housing. To see how vanishingly unlikely it is that such guarantees will be called upon, this would involve rates of non-payment of rent reaching over 25 per cent. Even at the height of the Covid-19 crisis, residential rental payments were running at 96 per cent – even with a ban on evictions.

In the longer term, the Government should draw on the success of student housing. This has boomed in recent years after it was made a separate class of land from general residential that large house builders couldn’t buy. We suggest that Government should require councils to set aside land for ‘Homes for Heroes’ in new local plans, aiming to deliver 50,000 homes each year – or 250,000 homes over five years.

This means that land would flow outside of the typical ‘build to sell’ house builder route, increasing build-out rates by creating a new route to market alongside existing housing types. This should be part of a wider push to get land to a range of builders.

If these proposals are adopted now, the first of these homes could be delivered before the next general election, with tens of thousands more on the way. This can work alongside the First Homes product to help expand ownership.

Homes for Heroes can be a win for all. They can increase housing supply. They can save the government further spending. They can offer a good return to pension funds. But most of all, they can show key workers in both the public and private sectors who kept the country moving that their risk and sacrifice has not been so quickly forgotten.

A new market in long-term fixed rate mortgages?

14 Sep

At one end of the age spectrum, Britain has older people in need of social care.  At the other, younger people who want to own their own homes.  The best one can say of Ministers’ attempts to help both to date is that these are a work in progress.

The social care plan that will be voted on these evening will do nothing much to improve the provision or quality of care, whether delivered in one’s own home or elsewhere.  It may not deal even partly, let alone wholly, with the problem it aims to address – namely, having to sell the family home to help pay for care.

This is because it’s more than likely, when the new Health and Social Care Levy kicks in during 2023, that the money raised from it will flow to health – that’s to say the NHS, the capacity of which to consume resources is inexhaustible – rather than social care.

None the less, we raise half a cheer for the Government for potentially ensuring that some people at least will no longer have to sell their houses to help fund care costs.  Even if the proposals that have been announced so far won’t deliver the Conservative Manifesto commitment of ensuring that “nobody needing care should be forced to sell their home to pay for it“.

Since the levy will be a form of national insurance, it will largely be paid by younger people.  So the generation that can’t afford to own their own home will have even less disposable income than they did before.

Which takes us to Ministers’ housing plans.  The Health and Social Care Levy scheme has been drawn up at short notice, and the Government is rushing it through Parliament speedily.  Neither condition applies to the housing measures.

The Planning Bill pledged in the Queen’s Speech hasn’t come to the Commons or Lords yet – and no wonder, since its terms are essentially being negotiated between Ministers and Conservative backbenchers (plus senior councillors).  Pre-election, any prospect of loosening Green Belt restrictions was seen off.  Post-election, Tory MPs did for the housing algorithm.

It is reported that the Government will now abandon the zoning system it had planned, plus targets for housebuilding.  One take is that such a retreat would damage Ministers’ aspiration to see more homes built.  Another is that is would make little difference.

This is because housebuilding numbers have been increasing during recent years: in 2019/20, 243,770 homes were delivered – the highest annual number in over 30 years, and the seventh year in a row that the number of homes delivered rose.  Furthermore, the Government has already persuaded Parliament to back an expansion of permitted development rights.

Developers will be able add two storeys to existing buildings without planning permission, and turn premises into homes.  There is a push for street votes to expand properties – see Bob Blackman’s recent piece on this site – as an alternative to concreting land.

Whatever happens next, any Minister who sought to solve all of Britain’s housing problems by building more would be the ultimate one-club golfer, since more homes wouldn’t address the other factors in the mix: limited space, smaller families, high immigration, powerful developers, a long tradition of property rights, a complex planning system, curtailed post-crash lending and new Net Zero requirements.

And if boosting home ownership is an aim of policy – as it should be – what we wrote in the ConservativeHome Manifesto, the best part of ten years ago, still applies.

“No matter how fast we can make land and construction capacity available, the money markets can always move faster – pumping cheap credit into property investments. Any government move to undermine sensible planning protections only serves to set off the feeding frenzy.”

Ministers have tried to help younger people get in on the act through Help to Buy (launched by the Coalition) and the 95 per cent mortgage guarantee (unveiled in the last Budget by the Chancellor).

But home ownership has only drifted up marginally in recent years – to 65 per cent in 2018 compared to its 71 per cent high in 2003.  And when one turns to who owns what, it’s a tale of two generations: last year, only nine per cent of owners were aged between 25 and 34; a whopping great 36 per cent were 65 or older.

One of the clubs that the Government wants to see used is long-term fixed rate mortgages. “We will encourage a new market in long-term fixed rate mortgages which slash the cost of deposits,” that 2019 manifesto said.

It doesn’t follow that, because some of its other commitments haven’t been honoured (such as the pledge not to raise national insurance), this one won’t be delivered.  However, the keys to making it happen lie not so much in the Treasury as in the Bank of England, and the new requirements that it placed on getting a mortgage in the wake of the financial crash.

The Government’s interest in long-term fixed rate mortgages owes much to the Centre for Policy Studies, and in particular to the case put forward in a report for the think tank by Graham Edwards.

He argues that, because of the certainty that these mortgages offer, they don’t need to be stress-tested – and so can be offered with the 95 per cent loan to value rates that were the norm before the financial crisis.

What about the danger of negative equity?  The counter-case is that, while this is always present, there was a minimal increase in default rates in the wake of the crash.  What if wages grew more slowly than the mortgage costs?  Edwards’ answer is that “there is still a lot of scope for borrowers to absorb the increase in housing cost before they reach a point of financial stress”.

It will be claimed that the Conservatives are fixated by home ownership – just as, returning to social care, the Prime Minister is concentrated on people selling their homes to help pay for it.

In theory, it is open to the Government to stress one Tory viewpoint, that “there’s no such thing as a free lunch” to the exclusion of another, that “wealth should cascade down the generations”.  But in practice, Ministers can’t be indifferent to younger people’s desire to own their own homes, at least if they wants them to have a stake in the capitalist system that the Conservatives support.

Nor can it ignore the wish of older ones to pass on family homes – at least, if the Party’s experience in the 2017 election is anything to go by.

As we say, Ministers need to deploy different clubs if they are to negotiate the course of “building beautifully”: smaller developers, migration control, more supply, control on costs (including those emerging as a consequence of Net Zero).  But these won’t be enough to deliver higher home ownership, too.

For that, the Government will need to help rebalance the playing field between those who own property and those who don’t, which requires help from the Bank of England and the financial institutions.  Otherwise, younger people, bereft of alternatives, will have an growing interest in levelling-down, not levelling-up.  In other words, in a housing market crash.

Let’s look at how to reduce the need to put people in care homes. Not just who should pick up the bill.

13 Sep

Those who wish social care provision in this country to be logical, face rather a daunting problem. Jacob Rees-Mogg, interviewed for this site last week, said:

“It is odd that if you’ve got Alzheimer’s it’s not paid for, but if you’ve got cancer it is paid for”.

Indeed so. If the principle of the NHS is that healthcare should be universal and free at the point of use, then why not also social care?

On the other hand, if means-testing is accepted for welfare payments, why not for social care? John Redwood argued in a Centre for Policy Studies paper a few years ago:

“Families who would like to inherit the old family home or their elderly relative’s property argue that it is unfair for the state to pay for the residential or care home costs of those who saved nothing during their lives and did not buy a home, whilst expecting the richer pensioners who did make provision to pay their own bills. Their argument is a specific case of a more general argument against means-testing – it “rewards” the unsuccessful, the profligate, the lazy, the unlucky and the disadvantaged at the expense of the hard working and the prudent.

“It is, surely, morally right to expect the taxpayer to fund decent food, care and accommodation for the disadvantaged and the disabled who may have not been able to get a better paid job, or afford the home or put money away in savings. This may also entail the state paying for some of those who could have provided for themselves but chose not to. The latter is the price of being able to do the former: for everyone who has blown money on round the world cruises or fast cars who ends up penniless, there are many more deserving cases of people who were never able to earn good money in their working years.”

The full basic State Pension is currently £137.60 per week. I’m due to start being paid that benefit after my 67th birthday on January 11th 2033.  If I keep toiling away for ConservativeHome I may well be too rich to be eligible for anything on top of that modest provision from the taxpayer by then. But what if I become idle and extravagant with “world cruises or fast cars”? And then, scheduled rather cunningly, I become completely skint by 2033? I could fill my boots with Pensions Credit (currently an extra £177.10 a week). Plus my rent could be paid by Housing Benefit (which still exists for pensioners making new claims rather then being absorbed under Universal Credit.) Also Council Tax Support. Should we push up the basic state pension to, say £300, and scrap the Pensions Credit and Housing Benefit perverse incentives for the wastrels? There seems to be no clamour for any such reform.

The Government proposals strike me as misguided as they incentivise pensioners who are paying for good quality care which they have control over to switch to a deficient service paid for by their local authority. (They might be pressurised by their greedy offspring to make this switch.) Even if this increase in public spending was justified, it is complete nonsense to see that it is “impossible” to find savings in the trillion pounds of overall state spending. Even if it was impossible to fund such economies, we are so heavily burdened with tax already that any hike in rates may well be counterproductive in terms of revenues. Still, I accept that the issue of who should pick up the cost for social care is, as Sherlock Holmes put it, “a three-pipe problem”. Lord Lilley’s case for a genuine insurance scheme struck me as compelling.

What seems to be missing from the debate is how to reduce the number of us (half a million at present) who need residential social care – that fate which typically manages to combine being miserably dreary with staggeringly expensive. Of course, with an ageing population there is a sense of “running to stand still” with such endeavours. All the more reason to make every possible effort to avoid institutional care wherever possible.

Here are some relatively straightforward starting points.

First. End Stamp Duty on “downsizing”.

For some, there is great sentimental value in staying where they are. For others, the upheaval of moving is discouraging. But cost is also a factor. Charging Stamp Duty for those who downsize makes no sense. From October, the threshold will revert to £125,000 – the rate ranges from two per cent to 12 per cent of the purchase price. Given our astonishingly high property prices, that means that even those wanting to buy something more modest then they currently have would face a hefty bill. So inertia is encouraged with no transactions and no tax revenue. It also restricts the supply of family homes. Coping with a large home might well be challenging for an octogenarian. Repairs accumulate. Heating is expensive. Moving to a smaller home, perhaps nearer to relatives would have advantages. Less likely to fall. Less loneliness. Better family care. The need for a care home could, at least, be delayed. But the Chancellor of the Exchequer stands in the way.

Second. Lift planning obstacles to retirement homes.

For some simply moving to a smaller home might not be enough. While remaining property owners they might also want an arrangement where they have some assistance – and buy a flat or bungalow or cottage that is a “retirement property”. These are collections of properties where there is some assistance with security and maintenance. There are some developers (such as McCarthy Stone) seeking to meet this demand for those over 55 or 60 who are basically still able to cope with independent living with some back up. But there is a shortage – the Australians and Amercians have far more. Planning applications for such properties are treated like other private housing as it is unsubsidised. Then it is subjected to the financial penalties of Section 106 demands and the Community Infrastructure Levy. The social benefits of these developments should be recognised and such burdens lifted.

A Demos report concluded that:

“Specialist housing for older people delays and often prevents the need for residential care. Since for each year a person postpones moving into residential care the state would save on average £28,080 the cost savings can be substantial. Both the University of Reading and IPC calculated net cost savings to the NHS of hundreds of millions of pounds in building more retirement housing.”

So far as social housing is concerned the priority should be new sheltered housing. It should be well managed and architecturally beautiful. Where council-owned sheltered housing blocks are badly run then charitable trusts, if able to offer a better service, should take over the management. It makes no sense for an elderly person to be alone in a four-bedroom council home just because there is no alternative of attractive sheltered housing available.

Third. Require better value for money from Public Health budgets

Local authorities have Public Health budgets of £3.7 billion. Plenty has been written about wasteful spending during the pandemic. But I had already highlighted on this site that this was nothing new.

But the money could be spent effectively. Providing a vaccination against shingles is an example. Sometimes victims from this unpleasant illness have to go into hospital. More frequntly they remain at home but are unable to look after themselves and thus need social care.

Fourth. Boost local innovation

We often think of Council Adult Social Care as just being for the elderly – but a significant part of the service is also for adults with learning difficulties. Many councils have made substantial progress in improving the lives of disabled residents by taking part in the Shared Lives scheme. This offers an alternative for those currently in supported living or institutional care. It is of them being placed in a family environment in someone’s home. It can also provide respite for parents with grown up sons or daughters who they are caring for. But progress is uneven. Some councils are failing to take the opportunity to provide a better service for the disabled at a lower cost for the Council Taxpayer.

Then we have technological improvements. We can look to what other countries are achieving. Also innovation that has succeeded in parts of our own country that other areas have yet to embrace. The private sector has a role to play. Bath and North East Somerset Council and the NHS have used Virgin Care to provide integrated community care – which has delivered good results.

This is localism in practice and is already working to some extent. But the Government should nudge it along. At present, the Adult Social Care precept on the Council Tax just bails out failure. It could be replaced by an Innovation Fund.

Fifth. Bring back the Big Society

One heartening aspect of the pandemic was the enthusiasm for helping out elderly and vulnerable neighbours. Faith groups and voluntary organisations will always be better suited at applying compassion than inflexible public sector bureaucracies. The state should not seek to usurp this role but it should look at how it can help it to flourish – in commissioning services rather than trying to doing everything directly. Also in simply getting out of the way – in lifting regulatory budrens.

Conclusion

We are twice as likely as the Italians to end up in care homes. Four times as likely as the Poles. Eight times as likely as the Ukranians. We are constantly told it is “inevitable” that evermore of us can expect that fate. But why should we accept outcomes that are so much worse than other countries? Why should the only argument be about who pays for this grim destiny?

“Do not go gentle into that good night.
Rage, rage against the dying of the light.”

Karl Williams: Ministers should await better evidence before rushing yet another round of NHS reform

4 Sep

Karl Williams is a Senior Researcher at the Centre for Policy Studies think tank. His new paper, ‘Is Manchester Greater?’, is published tomorrow at cps.org.uk

It’s taken a long time for the public to come round to the idea that maybe, just maybe, the Tories aren’t out to get the NHS. Persuading people of that fact is arguably one of Boris Johnson’s great personal achievements as Conservative leader.

True, the Tories are never likely to be seen as “the party of the NHS” in the way Labour are, but perceptions have certainly come a fair way since the much-reviled Andrew Lansley reforms of the Coalition years.

Things have come so far, in fact, that the Government feels able to embark on the most significant top-down NHS reorganisation for a decade. The direction of travel is going to be very different to the Lansley reforms – in fact, the explicit aim is to roll many of them back – but the scale of the planned restructuring is such that it deserves to be scrutinised very carefully indeed. Particularly since the two people who agreed and devised the reforms, Matt Hancock and Simon Stevens, will no longer be around to see them through (and take any flak).

The Health and Care Bill has been pitched as a response to the Covid crisis. But in fact, the bulk of it is based on Stevens’ long-held ambition to integrate the NHS more effectively, and see competition replaced by collaboration as its driving force.

Already the NHS in England has been subdivided into 42 “Integrated Care System” (ICS) regions, of which 13 are at a more advanced stage. But the Bill will go much further, not only giving all of these a legal basis, but making them the main bodies through which the NHS in England is run. Managed by an “Integrated Care Board”, overseen by an “Integrated Care Partnership” and populated by a proliferation of joint NHS-local government committees under a shared “duty to collaborate”, each ICS will have as its raison d’etre greater health and care integration.

The basic idea here is actually pretty appealing: everybody – GPs, hospitals, social care providers, local government, health charities – should be working closely together to meet patient needs, breaking down barriers between different institutional silos. This should smooth the flow of patients around the system, directing them to where they can get the most appropriate treatment or support, and (crucially) taking the strain off frontline workers on hospital wards.

There’s also a population health element to integration, prioritising prevention over cure. The net result is supposed to be better health outcomes, delivered in a less resource-intensive way.

England isn’t the only place to have come up with this idea. Integration as a solution to the pressures of an ageing population has been tried in New Zealand, Spain, Sweden, Scotland and elsewhere.

However, the model developed by NHS England, promulgated through The NHS Long Term Plan in 2019, is based on surprisingly little evidence. Back in 2017, a National Audit Office report on health and care integration warned that:

“Departments have not yet established a robust evidence base to show that integration leads to better outcomes for patients. The Departments have not tested integration at scale and are unable to show whether any success is both sustainable and attributable to integration.”

That is, in essence, still the case today. Ministers seem inclined to take the purported benefits of the ICS reforms largely on faith – perhaps because, unlike the Lansley reforms, they are the brainchild of NHS bosses, not the creation of politicians.

This is why I have spent the past few months evaluating the data emerging from the 13 pioneering ICS regions – most notably Greater Manchester, where integration is most advanced and the data is richest. And the picture is very far from encouraging.

As part of “Devo Manc”, Greater Manchester was the earliest region in England to integrate its care systems, taking charge of health and care for 2.8 million people from April 2016. If the ICS approach is going to work well anywhere, it should be somewhere like Greater Manchester: a densely populated, well-connected conurbation with a distinct regional identity, strong local political leadershipm and a good track record of healthcare organisations working together.

More formalised integration was also smoothed by a chunky £450m “transformation fund”, the equivalent of 7.5 per cent of the region’s £6 billion annual health and social care budget.

Despite these manifest advantages, the best that can said is that results have been mostly quite poor. Take for instance “delayed transfers of care”, a key indicator used to gauge “bed-blocking” at the interface between hospitals and social care. This was 65 per cent higher on average in the years after integration (until just before the pandemic) compared to the years beforehand. In the ICS areas as a whole, this increased by 24 per cent – compared to just nine per cent across the rest of England.

Before the pandemic struck, Greater Manchester was also falling short on the concrete targets it had set itself, for instance around mortality. There were supposed to be 580 fewer respiratory disease deaths by 2021, a drop of about 16 per cent. In fact, by 2019, respiratory disease deaths were up by seven per cent. In 2016, there were seven more respiratory disease deaths per 100,000 people in Greater Manchester than in England as a whole. By 2019, this had doubled to 14 more.

It’s not just Greater Manchester where things don’t seem to have gone to plan. Other regions such as West Yorkshire have progressed the ICS model under the supervision of NHS England, rather than elected local leaders. But a preliminary survey (the data is more imperfect because formal integration started later) points to limited overall improvement at best. On bed-blocking, the region does well. But some other indicators – like emergency readmissions – have weakened.

And however you slice it, there is no evidence, across either West Yorkshire or the 13 pilot areas more broadly, of the sort of large scale improvements the ICS reforms are supposed to bring.

Given the scale and complexity of the Integrated Care Systems, it’s hard to pinpoint exactly why this is. But that complexity might itself be part of the answer. It’s notable that while both Greater Manchester and West Yorkshire saw their NHS workforces expand at a much faster rate than the national average in the four years before the pandemic, the proportion of clinically qualified NHS workers fell more quickly. Perhaps new integrated structures and processes are absorbing resources – personnel, time, energy and money – that could better be spent elsewhere.

Supporters of the ICS reforms will say that more time is needed: in ten to 15 years, once reforms have bedded in, they will be transformational.

That’s all very well. But in the meantime, there are pressing problems facing the NHS, including a massive treatment backlog cause by the pandemic. Already waiting lists are at five million.

The Government’s determination to address the to tackle the long-term problems facing health and care provision is to be welcomed. But it is important to take the time to get things right, rather than intensifying the current pressures on the NHS through costly and disruptive reforms that are not supported by national or regional data.

Our paper suggests that instead of rushing off down the road to deeper integration as per the ICS model, ministers should take a step back, pause to look at the data in more detail, and demand to see a more convincing evidence base for the approach proposed in the Health and Care Bill.

This would mean letting the 13 more advanced ICS regions carry on with integration for the next five years or so, while reserving judgement on whether the approach should be driven forward across the rest of England. In the meantime, ministers can focus on the more immediate pressures on the NHS likely to build up as winter approaches.

If the ICS reforms eventually work out, the Conservative Party isn’t going to get the credit. But if they go wrong, it’s pretty clear who’s going to get the blame. The public might be prepared to forgive one Lansley-esque healthcare misadventure in a decade. They might not be so willing to forgive two.

Alex Morton: We need to boost our brownfield developments. But that doesn’t mean a zero greenfield approach.

21 Jul

Alex Morton is Head of Policy at the Centre for Policy Studies, and is a former Number Ten Policy Unit Member.

You don’t need to live in a town or city to know that Covid has had a shattering impact on their commercial spaces. Offices and shopping centres that once buzzed with activity have been shut down for months on end. Even once we are past the pandemic and pingdemic, it is still not clear how much activity will return.

This represents a profound challenge to the Government’s plan to build back better. Even before the pandemic, many of our high streets had started to look like ghost towns. And the problem is worst in those areas that are most electorally important to the Conservatives: as I point out in a new report for the Centre for Policy Studies think tank, there was a clear correlation between higher rates of retail vacancy and the number of new seats the Tories won in each region in 2019.

If the Government is to revive high streets, a clear and bold approach is necessary – and if that revival is to be in full swing by the next election, it needs to start now.

The Government has already made it significantly easier to convert unused commercial space to residential. This would not only bring new life to commercial spaces, but help tackle the housing crisis. Our new report, Reshaping Spaces, calculates that even before Covid-19 there was space for at least 500,000 homes from recycling surplus retail space into homes and flats.

This is a likely underestimate, since in the wake of the pandemic there will be an opportunity to regenerate entire commercial centres (often at higher density), and since as home working and hybrid working increase, there may be surplus office space that can also be converted (although it is too soon to know if this is true).

Reshaping Spaces makes a series of recommendations to make it easier to regenerate commercial centres. For example, we argue that business rates are no longer fit for purpose and are damaging commercial centres. At the very least, Government should reform the incentives to hold onto vacant commercial space: currently the business rates retention system penalises councils for recycling buildings more than keeping them vacant.

But arguably the most important recommendation is that, as the first step in the new local plans, all councils should put a commercial needs assessment in place by 2022, assessing levels and location of commercial space. Councils should receive additional funding to pay for this, and see a small incentive payment made when this is completed. Where the local council does not do this, Government should step in and complete it, working with local employers and landlords to create such a plan.

Thus by the time of the next election, probably in 2023, every area would have a plan for its commercial centres – the high streets and business districts, the retail parks and out of town office hubs. People could see that there was a plan and action underway following on from it. But, crucially, councils would be able to use this assessment as the foundation of the wider local plan: in essence, the first step would be to reassess the level of brownfield land available, before moving on to the green.

The political advantages of this approach are obvious. There is nothing more frustrating than brownfield sites remaining unused with no plan of action in place, whilst new homes on greenfield are pushed through on appeal. This is partly why the CPS has called for planning permissions to be turned into delivery contracts, so that permissions are actually built out (see here) – something many SME house builders have welcomed.

But there is also a political danger. One of the more seductive myths in the housing debate is that there is enough brownfield land available to satisfy our housing needs.

It is true that there are things that can and should be done to reduce the amount of greenfield development that is needed and to boost home ownership without building more.

As we have pointed out at the Centre for Policy Studies, it is a scandal that, in the decade after the financial crisis, buy-to-let landlords essentially snapped up all of the extra housing stock that was built. Rebalancing the housing stock in favour of owner-occupation should be a crucial priority for Government – hence our proposal for long-term fixed rate mortgages for first-time buyers (see this excellent report), which was taken up in the 2019 Conservative manifesto. The Government could still go further, perhaps by introducing a CGT cut for landlords who sell up.

We also recently published a briefing note that showed how net immigration has a significant impact on the level of new homes needed, particularly in London and the surrounding area. The South and London see high levels of international immigration, indeed without international immigration London’s population would have fallen by 700,000 in the past decade, which in turn would start to relieve pressure on the wider south as fewer people are pushed out by London’s high housing costs. (see here and here).

However, even if immigration falls, there will still need to be greenfield development in England. Even in the South, only 40 per cent of household growth is due to net immigration.

As the planning debates return later this year, there will once again be those who argue that we can do without greenfield development, that high housing costs (particularly in the South) are just caused by low interest rates. They will argue supply has no impact because this is convenient politically.

One of the key misunderstandings is when people argue because there are 23 million households, whether you build an extra 100,000 or 300,000 homes a year makes no difference to overall housing costs – in either case it is just one per cent of the total housing stock and so a negligible increase in supply.

But it is not just total households that matter in terms of house prices. It is the total number of transactions in terms of homes bought and sold. So you should not measure new build homes against total households but against annual transactions. In recent years, transactions ran at around one million to 1.2 million a year (see link).

Assuming a market of one million sales, the difference between 100,000 homes a year and 300,000 homes a year, or 200,000 homes, is an increase in supply of 20 per cent relative to the same demand. Even 1.2 million sales give an increase of around 16 per cent in supply. So an increase in new builds does help to hold down house prices, all other things being equal, and will have a reasonable impact on prices. This is why supply matters and planning reform matters.

A “brownfield first” approach is very different from a “zero greenfield” approach. It is about actually developing on brownfield rather than just rejecting greenfield development. People will accept some greenfield development if measures to minimise it are in place, not if greenfield is seen as the first call.

Government needs to listen on planning reform – yes. It needs to be flexible – yes. The Housing Minister and No 10 are doing their best to do so. But neither Conservative MPs nor conservatives or liberals more widely should fool themselves – a brownfield first policy is both feasible and desirable. But a “zero greenfield” policy is not.

Nick King: Luntz’s polling shows a crisis of confidence in capitalism. Here’s how we can change that.

8 Jul

Nick King is a Research Fellow at the Centre for Policy Studies.

The recent survey work conducted by Dr Frank Luntz on behalf of the Centre for Policy Studies think tank was some of the most extensive ever undertaken in the UK. It is no surprise, then, that it has been the subject of media attention and scrutiny for days, with an array of organisations poring over its findings and implications.

Their attention has mainly been focused on the publics disillusionment with the political class, our increasing polarisation as a country and the rising division between the woke and the anti-woke.

Equally concerning, though less commented on, have been Luntzs findings in relation to capitalism, enterprise and business all of which, I am sorry to say, the public seem to take a pretty dim view of.

ConservativeHome readers might point out – when asked their opinion of British business – that our firms create jobs and opportunities, provide salaries to their employees, pay billions in taxes, are innovative and socially responsible. But Luntzs poll found that the associations that spring to mind for most people are about profit over people, tax avoidance or excessive CEO pay.

This cynicism was all the clearer when voters were asked what business and economic leaders care most about. The British public chose making as much money as possible for themselvesand using loopholes to pay as little in tax as possibleas their second and third most popular answers. Only making a profit for their companies and shareholderswas more frequently pointed to. But before anyone takes too much comfort from the publics familiarity with s172 of the Companies Act, I should point out that I am not sure that those polled meant it in a good way.

To those of us who are supportive of free and open markets, this rings serious alarms bells. Not least because it’s the latest example in a worrying trend. Similar notes of caution were struck by a report published this week by the Institute of Economic Affairs entitled Left Turn Ahead? It points to widespread distrust of business and capitalism among the young almost three quarters of whom think our current economic system fuels racism, greed and exploitation. Crucially, the report argued that this sentiment no longer diminishes with age.

Luntzs findings suggest that the British public has fallen out out of love with business and that they are not convinced its a cause worth fighting for. A majority of voters even agreed with the statement: “When I look at the corporate leaders and how they treat us, I just think ‘f*** them all’.” Although at least business executives can console themselves that they fared slightly better than the politicians.

I wholeheartedly disagree with such attitudes. Britain has so many great businesses, and it needs more of them. Businesses create the jobs and wealth and innovation that keep this country going.

But it is clear that if we going to convince the public to change their minds, we need to carefully consider the terrain on which we are fighting and the battles which will win the war. Here are some ideas:

First, as Luntz has consistently pointed out over his long and distinguished career, language matters. Capitalism is unpopular. But to many of capitalism’s advocates, terms like free enterprise and open markets can be used interchangeably with it – and other polling suggests these concepts are more favourably received. If a phrase is more appealing than capitalism to those who reject it as a concept, then it makes sense for those who believe in the benefits of this system to adopt the language which people more readily accept.

Second, we need link the benefits of the economic system to individuals’ lives and livelihoods in the most direct way possible. Those surveyed by Luntz and the CPS were clear that they prefer the term “employers” to “companies” (and both, overwhelmingly, to “corporations”), as well as “employees” to “workers”. This suggests they want a sense of participation and reciprocity – something which comes out more generally in the polling. Again, it makes sense to adopt this language and point out the symbiotic relationship between employers and employees as far as possible.

Third – and this is not something brought out in the survey – we should talk more about the sorts of businesses people are typically more supportive of. As previous work I have undertaken at the CPS demonstrates, people are far more positively inclined towards the sorts of small and family businesses which make up the vast majority of companies within the UK. When trying to convince people of the value of businesses we should “think small” wherever possible.

Finally, we need to remind people of the role businesses play in society. This is not a plea for businesses to publish well-intentioned but often meaningless ESG strategies. Nor is it a suggestion that businesses should demonstrate their right-on credentials – the British people left Luntz in no doubt that they did not want business leaders weighing in on culture wars. But it is a suggestion that we draw out the link between business and the things the British people care about all the more clearly.

When asked the fundamental purpose of the economy and presented with a dozen options, more than a third of those asked responded “to pay for public services like the NHS”. It might not be the purpose I would pick, but the British public are absolutely right to draw a link between businesses and the revenue needed for the proper running of our public services. So lets remind them of the link whenever we can.

All is not lost. Luntzs polling data also showed that most voters (especially Conservative ones) put a value on hard work and that they think success in this country is typically earned and deserved. But the survey presented a fascinating and sobering insight into the crisis of confidence in capitalism which this country faces. If we do not heed its lessons, we will be faced with a crisis not just in confidence, but in capitalism itself.

Sam Hall: How to help poorer people meet the costs of net zero

6 Jul

Sam Hall is the Director of the Conservative Environment Network.

Last week marked two years since MPs unanimously put into law a target to achieve net zero greenhouse gas emissions by 2050. Since then, the target has been reaffirmed in the Conservatives’ election-winning manifesto, a raft of carbon-cutting, job-creating policy measures have been implemented, and many other large economies have followed the UK’s lead in setting net zero targets.

Our main challenge now is not the overall cost of the target, which is both affordable and dwarfed by the many benefits, but ensuring fairness in how costs are allocated.

While it is certainly true that net zero will require significant new investment in clean infrastructure and technologies, these investments will bring wide economic benefits, notably a net increase in employment, and will cost less as a share of GDP than the damage caused by unchecked climate change.

As we accelerate emission cuts over the next few years to achieve the UK’s more stringent targets for 2030, this will trigger additional investment in building retrofits, renewable energy, and transport infrastructure, which will ease post-Covid unemployment.

Thanks to the ingenuity of British scientists, engineers, and entrepreneurs in developing new technologies and making existing technologies better and cheaper, the overall costs of net zero are being revised downwards all the time. And since clean technologies like electric cars and heat pumps are much more energy efficient than the fossil fuelled equivalents, there are likely to be significant fuel savings for consumers in the long term.

More important than the overall costs is how they will be distributed across society and the economy. Many of net zero’s critics highlight the impact of net zero on the poorest as one of their chief concerns. They are right to make this a priority, although fortunately so far negative distributional effects have been minimal. According to the Climate Change Committee, household energy bills have remained flat since the passage of the 2008 Climate Change Act. But we need to ensure that forthcoming technology changes aren’t regressive either.

This distributional analysis is one of the main focuses of the Treasury’s net zero review, which is currently being finalised on Whitehall. But as well as identifying potential regressive effects, the Treasury must also provide policy solutions. To do this, they can look to a number of excellent recent centre-right think tank proposals on how to drive forward net zero in a way that both enhances fairness, and boosts jobs and the economy.

Take critical clean technologies like carbon capture or low-carbon hydrogen, which due to a lack of scale remain expensive, yet are a promising source of green jobs. When commercialising these nascent industries, we should follow Onward’s recommendation and avoid subsidising them through energy bills, since low-income households spend a greater share of their income on energy.

The government was right recently to cut subsidies for more expensive electric vehicles (EVs), lowering the cap for the Plug-in Car Grant so that vehicles with a sticker price of more than £35,000 were ineligible. Ministers should also consider Bright Blue’s recent call to subsidise second-hand EVs, so that low-income people can benefit from this government funding pot too, and access these cheaper-to-run vehicles.

Similarly, as more people switch to EVs and need affordable overnight charging, we should protect people without private driveaways from paying extortionate prices to use on-street charge points. Policy Exchange has proposed a system of price caps for charge point operators in receipt of public funding.

Fairness is particularly important in the drive to retrofit Britain’s homes for net zero, given the scale of investment required. As Bim Afolami has advocated on this site and Simon Clarke more recently, the Treasury should offer vouchers for the most expensive types of insulation, such as solid wall insulation, and heat pumps. Even though a home’s running costs will be lower after it’s been retrofitted, the upfront costs are often a barrier to people installing these home energy improvements.

Finally, if the Treasury does extend carbon pricing to more of the economy, as is rumoured, it should consider giving some of the money back, in the form of a carbon dividend, to low-income households, as the Centre for Policy Studies has argued.

Once these investments have been made and these technologies adopted, our society will be fairer. People on lower incomes who typically live by busy roads will be less exposed to harmful air pollution. The fuel poor, who live in draughty homes, will spend less on their energy bills each month, while avoiding cold-related ill-health.

And if we replace Fuel Duty with dynamic, congestion-sensitive road pricing, driving will be cheaper for people living in rural areas and towns, who after all have few alternative transport options compared to city dwellers. But to realise these benefits, the government needs to help people make the necessary investments.

If we were to pursue the alternative approach of not mitigating climate change, unfairnesses in society would be exacerbated. Low-income households, for example, are disproportionately exposed to flood risk and to the health impacts of heatwaves, according to the CCC, and due to a lack of savings, they are more financially vulnerable to climate-related hazards. Similarly workers in traditional fossil fuelled industries – concentrated in ‘red wall’ constituencies – would have less opportunity to transition into new green industries and could end up in ‘stranded jobs’ as other countries switch to clean energy.

Some will argue that, in the face of these challenges, we should just abandon net zero, but that would be economically foolish, diplomatically isolating, electorally damaging, and much more besides. Others will argue that it’s not the government’s job to intervene to tackle inequality. But since the government isn’t a passive observer of this technological change, it can and should make sure it doesn’t adversely affect the least well-off and instead reduces their cost of living and makes their lives more convenient.

Now that our climate targets are becoming embedded, net zero politics is entering a new phase. Now is the time to put fairness at the heart of our net zero strategy.

Nick King: Levelling up. The challenge is less defining it than delivering it, for which Johnson will need the private sector.

25 May

Nick King is a Research Fellow at the Centre for Policy Studies.

To level up or not to level up? That is certainly not the question. If theres one thing the Government has been admirably clear about, it is its determination to do it. But that begs rather a lot of other legitimate questions, such as: what does levelling up really mean? How will we level up? What level are we levelling up to? How will levelling up be measured? And if answers to these questions are not forthcoming, how can we ever really know whether weve levelled up or not?

Some of these points were recently put to ministers from the Business and Housing departments by the Business Select Committee. The answers forthcoming were clearly not to the (Labour) Chair of the Committees satisfaction. He suggested there was no clarity in terms of understanding what levelling up means or the policy which sits behind it.

But there’s actually a strong argument – although you wouldn’t expect the ministers themselves to make it – that the lack of specificity around levelling up, and the catch-all nature of the term, have added to its value as a concept.

The Conservative Partys last general election manifesto talked about levelling up every part of the UK, levelling up skills and levelling up through investment in infrastructure. Prior to that manifesto, I produced a report for the Centre for Policy Studies, which called for greater devolution, enhanced skills, increased infrastructure investment and new Opportunity Zones as the principal means of levelling up.

Since the election, various other think tanks have put their own spin on levelling up, with Onwards taskforce looking at levelling up the tax system and innovation, the Centre for Progressive Policy developing its own Levelling Up Outlook, the Institute for Public and Policy Research suggesting we level up health, and Bright Blue looking at levelling up in the context of deprivation.

This all-encompassing nature of the phrase, not yet defined by any mainstream dictionary, is surely more of a strength than a weakness. We saw this during the election. Then, across the former ‘Red Wall’ seats of the Midlands and the North, people voted in their millions for levelling up, without needing a detailed policy prospectus outlining which departments would take the lead and what metrics they would apply. Yes, they wanted to ‘get Brexit done’ – but getting Brexit done was just one half of the equation to making their lives better: levelling up was the improvement that would come afterwards.

For all of its lack of explicit definition, those of us who are who committed to the levelling up cause – and I include myself in that number – feel we know what it’s aiming at. We know that at its heart it is about addressing the long-standing inequalities which exist in the United Kingdom.

Levelling up is about the life chances of people, the prospects of places and about making sure our country is the United Kingdom it should be, not the divided realm it risks becoming. In that spirit, it can be seen as a continuation of One Nation Toryism, of efforts to extend social mobility and even of various Governments rebalancing efforts.

Perhaps that is why, when Boris Johnson returned to Downing Street, having won his crushing majority in the election, he stood on the steps of Number 10 and promised to unite and level up’ our country. There followed measures such as substantial increases in infrastructure investment, the creation of the Towns Fund and, more recently, the creation of the Levelling Up Fund and the Community Renewal Fund. These all suggested a centrally-driven, targeted approach, relying on the funding of specific projects to level up specific places.

But the ambition to level up goes much wider and deeper than that. Ever since the election, every Government department has been tasked with thinking about levelling up and how to deliver it. In education, that means better schools and improved skills outside London and the South-East. For the Transport and Culture departments, that means greater national transport and digital connectivity respectively. For the Department of International Trade, it means getting more investment into the regions and more companies around the country exporting.

Now, to bring coherence and strategic intent to the levelling up agenda, the Government has promised a Levelling Up White Paper. This White Paper is to be produced by ConHome columnist, Harborough MP and the Prime Minister’s Levelling Up adviser, Neil OBrien. He is, in many respects, the perfect man for the job, with a first class brain and a long history of considering these issues, raised in the North but representing a Midlands constituency, and someone who knows his way around Whitehall.

This last point is critical given the clear intention to make this a ‘whole of government’ exercise. Virtually every department has been instructed to play its part in levelling up; the Prime Minister and the Chancellor recently put it at the heart of their Plan for Growth, and OBriens White Paper is being run out of Cabinet Office, suggesting an ambition to reach into various Whitehall departments.

He will, no doubt, have received direct orders from the Prime Minister as to what he wants in the White Paper and perhaps the slight shift in language within the Queen’s Speech gives us a clue as to what to expect. That speech promised to level up opportunities’ and the accompanying Briefing Note – prepared by the Treasury – tied the levelling up agenda much more closely to public services, such as health, education and policing. 

This suggests the Government will be looking as much at the opportunities presented to people, and within places, as the outcomes which those opportunities might lead to.For my part, the most important factor I would urge the Government to remember, is that whether we want to improve opportunities, or outcomes, levelling up needs to be centred on the potential of the private sector. As I argued in my recent Centre for Policy Studies paper with Jake Berry on rejuvenating the North, only the private sector can offer the scale of investment, the jobs and the opportunities which can lead to long-term sustainable change.

Government, of course, has a pivotal role to play. It needs to think about where it invests, about the implications of the gravitational pull of London and the South East and how it can best break the trend of self-perpetuating economic failure in the least successful parts of our country. But, most importantly, it can help create the conditions in which private enterprise can thrive.

After all, to business-loving, capitalism-supporting types like me, levelling up can only really be delivered through the dynamism of the private sector. It is its agility, investment and innovation through which life-changing opportunities will be created. Absent of that, levelling up will mean very little at all.  

Rachel Wolf: Tests for the delivery of levelling up, and levers with which to deliver it

10 May

Rachel Wolf is a partner in Public First. She had co-charge of the 2019 Conservative Manifesto. She was an education and innovation adviser at Number 10 during David Cameron’s premiership and was founding director of the New Schools Network.

The Conservatives have won more stunning victories. Why?

First, the approach that drove the 2019 victory continues to deliver.  Second, vaccines and furlough have rewarded sitting governments: they have demonstrated competence, agility, and a willingness to spend.

The next great test won’t come for a while. Boris Johnson is Merrie England: he is the perfect leader for our summer of freedom. The economy will temporarily boom. Furlough won’t be withdrawn until September. Provided it stops raining, everyone should feel good.

But the Government will be acutely conscious that the next six months is also the last window for policies that can deliver by 2024. They will also know that, by Christmas, any lingering effects of what my partner and ConservativeHome columnist James calls ‘furlough morphine’ will have worn off. Some economic scarring is likely.

In other words, ‘levelling up’ now needs to get real. This is clearly the plan in the next few months, starting with the Queen’s Speech tomorrow, and then leading to the Levelling Up paper.

Truth be told, levelling up is a poor slogan. It has never done very well in our focus groups – people find it confusing and then, when it’s explained to them, mildly irritating. They don’t think they’re ‘levelled down’, they think they’re ignored. Equally, they find the idea that in four years they’re suddenly going to become London and the South East bizarre – it’s not what they want, and they don’t think it’s credible.

But the danger of ‘levelling up’ is not that it confuses voters, but that it confuses policy. Too many seem to equate it with transforming regional productivity, affecting every town in provincial England and Wales, within a Parliament. Obviously if that’s what voters wanted, they would be disappointed.

Of course regional productivity and innovation are vital, and longer term work should begin. But there are also shorter-term gains. Here are some important ones, some obvious levers, and ways to measure progress.

The high street test.

People care deeply about where they live. They ‘measure’ decline by their town or city centre. Here’s what you hear time and time again: shops boarded up; graffiti on the cenotaph; drug addicts; no monthly market; no decent playground.

In other words, it’s depressing to be in, feels mildly unsafe, and there’s nothing to do.

  • Levers: Business rates; soft infrastructure (local museums, libraries, playgrounds); events including markets and protecting green spaces; incentives for lower margin, often civic enterprises from soft play to youth clubs to sports. Decent bus services. Core public services in the town centre.

It is crucial that ‘economic investments’ (many of dubious effectiveness) do not trump these. Yes, it becomes easier to sustain this kind of infrastructure when people are wealthier. But it is worth remembering that many of these things existed when people were much, much poorer.

  • Tests: vacancy rates. Footfall. Number of events. And, of course, what people tell you about their town.

The safety test

Under-reporting of crime is a big problem, and there is reason to believe it disproportionately affects the Red Wall. Burglary, shoplifting and vandalism are particular problems.

Fraud, too, is a national problem with unequal consequences. Pensioners in Red Wall seats who may own their own homes but have very modest savings and no private income are particularly exposed to losing their life savings. Meanwhile, specific estates suffer from low police presence, and deprived coastal communities and small towns are the targets of County Lines.

In other words, crime is a particular issue in particular ways in these places.

  • Levers: the extra police will help. We also need to change the way in which Home Office funding is allocated and put more emphasis on localised funds like the Safer Streets Funds (which pays for things people want like CCTV). We need a massive, revived focus on fraud – it is getting insufficient airtime and attention.
  • Tests: the obvious source is surveyed crime, but the government also needs better ways to measure crime than annual face to face interviews,

The Opportunity Test 1: Skills and Jobs. 

Training and apprenticeships are a huge priority for working class people. They want local training opportunities – ideally leading to local jobs. We know there’s huge untapped demand for technical level skills in the labour market, and that many adults want to retrain. It remains one of the great challenges of our system.

  • Levers: the Queen’s Speech will create a proper lifetime learning entitlement. Now it needs more funding and less bureaucracy (which is already blighting other skills entitlements and apprenticeships).

On jobs, big changes will be long-term. As well as incentives for private sector investment, the public sector is an opportunity. People want trained people to stay or return home. A start – and one of the most popular things universities can support – would be incentivising public sector graduates (like teachers, nurses, and doctors) to stay in areas where recruitment is a challenge.

  • Tests: number of adults in retraining. Reduction in skills shortages in ‘technical’ roles. I’d include reduced reliance on foreign skilled labour in specific areas (such as parts of construction, who are presumably going to see investment, and therefore job opportunities through net zero and transport).

The Opportunity Test 2: Schools

Schools perform less well in many Conservative target areas. In the past, I would have said this was a moral imperative, but not an electoral one – school quality wasn’t a big vote winner. But I think there’s now greater desire from parents (and we’ll be publishing a report with the Centre for Policy Studies on this in the near future). They are more aware of how their children are doing, how far behind some of them are, and how differently schools responded to the pandemic.

  • Levers: incentives for teachers to go to underperforming areas. Renewed focus on academies and free schools. Ofsted inspections with a focus on standards. Continuing the drive on behaviour. There should also be new focus on the most gifted through programmes in schools and more academically selective sixth forms.
  • Test: Ofsted ratings (including number of failing schools); percentage getting five good GCSEs in core subjects (called the EBACC).

Finally, an overall measure: retention of people and inward migration – in other words, do people want to stay and move to the towns of England? It is implausible that this will transform in a few years, but you might start to see a little movement towards the end of the Parliament (and post-Covid home working will accelerate this effect if places are nice to live in).

You will no doubt have issue with many (if not all) of these levers and measures. There are some omissions (most obviously health). But my point is that it is possible to generate and measure progress within a few years. The job won’t be done, but people will see the path. That shouldn’t diminish the importance of the longer-term, even harder job of thinking through regional growth and productivity. But if you don’t get these areas right, Johnson and the Conservatives won’t be given permission to carry on.

Budget 2021: Think tank response round-up

3 Mar

Centre for Policy Studies

Robert Colvile, Director – ‘Should help business and the economy rebound powerfully’

“The combination of business rate reductions, investment incentives and other measures should help business and the economy rebound powerfully in the next few years – and we are pleased to see our proposal for free ports at the heart of the Chancellor’s speech. But there is the danger of a cliff edge later on as support is withdrawn and taxes increased – or that businesses will anticipate higher taxes and fail to invest.

“Britain still has a huge problem with its long-term growth rates – as the latest OBR figures show only too clearly – and the tax burden is set to increase inexorably. We appreciate that the Chancellor needs to balance the books. But the great challenge facing the Government is not just to put the economy back on an even keel in the short term, but put in place permanent pro-growth measures that raise growth rates for good.”

Institute of Economic Affairs

Mark Littlewood, Director General – ‘A barrage of short-term costly measures’

“After months of damage inflicted by the pandemic and lockdown measures, the Chancellor had the opportunity to deliver a pro-business, pro-growth Budget by lowering and simplifying taxes and slashing unnecessary regulations.

“Instead, we received a barrage of short-term costly measures which risk depressing economic growth, reducing employment, hampering entrepreneurialism, and ultimately harming the long-term economic recovery. Dialling up taxes was a mistake, and our economic growth will be less impressive as a result.”

Adam Smith Institute

Matt Kilcoyne, Deputy Director – ‘The most serious attempt to rebalance the economy a Chancellor has made’

“Rishi Sunak’s super deduction will induce investment into Britain’s factories and help businesses bounce back and Britain’s economy boom as we leave the pandemic behind. We’d estimated at 100% full expensing would be worth over £2,214 per worker, going beyond that is a bold move to help the private sector build the recovery. It will benefit most those areas that have been left behind in recent decades. It is the most serious attempt to rebalance the economy a Chancellor has made and it is truly welcome.

“Rates relief and employment support will be welcome while the ability to operate and raise revenue remains suppressed even as we leave lockdown. But the success of vaccines means the economy will reopen and activity will return; the government cannot continue propping up our economy indefinitely. Moving forward, the strategy should be to get the state out of the way, by lowering taxes to encourage investment and cut red tape that hurts entrepreneurs.

“The Chancellor was right to say that the state should not be borrowing to pay for everyday public spending. But it’s hard to square that circle with a new commitment to guarantee mortgages of first time buyers. This is a Fannie Mae and Freddie Mac guarantee to boost the demand side — without a credible plan to boost supply of new homes in the places people want to live we’ll just end up with another housing bubble and the risk of boom and bust.

“Keir Starmer was right to remind the Conservative Party that the proper basis on which to make tax decisions is economics not the political cycle.”

TaxPayers’ Alliance

John O’Connell, Chief Executive – ‘Big tax hikes risk choking off the recovery’

“There were some wins for taxpayers today, but it doesn’t gloss over the fact that this was a tax-raising budget.

“The chancellor is helping to rescue struggling sectors but £30 billion worth of tax increases will hit hard-pressed households and businesses already under the highest tax burden in 70 years. 

“Big tax hikes risk choking off the recovery Rishi wants before it has even started, so let’s hope that other measures in the budget help to boost jobs, spur investment and ultimately revive the economy.” 

The Entrepreneurs Network

Sam Dumitriu, Research Director – ‘Chancellor needs to think hard about fundamentally reforming how international profit is taxed’

“A higher corporate tax rate will discourage investment and make the UK less competitive internationally, so it is right that the Chancellor has combined it with a new 130% Super Deduction for investment.

“However, when the two years are up and Corporation Tax rises to 25%, the UK will fall far down the list on international tax competitiveness. Although, we currently have a low headline rate, the effective rate that businesses actually pay is mid-table by international standards due to stingy capital allowances.

“To avoid an investment slump, as the OBR forecast, when the Super Deduction expires, the Chancellor should allow businesses to write off the full value of their investments – the so-called full expensing he mentioned at the despatch box.

“But a high rate, even with full expensing, increases the incentive to engage in sophisticated tax avoidance and shift headquarters. To counter that, the Chancellor needs to think hard about fundamentally reforming how international profit is taxed.”

Centre for Social Justice

Edward Davies, Policy Director – ‘A huge help to those working low-paid jobs’

“We are pleased the Chancellor is extending the £20 uplift in Universal Credit for another six months. Universal Credit is a lifeline for the poorest people in the UK and today’s decision will make a significant difference to many people.

“Likewise, the announced increase in the National Minimum Wage to £8.91 an hour from April is also welcome and will be a huge help to those working low-paid jobs.”

Joseph Rowntree Foundation

Helen Barnard, Director – ‘Makes no sense and will pull hundreds of thousands more people into poverty’

“It is unacceptable that the Chancellor has decided to cut the incomes of millions of families by £1040-a-year in six months’ time. He said this Budget would “meet the moment” but this decision creates a perfect storm for the end of this year, with the main rate of unemployment support cut to its lowest level in real terms since 1990 just as furlough ends and job losses are expected to peak. This makes no sense and will pull hundreds of thousands more people into poverty as we head into winter.

“Even before Coronavirus, incomes were falling fastest for people with the lowest incomes due in large part to benefit cuts. Ministers know this short extension offers little relief or reassurance to the millions of families, both in and out-of-work, for whom this £20-a-week is helping to stay afloat. This cut to Universal Credit will increase hardship when the economic crisis is far from over and undermine our national road to recovery.

“It is not too late for the Chancellor to do the right thing: announce an extension of the £20 uplift to Universal Credit for at least the next year. It is also totally indefensible that people who are sick, disabled or carers claiming legacy benefits continue to be excluded from this vital support. The Government must urgently right this injustice.”

Resolution Foundation

Torsten Bell, Chief Executive – ‘Need to see wider economic stimulus to drive the recovery’

“It’s welcome that the furlough scheme which has seen British workers through this crisis will remain in place until restrictions are lifted, playing a critical bridging role between the lockdown and the recovery. The phased tapering off over the summer will also avoid a risky cliff edge.

“But the peak of unemployment is ahead rather than behind us. We also need to see wider economic stimulus to drive the recovery this autumn, and support for the millions of people who have been without work for long periods during this crisis.”

Institute for Fiscal Studies

Paul Johnson, Director – ‘A big reversal of decades of policy direction and a significant risk’

“What we can be sure of is that Rishi Sunak has spent big again, extending some support right through 2021 at a cost of an additional £60 billion or more. As a result borrowing is now forecast to again be above 10% of national income in the coming financial year. Whether the big fiscal tightening planned for subsequent years will actually happen is less certain. It continues to depend on spending being lower than planned prior to the pandemic. And it also depends on a large increase in corporation tax actually being implemented without additional measures to at least ease its long-run impact. Make no mistake, this proposed increase in the main rate of corporation tax is a big reversal of decades of policy direction and a significant risk. For all the rhetoric about it leaving the headline rate here below that in other G7 countries, our effective tax rate will be relatively high.

“Mr Sunak made much of his desire to be honest and to level with the British people. The fact that he felt constrained to raise taxes by hitting companies and through freezing allowances, rather than through more explicit rises in people’s taxes, suggests there are limits to how far he wants to level with us as he attempts to raise the overall tax burden to its highest sustained level in history.”

Bright Blue

Ryan Shorthouse, Chief Executive – ‘The Government has yet again foolishly cut, rather than maintained, the value of the cost of Fuel Duty’

“The Chancellor has been refreshingly generous, adaptive and pragmatic in his response to the economic havoc caused by Covid-19. He is right to extend the flagship furlough scheme until the autumn, gradually phasing in increased employer contributions. It has saved the livelihoods of millions of people. Indeed, considering its success, the Government might consider an adaptation of the furloughing scheme for future crises for businesses and workers – a government-supported insurance scheme requiring employer and employee contributions.

The Chancellor is right to set out how this Government will get a grip on the public finances in the coming years, but postpone action until the years ahead. However, this makes the decision to cut the international aid budget and public sector pay in the coming fiscal year, as announced last autumn, odd and unnecessary.

“There was an agenda that was notably lacklustre in the Budget. In the year of COP26, this was meant to be the year that we trigger a post-Covid green recovery. But the Government has yet again foolishly cut, rather than maintained, the value of the cost of Fuel Duty for drivers of petrol and diesel vehicles. And it still lacks the ambitious and necessary policies to support more people with the path to net zero, especially in the way they drive their cars and heat their homes.”