Alex Morton: Reform and supply and a shift to ownership. What the Government should do next on housing.

16 May

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

The Government is turning to home ownership as an overarching theme. This is excellent news and well overdue – the Conservative Party has always had ownership as a key theme during periods of electoral success.

Meanwhile, the Levelling Up and Regeneration Bill has indicated that planning reform has been put on the back burner, a less welcome development, in part due to an overly aggressive initial strategy. Reforms need to boost supply without antagonising MPs. Two broad areas on which the Government is focusing are broadly:

  • Planning reform and supply.
  • Tenure shift to ownership.

Below are thoughts on where they could – and should – go next on both of these areas.

Planning reform and supply

Taking back control via streamlined, design and delivery focused local plans.

Michael Gove’s approach was described in recent briefing as ‘taking back control’. This is a great theme to tie reforms together. He is trying to simplify the planning system, to introduce measures like Street Votes in urban areas to allow gentle densification, and give more power to SME housebuilders. But he and his effective new Housing Minister, Stuart Andrew, must go substantially further – without reigniting the pointless fights of 2020.

Street votes need to be powerful and widespread, particularly in London. Elsewhere, despite pledged planning simplification, only new Environmental Outcome Reports have appeared. Planning applications and local plans must be streamlined mechanisms for delivery, with a mix of tenures and design features built into each site in local plans. SMEs and different tenures must be given a greater share of the land that comes forward in the local plan process.

Much more can – and should – be done on streamlining the actual mechanics of planning. On design, design codes are welcome, but risk becoming an ornamental policy peg not a fundamental systemic fix, and MPs may well press harder on this issue of quality.

Not cutting land supply and housing numbers.

The Government seems unclear on the 300,000 a year target. Its main focus must be on ensuring that by 2024 housing supply is maintained or rising, not falling – both for wider economic reasons and because selling an ownership dream if new build supply is falling will be much harder. Government needs to ensure that the supply of land is maintained even if there is pressure from MPs to change this. Not least because the SME sector – not the big players – will be hit the hardest.

Not delaying too long

Every month that the Government is unclear on planning causes delay and logjams out in the real world. We are now nearly two years into a reform process that has miles to go. As far as possible, the planning reforms should be finished by the end of this year. The economy is about to take a downturn, and the last thing that SME builders need is long and dragged-out changes to planning.

Migration control

This is not strictly speaking part of planning reform. But politically the two are symbiotic. You can’t persuade people to build more homes if the main driver is soaring migration. This task is not helped by foolish MPs who complain about building in the South of England while pressing at any international crisis to take in huge numbers of refugees. If the Government wins in 2024 and wants or needs to return to planning reform, then the place to start is by getting to grips with immigration now, and bringing down the current rising net migration figures.

Tenure shift to ownership

Right to Buy extension

The biggest single policy there is time left to implement before the 2024 election is the Right to Buy extension to housing associations first promised in 2015 to nearly two million households, roughly four million people.

This group of voters is concentrated in towns in particular – and will notice if the plan is abandoned. The Government has recently hinted that it takes the point, and so should proceed as fast as possible. A deal already is in place with the housing association sector, and the sale of high value empty social housing to pay for it is not controversial: those who want to defend million-pound council homes are out of touch with the vast majority. The Centre for Policy Studies will soon publish further work on this crucial area.

Mortgages

The CPS published work that influenced the Government’s adoption of long-term fixed mortgages in 2019 (see Resentful Renters). While we have seen a few of these mortgages introduced as a result, we will only see them gain scale when the Bank of England embraces the product.

As an upcoming CPS paper will show, the Bank’s Financial Policy Committee has been unnecessarily limiting borrowers to four to five times their income. This has hit first-time buyers especially hard. There are numerous institutions waiting in the wings to offer these products and help get home ownership rising again, but the Bank must remove unnecessary barriers. If there are concerns about inflating house prices, action on buy-to-let should be taken at the same time.

Shared ownership and renters

There needs to be a clear offer to private renters – one option would be a huge expansion of shared ownership for those who cannot buy outright, (see Homes for Heroes). This could partly be funded by getting pension funds and others involved in the market. The plan could become even more important if house prices do start to fall and/or the house building industry is hit by the likely economic turmoil coming through the system.

The Government is focusing on the right goal: home ownership. But it needs to be careful that in avoiding planning civil war, it goes too far in defending a system that is clearly not working and ignoring the need for more homes.

One of the biggest problems is that many politicians carry around with them an electoral map that so archaic it was written on an Amstrad, that house prices rising is what the public wants to see.

Rising house prices are hugely unpopular as this polling shows – only five per cent want prices to rise and 50 per cent want prices to fall, with around a quarter wanting stable prices and the rest ‘don’t knows’.

So while new homes can be unpopular, the main obstacles to building more are infrastructure, design and quality of life issues, not the effect that building them may have on house prices. Opposition to house price rises is one of the few factors uniting 90 per cent of the public. Moderate falls – unlike a major crash – should focus politicians on how to keep house builders building, rather than prop up prices.

Ultimately, housing and home ownership are key agendas both ahead of 2024 and in the longer term. Those who defend capitalism will find that it will only become less and less popular if there are fewer and fewer people with any capital. It is true that all these difficult issues cannot be solved before 2024, but there has to be a clear direction of travel toward greater home ownership and plans for how to deliver this in the medium term, including further planning reforms.

‘The Treasury is taking with one hand to give away with the other’. Think tanks react to the Spring Statement

23 Mar

Centre for Policy Studies

Raising National Insurance thresholds to match Income Tax welcome

“The Centre for Policy Studies warmly welcomed the Chancellor’s landmark decision to raise National Insurance thresholds to the same level as income tax, in response to the cost of living crisis.

“This policy, the Universal Working Income, was suggested by the Centre for Policy Studies in its landmark 2018 paper Make Work Pay, and was adopted by the Conservatives in their 2019 manifesto. At the time, we calculated it would take 2.4 million people out of tax altogether.

“The CPS had recently argued that increasing NI thresholds was the best way to offset the effects of the Government’s increase in National Insurance for those on low and average incomes – but welcomed the Chancellor’s decision to go much further.”

Adam Smith Institute

Chancellor is ‘gas-lighting’ voters over his tax plans

“The big announcement today will undoubtedly be the 1p cut to the basic rate of income tax. Such a cut won’t go into effect until 2024 and Brits need relief now. It’s a cynical ploy to cut tax just in time for the next election, while at the same time hiking tax on workers through National Insurance. In terms of intergenerational inequality, lowering income tax while increasing NIC shifts the tax burden from the old to the young.

“In an ideal world, the Chancellor would have scrapped the planned National Insurance Contribution rise, although it is encouraging to see that he plans to raise the NIC threshold in line with income tax thresholds.”

TaxPayers’ Alliance

The Treasury is taking with one hand to give away with the other.

“Cutting income tax down the line will be easily offset by the upcoming national insurance hike and freezing income tax thresholds, leaving taxpayers out of pocket overall. If the government wants to give taxpayers and businesses a respite from rises, they’d do well to simply scrap the health and social care levy.”

“The alignment of income tax and national insurance is a welcome step to simplifying the tax system. The chancellor should take this chance to combine the two into a single income tax and offer a really radical reform of the tax code.”

Centre for Social Justice

The reality is this cost of living crisis is just getting started

“Today we needed to see a strategy for those struggling the most. Universal Credit remains the best weapon in Government’s arsenal to get support directly to those who will be worst hit by the spike in energy prices, while also helping claimants into work.

“Building on the profoundly welcome cut to the taper rate at the Autumn Budget, the Government should further harness the flexibility within UC to help those furthest from the labour market by investing more in the system in response to rising energy costs and the wider cost of living.”

Bright Blue

Since the Chancellor seems to be allergic to welfare, he is hamstringing himself by refusing to do what would help best

“This is the confused Chancellor. He is desperate to burnish his Hayekian credentials to his colleagues, but he has been consistently Keynesian in his response to two major crises during his short tenure, using a mixture of public spending and now tax cuts to stimulate the economy through troubled times. Public debt, tax levels and inflation will remain historically very high for the foreseeable future, much higher than what fiscally hawkish economists would advise.

The fairest way of helping households struggling with a range of costs, especially fuel and energy, is through broad subsidies such as Universal Credit or broad taxes such as VAT, National insurance or Income Tax.”

Policy Exchange

It is not surprising that the Chancellor is trying to hold on to fiscal rules

“Indeed, the Chancellor’s focus on security in this Spring Statement reveals the tension at the heart of a new culture of enterprise in these difficult economic times. In the long-term, it is the creative destruction, innovation and churn that create a resilient economy. But in the short-term, you need resilient businesses who aren’t laden with debt service costs or input squeezes to make those long-term investments. You need consumer confidence, protected by Government spending in difficult times, to power private business.

“In this Statement, the Chancellor is making the judgement that, ultimately, a moderate intervention will suffice for now, to get through the current challenges, and that too much protection, too much ‘security’ will ultimately cover up weaknesses and hamper the dynamic economy the Chancellor is so eager to create. This is perhaps the biggest call of all, and we should all hope he is right.”

Institute of Economic Affairs

This was a mitigation mini-Budget, not a radical one

“The reduction in fuel duty will make a small difference to households. The decision to raise the National Insurance threshold means workers on an average wage will see their contributions fall, despite the planned 2.5 percentage point rise going ahead. The pledge to reduce the basic rate of income tax is welcome.

“But the UK will spend £83bn on debt interest this year – almost double our entire defence budget. The Chancellor will not achieve economic ‘security’ without a commitment to drastically bringing down our tax bill and reducing government spending, which has spiralled out of control. Only then will he boost our anaemic growth forecasts.”

Onward

Time is running out if the Chancellor wants his economic plan to be felt before the next election

“Today’s statement was a firefighter’s statement. The Chancellor has warned about inflation since he entered the Treasury and today his warnings were realised. The 5p cut to fuel duty and the rising threshold for National Insurance contributions offer considerable protection against spiralling inflation, especially for those on the lowest incomes – and, from 2024, he ensured that voters will keep an extra penny from every pound they earn.

“Critics will say he should have scrapped the planned National Insurance rise. But doing so would have meant finding £12 billion elsewhere for the NHS and social care, or explaining to voters why they must wait months for operations in the run up to a general election. Ultimately this left him with no easy choices.

“But while voters recognise that the Chancellor is fighting fires on all fronts, he cannot lose sight of why the Government was elected back in 2019 – to level up opportunity across the UK. Today’s statement had positive language on capital investment, R&D and apprenticeships, but scant detail and no decisions until the Autumn.”

Conservative Environment Network

Today’s Spring Statement will help people cope with rising household bills 

“Scrapping VAT for insulation will help people upgrade their homes and reduce their energy bills. This quick and simple tax cut will help families with soaring gas prices. The Chancellor should also look to expand existing energy efficiency schemes to help fuel poor households insulate their homes.

In the short term, a fuel duty cut will soften the blow of rocketing oil prices, helping motorists and cutting the cost of transporting goods across the country. But the crisis underlines the need urgently review the UK’s road taxes.

As people switch to electric vehicles, which will reduce the UK’s dependence on expensive oil imports, road taxes like fuel duty will need to be replaced. This is an opportunity to deliver a fairer deal for motorists and cut congestion while raising revenue for excellent public services.”

Joseph Rowntree Foundation

Chancellor has abandoned many to the threat of destitution, not economic security

“The Chancellor has acted recklessly in pressing ahead with a second real-terms cut to benefits in six months, while prioritising people on middle and higher incomes.

“Changes to National Insurance won’t help those who aren’t working or can’t work due to disability, illness or caring responsibilities, and exposes them to an increased risk of becoming destitute. This means they will face regularly going without absolute essentials such as food, energy and basic hygiene products.

“We can’t build a strong or secure economy by weakening the incomes of the poorest. With benefits reaching their lowest level in real terms since 1985, the Chancellor had ample opportunity with his increased headroom to uprate them in line with inflation to protect those most at risk.”

Institute for Fiscal Studies

If he wants to be remembered as a tax reforming chancellor, so far he is headed in the wrong direction

“There are two paradoxes at the heart of today’s statement. The Chancellor has managed to announce tax cuts without reducing the planned tax take from previous plans. And by saying nothing about spending, he is reducing the real-terms generosity of his plans for spending on public services. That’s what inflation does.

“The cuts to income tax and National Insurance are effectively paid for by increasing revenues as a result of fiscal drag. The freezing of the income tax personal allowance and higher rate threshold turn out to be much bigger tax rises than first intended. As a result, almost all workers will be paying more tax on their earnings in 2025 than they would have been paying without this parliament’s reforms to income tax and NICs, despite the tax cutting measures announced today.

“And by keeping to previously announced cash plans for public spending Mr Sunak is being considerably less generous to public services than he intended when he set out his spending plans in the Autumn.”

Tom Clougherty: The Chancellor can help households next week by raising tax thresholds and rebooting energy policy

16 Mar

It can’t currently be much fun being Rishi Sunak. Next week’s Spring Statement was supposed to be dull. He would update us on the economy and the public finances, announce a few worthy policy reviews and consultations, confirm previously announced plans, and sit down.

Instead, only days to go, the Chancellor finds himself facing surging inflation, a cost of living crisis, and war in Europe. People want him to cut taxes, raise benefits, spend more on defence (and a hundred other things) and still keep the public finances ticking towards balance. Good luck with that.

Politically and practically, the rising cost of living – driven primarily by energy prices – is Sunak’s most immediate and important challenge. Things were bad even before Russia invaded Ukraine, but the conflict’s appalling humanitarian cost will likely be accompanied by still-higher energy prices and even an inflationary supply shock to global food markets.

So rising prices will be with us for a while. With little sign of corresponding wage increases, households across the country will be pinched. Sadly, there isn’t much the Chancellor can do about global prices. All he can currently do is help us to adapt, while sheltering the most vulnerable households from inflation’s impact.

On electricity and gas bills, the Chancellor will probably argue – with justification – that he has already responded to the pending increase in the energy price cap, and that further measures should wait until the energy price cap rises again in October.

Another possibility is help for motorists. Sunak has been urged to follow France, Sweden, Ireland, and the Netherlands’ examples by cutting fuel duty. The RAC says that rising VAT receipts from higher pump prices could be recycled into a 5p/litre cut. I’m not convinced that’s the best use of scarce fiscal firepower (especially with an ongoing ambitious transition to electric vehicles). Voters may also not notice the saving or credit the Chancellor for it. Still, my fellow motorists wouldn’t say no.

If policy changes are intended to offset cost of living pressures, it’s generally better they align with longer term plans, or have their own convincing rationale. The Chancellor could turn to two such ideas. Firstly, he could move some green levies off energy bills and fund any connected environmental programmes from general taxation. It makes sense for carbon costs to be reflected in consumer prices, but not that other commitments are loaded onto household bills.

Another sensible change would be to base automatic increases to benefits (and, ideally, tax thresholds) on the most up-to-date inflation figures we have, rather than those of six months ago. There’s no particular reason why we use such a lagged indicator. Switching to more timely and accurate uprating would help households now, but also constitute a general rationalisation. Benefits, credits, thresholds, and allowances could also be uprated alongside forecast inflation, with subsequent adjustments for over- or undershoots.

Of course, if we’re talking about rational and coherent policy, we can’t overlook the National Insurance hike soon set to take effect – which is, alas, neither. It is scarcely believable that any government, let alone a Conservative one, would choose to raise taxes on workers and employers during a cost of living crunch.

And yet here we are. If people need money, the first thing the government should do is let them keep more of what they earn. To do otherwise is politically perverse, economically destructive, and a betrayal of conservative principle.

It is also unnecessary. There is no pressing need to ‘pay down Covid debt’. The best way to pay for a one-off, pandemic-induced NHS backlog is by borrowing the money and spreading the cost over time. The Treasury is understandably worried about rising borrowing costs, but, generally, people are still prepared to lend to the government extremely cheaply. That is unlikely to change soon.

Of course, we should never borrow and spend just for it’s own sake. Balancing the budget, streamlining the state, and protecting future generations are noble goals. But there’s a question of priorities – and the decision to put fiscal targets ahead of hard-working households and their shrinking incomes suggests the wrong ones.

If the National Insurance rises can’t be cancelled or deferred, then the Chancellor should do what the Centre for Policy Studies has suggested and raise the primary threshold for individuals. That way no-one earning the average wage or below would lose out.

Such an approach would also give the Chancellor an opportunity to make good on a key 2019 manifesto promise to raise the threshold for National Insurance towards the personal allowance for income tax. It would cost around a third of the expected revenue from the health and social care levy.

In the longer term? Recent events have made clear that the government’s energy policy needs rebooting. So anything the Chancellor can do to remove barriers to new nuclear and renewables, as well as offshore oil and gas extraction (and even fracking) would be welcome. Crucially, that includes rejecting calls for counterproductive windfall taxes.

The Chancellor should also build on his recent Mais lecture, which focused on the need to ‘accelerate growth and rejuvenate our national productivity’, with a particular emphasis on business investment, skills, and research and development.

There’s an especially pressing need for policymaking for the first, given that we’re a year away from the corporation tax rate rising, the investment super-deduction expiring, and the annual investment allowance falling precipitously.

The Chancellor will likely announce a new, permanent approach to taxing business investment in this autumn’s Budget. For now, he must reassure business that he understands their concerns, and invite views on what a more investment-friendly corporation tax regime would look like.

I realise that’s an awfully long way from war, inflation, and energy crisis. But I suspect it’s precisely the sort of thing that Rishi Sunak hoped he would be originally able to focus on in his Spring Statement.

Tom Clougherty is Head of Tax & Editorial Director at the Centre for Policy Studies.

Tony Danker: Now is the moment for the Government to go for growth

3 Feb

Tony Danker is Director-General of the Confederation of British Industry

For business leaders, the past few weeks have felt like peak politics. But this week has marked a shift back to economics. And it is most welcome.

Yesterday saw the publication of the long-awaited Levelling Up White Paper, with its transformational aspirations. Today there are energy price announcements and an interest rate decision. Economics is coming to the fore once more.

For me, the biggest takeaway from yesterday’s PMQs is that the debate about long term growth has now reached primetime. Here at the CBI, we’ve been banging this drum for a while now. We partnered with the Campaign for Economic Growth at Conservative Party conference back in the Autumn because we wanted the government to focus more on business investment to drive the economy. And today I was joined by the brilliant Robert Colvile from the Centre for Policy Studies at a joint CBI-CPS event to answer the question: are we actually serious about growth?

The UK currently has the fastest growing economy in the G7, but it doesn’t tell the whole story. V-shaped recoveries around black swan events are no time for credit or blame. The downward nosedive is not an accurate judgement of economic performance; and nor is the climb.

The truth of the matter, as set out in black and white by the OBR, is that we’re looking at post-recovery growth of just 1.3-1.7 per cent. For a country that has demonstrated it can do growth at around 2.5 per cent, this is not ambitious enough.

And let’s be honest, without higher, sustainable growth the ambitious, levelling-up goals set out yesterday, from improvements to public services and much more besides, will be all the harder to achieve unless we can get growth going again.

Let’s look a little closer at the bind we’re in – and importantly – how we can escape being caught in a trap.

Lumping more onto the UK’s tax burden – already at the highest sustained level seen in peacetime – cannot be the answer. The evidence is clear that raising taxes stifles growth, and cutting them drives it.

We’re not talking growth at any cost and by any means. And we’ve not lost sight of the need for fiscal responsibility. We’re talking sustainable, long-term growth stemming from greater investment, innovation and productivity.

Just as companies can’t afford not to invest in growth, nor can countries. It’s not just about money – it’s about ambition and imagination too.

And there’s never been a better time to go for growth, because right now we’re at a unique moment: when once-in-a-lifetime events have coalesced to create a burning platform for change.

One of those is Brexit. I am a big believer in the opportunity of post-Brexit Britain. I think it gives us the platform we need to push the UK’s huge economic potential and the freedom to make big bets. It can awake us from the flatlining productivity that took hold after the financial crisis.

Another is the pandemic, which has driven huge acceleration in tech and digital adoption.

And finally, we have the opportunity that flows from our world-leading position on decarbonisation. There is a wall of investment to fund decarbonisation – backed by firms with over $130 trillion in assets. British businesses are begging Conservative politicians to see the enormous economic prizes available go to those who move fast.

All this means this is our moment.

So how do we seize it? By harnessing the creativity and initiative which birthed the Super Deduction, new skills bootcamps and offshore wind investment – measures which spurned orthodoxy in public policy and showcased the boldness and vision we need.

The first step should be a permanent Investment Deduction, succeeding the Super Deduction and mitigating the looming Corporation Tax rise. It would act as a long-term incentive to invest and grow enterprise, with businesses acting across many fronts in service of the nation.

Achieving the Prime Minister’s vision of the UK as a science superpower requires nurturing a workforce fit for the future. So, how about building on the Apprenticeship Levy with a new Skills Challenge Fund to invest in the high-value skills businesses really need.

We also need to get serious now about generating more of the skills we need at home – so we’re less reliant on immigration. Nadhim Zahawi is onto something with his new Unit for Future Skills, examining where skills gaps exist. Let’s supercharge that and build an independent Council for Future Skills. It could optimise training towards future economic demand and recommend visas to overcome shortages in home-grown talent, setting the Shortage Occupation List.

On energy, ending uncertainty on hydrogen and schemes like carbon capture and storage will enable the UK to lead in global green markets.

Meanwhile, let’s build on Monday’s Benefits of Brexit paper by establishing a new Office for Future Regulation to allow a post-Brexit UK to become the smartest and most future-focused regulator in the world, with a clear remit to target competitiveness, investment and innovation.

The focus of this new body should be the big bets for our economy. Set free to be agile, now we are no longer bound by EU-wide consultation and compromise. Proportionate, so that it strikes a better balance between investment and consumer protection. And more dynamic, allowing regulators to act quickly and decisively, as we saw with the vaccine, when the MHRA saw the UK lead worldwide.

This is not all on Government. Business has a key role, and the CBI will be promoting serious growth to firms across the country. We will ask them to increase business investment. In net zero. In innovation and digital transformation. In exports. In skills. In workforce health and wellbeing. And we will gather them in clusters around the country to deliver levelling up the only way it can be done – by the private sector through better skills, jobs and wages.

Business leaders – of all sizes and sectors – will respond because they are serious about growth.

So let’s get serious, together. Let’s unite, creating sustainable growth – the only real answer to our cost-of-living crisis, rising energy prices and high inflation. Growth that propels the UK beyond recovery to a new era of prosperity.

After a disappointing decade for UK investment and productivity, this is our second chance. Let history show that, this time, we seized the moment.

 

Dean Machin: Policymakers must understand the reasons people go to university – or else educational reforms will be resented

13 Dec

Dean Machin is Head of Public Policy at the University of Portsmouth. He is a former philosopher who has advised David Willetts and written a report on data-sharing for the Social Mobility Commission.

It is the increasingly settled wisdom that universities are failing to deliver yet they are more popular than ever. Why?

Putting aside conspiracy theories about universitiesingenious ways to inveigle young people into their clammy embrace, part of the explanation must be that, university apart, the options for school-leavers are poor. But we won’t change what school-leavers aspire to without understanding why university is so attractive, particularly to disadvantaged young people.

The Apprenticeship Levy, which unintentionally led to a decline in intermediate and advanced apprenticeships at the same time as a significance increase in higher apprenticeships, highlights how policy can misfire when policymakers do not understand people’s motivations. A party that has always seen itself as working with the grain of human nature should remember this.

It’s about taking control of your future, not just productivity

The Centre for Policy Studies recently proposed a package of measures to incentivise the kind of training and education that will make both individuals and the country richer in the long run. The pre-supposed purpose of university is to improve productivity. Courses that do not this should be taken at students’ “own risk. Whether this is the ‘right’ purpose of a mass university system is beside the point: if reforms based on this premise jar with why people choose university, perverse outcomes will follow and many young people will be left frustrated and angry.

As any university recruiter will tell you, there are a whole raft of often idiosyncratic reasons why anyone chooses university or one university over another. But some generalisations are possible.

First, university is a fairly permanent aspiration. In 2010 the Millennium Cohort Study found that 97 per cent of mothers of seven year olds wanted their children to go to university. A more recent survey found that 65 per cent of parents with children under 10, and 70 per cent of parents with children 1115, want their children to go to university.

Second, through UCAS there is a well-designed and relatively efficient national system to turn young people’s occasionally vague aspirations to university into effective applications. There should almost certainly be some similar system for further education and apprenticeships.

Third, school leavers have few good alternatives to university but – and this is the central point – for disadvantaged young people, university is by a long way their best bet. The state pays upfront for their education and offers (means-tested) living-costs – weighted to enable them to move to another town or city. There is no comparable level of support for any other option.

If you do not live in a place that offers many economic opportunities, and if you have few financial resources and little social capital (so no friendly aunt in Islington to provide lodging while you find your way in the media), university is your best bet to reduce the degree to which your background determines your future.

Francis the Train Guy recently found social media fame because of his infectious passion for trainspotting. When interviewed, he cited university as giving him the confidence to be open about what is generally viewed as a tedious pass-time. He contrasted the liberating effect of university with the pressure to conform at school and sixth form.

For Francis, it was trainspotting and for some others it will be their sexuality. For most, though, it will be an ambition to be something that perhaps their parents find incomprehensible, or that no-one in their background has ever seen as feasibly achievable. In his speech ‘What is education for?Michael Gove put the general point rather well. Education has an emancipatory, liberating, value. … I believe education allows individuals to become authors of their own life story. Education helps you take control of your own life.

Is emancipation the state’s business?

Life is not sustained by productivity increases alone and having greater control over your own life is something citizens can demand of their politicians. Public funding for this is also uniquely valuable for disadvantaged young people – those with little social and financial capital behind them. More advantaged young people might not need state support to see the world as full of opportunities, to develop self-confidence, or to make their aspirations effective. Disadvantaged young people almost certainly will. Narrowing university funding only to areas that make people more productive would level down, not up.

So what?

While this argument reinforces Government wisdom to provide alternatives to university – different people will become authors of their own story in different ways – it also highlights the need for policymakers to understand the varied reasons that draw people to university. Without this, well-intentioned reforms might have perverse consequences and be resented. Attempts to push people on to technical courses at local further education colleges, for example, who might otherwise leave home for university (possibly to study the creative arts!) could end up being as popular as Jeremy Corbyn.

When describing the liberating benefits of university, the Train Guy made no mention of the subject he studies (engineering if you are interested). The benefits of university are not reducible to the economic returns of studying a particular subject. If they were it would be very difficult to explain the 2021 HEPI Survey finding that while 25 per cent of those surveyed would have changed course or university, only eight-nine per cent wished they had not gone at all.

Those who think is this all is nonsense and that investment in universities must succeed or fall on the basis of productivity increases should note one thing. To implement their view not only will policy have to change but so will people. Young people must start to want different things. It has always been a standard critique of left-wing parties that their policies would work if only the people were different.

Finally, and more practically, the foregoing identifies a test for the Government’s post-18 education reforms: do reforms give disadvantaged young people those with little social and financial capital a greater chance to be “authors of their own life story” or just the chance to be more productive? Answering this question will offer a very good guide to which reforms will work and which will not.

Tom Clougherty: Tax rises will trash the UK’s international competitiveness. But there is a better way.

22 Oct

Tom Clougherty is head of tax and editorial director at the Centre for Policy Studies.

Unless the Government changes course, Britain’s international tax competitiveness is going to plummet in 2023, with coming tax increases set to leave us with one of the least growth-friendly tax systems of any rich nation.

That’s the key finding of a new analysis by the Centre for Policy Studies and Tax Foundation think tanks, based on the latter’s 2021 International Tax Competitiveness Index, which was released earlier this week.

The UK comes 22nd on the latest edition of the Index, just behind Canada (20th) and the United States (21st). We have the best cross-border tax rules of any OECD nation, but do not fare so well domestically: finishing 18th for corporation taxes, 22nd for VAT, 23rd for individual taxes, and 33rd for property taxes.

For now, that ranking is actually slightly unfair to the UK: because of a data lag, this year’s Index does not reflect the impact of the temporary super-deduction for capital investment, which Rishi Sunak announced at his March budget.

The super-deduction addresses a long-standing weakness of the UK tax system – our unusually stingy treatment of business investment – and therefore represents a bold, pro-growth move. If we factor it into the International Tax Competitiveness Index, the UK’s corporate tax rank improves from 18th to 11th and its overall rank from 22nd to 21st.

The problem, of course, is that the super-deduction is only temporary. So while it might encourage firms to bring forward existing investment plans, it is not likely to sustainably boost investment in the longer-run – which ought to be the goal of a truly effective tax reform.

And, sadly, the positive impact of the super-deduction on Britain’s tax competitiveness looks set to be equally short-lived. With higher marginal tax rates due to hit personal incomes in April 2022, and corporate incomes in 2023, the country is approaching a competitiveness cliff-edge. The outlook is not at all promising.

First, the attractiveness of our individual tax system will decline as the ‘health and social care levy’ is introduced. This will increase the top tax rate on earnings to 48.25 per cent, compared with a current OECD average of 42.7 per cent. For dividends, the top rate will rise to 39.25 per cent – the fourth-highest in the OECD, and well above the 24.1 per cent average rate. The UK would fall from 23rd to 31st on the International Tax Competitiveness Index’s ranking of personal tax regimes.

Worse is to come a year later, when the expiry of the super-deduction will be accompanied by a big increase in the headline corporation tax rate, from 19 to 25 per cent. The combined effect of this change will be to send the UK plunging down the tax competitiveness rankings: its corporate tax rank will fall from 11th to 31st out of 37 OECD countries, and it will slide to 30th place in the International Tax Competitiveness Index overall.

This prospect represents a step-change in the UK’s attractiveness to internationally-mobile business and investment. Coming in the wake of Brexit and a deep, pandemic-induced recession, when generating robust economic growth should be at the forefront of every policymaker’s mind, this development ought to be of grave concern to anyone who cares about the prospects of the British economy.

As for the Government, it will struggle to deliver any part of its agenda, whether it’s rising real wages, better public services, or sound public finances – not to mention longer-term goals like levelling up or the transition to Net Zero – if the private-sector economy does not grow strongly in the years ahead. Trashing the country’s tax competitiveness will make that ambition much harder to achieve than it needs to be.

What, then, should we do instead? Nice as it would be, given that tax revenues are forecast to reach their highest sustained level since the aftermath of the second world war, boosting the UK’s tax competitiveness doesn’t necessarily mean cutting the overall tax burden. Famously high-tax Sweden finishes 8th on the International Tax Competitiveness Index – well above the UK – while perennial chart-topper Estonia actually manages to raise an almost identical share of GDP from its tax system as we do.

Rather, the emphasis needs to be on reform – identifying the bits of our tax system that weigh heavily on growth and doing what we can to change them. On corporation tax, that means making the current approach to capital investment permanent, while maintaining a competitive headline tax rate. For individuals, we should rethink the highest ‘additional rate’ of tax, which raises little (if any) money anyway. Property taxes, meanwhile, need a total overhaul – beginning with economically disastrous business rates and stamp duties.

Developing an internationally competitive tax system is one of the key ways the Government can help the UK to attract more business and investment, spur domestic enterprise and entrepreneurship, and generally encourage a dynamic and growing economy. A powerful pro-growth tax agenda is well-within our grasp. We just need the Government to change course before it’s too late. Next week’s budget is the perfect time to start.

Anthony Browne: Increasing supply won’t fix the housing crisis. First time buyers need more power in the market.

19 Oct

Anthony Browne, the MP for South Cambridgeshire, is on the Treasury Select Committee and a co-founder of the HomeOwners Alliance.

The decline in homeownership rates, particularly amongst the young, is one of our most urgent national challenges: there are few issues that more directly affect people’s quality of life and aspirations. There is a simple political solution: build more homes. It is such an appealing thought – it has to be true.

But does building more homes actually lead to higher home ownership rates? The truthful answer is “not much”. We went on a massive national bonanza from 2005 to 2015, and homeownership rates still fell. All that rose were the numbers of properties that were privately rented “buy to lets”. As the report Resentful Renters by the Centre for Policy Study shows, the number of homes built in that period almost exactly matches the increase in private rented properties.

Clearly, building houses that are then sold as holiday homes or buy-to-lets does nothing to increase homeownership. Whole blocks of flats in London are sold off-plan to international investors, doing nothing at all to relieve the homeownership crisis.

The argument is often made that building more homes leads to a decline in house prices, putting them in reach of first time buyers. Supply and demand.

But there is an increasing economic consensus that the impact is marginal – the price is more determined by the vast secondary market in homes that have already been lived in, which makes up 99 per cent of homes, not the one per cent of new build.

And the prices in that secondary market are largely driven by the cost and availability of credit (aka mortgages) that finances the purchases. The restriction in access to first time buyer mortgages since the financial crisis roughly equals the drop in the number of first time buyers, and on its own could account for much of the drop in homeownership.

Again, look at the big picture: in the last few years housebuilding has been at record rates, but rather than falling, house prices have risen to record levels. That rather proves that housebuilding is not the driving force behind price changes.

So, if building more homes does not push up homeownership rates, what will? There are roughly a million residential property transactions a year, overwhelmingly of homes that have already been lived in rather than new builds.

The key to increasing homeownership rates is to make sure more of those million transactions (both of new build and already lived in) go to first time buyers. Identify the barriers that first time buyers face, and work out measures to remove them.

The Help to Buy scheme, where the Government guarantees deposits to overcome the deposit barrier, is one such scheme, and although beneficial, it can only ever be small scale. To move the needle, we need solutions that are sector-wide, for the new and secondary market.

In 2011, I co-founded the HomeOwners Alliance, to help aspiring homebuyers onto the property ladder. About a decade ago I led a campaign to push for a higher rate of stamp duty for people buying second homes or investment properties, to tilt the market in favour of those buying a home to live in.

Subsequently, the Treasury introduced the three per cent additional property stamp duty surcharge, and cut stamp duty for first time buyers, and the rate of homeownership has started rising again in the last few years.

That rise in homeownership in the last few years is nothing to do with housebuilding, since that housebuilding did not reduce prices, which is the supposed transmission mechanism between housebuilding and homeownership.

The rise in homeownership happened despite record house prices, because a greater proportion of the roughly million transactions a year have been first time buyers. Other things that the Government could consider to help first time buyers include:

  • Getting the Bank of England to allow lenders to offer higher loan to income ratios on long term (over 10 years) mortgages, as a new Centre for Policy Studies report proposes. That will not increase prudential risk to lenders, but would put homeownership within reach of many more first times buyers, by enabling them to take out long term fixed rate mortgages that are up to seven times income.
  • Increase the additional property stamp duty surcharge so that foreign buyers who do not intend to live in a property pay far more – there are even arguments to increase it to the same rate as VAT, or 20 per cent. The Government should also reduce the tax breaks given to buying properties through a company, and to those buying more than six properties in a single transaction. It is difficult to see any societal benefit in allowing so much of our residential property to be bought as investments for people who don’t even live in the country. It is also difficult to see why overseas buyers should pay a lower rate of tax buying a flat in the UK (which are limited in supply) than if they bought a car or computer here (which have no supply limitiations).
  • Give private landlords an incentive to sell their property to long-term tenants, for example by reducing the capital gains tax charge if they sell to a tenant who has lived in the property for more than 10 years.
  • Encourage building of more comfortable downsizing properties, for couples to move on from their family home after their children have fled the nest. The cost of moving, and the lack of available suitable properties, means there is massive so-called “property hoarding” where elderly people live in houses far bigger than they need.
  • Change stamp duty regulations to enable private shared equity, so that a company can buy a share of a property to enable the first time buyer to overcome the deposit barrier and buy the rest of the property. This must be done under a controlled regime so the first time buyer can staircase up to buy the rest of the property when they can afford to. At present, stamp duty is punitive if you buy a property using shared equity but not when using debt (mortgages), with the only very limited exemption being for shared ownership of social new build. [declaration of interest: I used to be on the board of a company that offers this].

Alex Morton: Five ways in which we can Get Housing Done. And why Gove is the man for the job

24 Sep

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

Michael Gove’s levelling up mission is crucial for the Tories at the next election. But planning and housing are just as important for the long-term future of the Conservative party. Homeowners vote Conservative (and always have done), while renters do not – by large margins.

Analysis by Matt Singh here shows this ownership factor is strong even adjusting for other factors (e.g. age). The problem for the Conservatives is that home ownership peaked in 2003 at 71 per cent then fell, though it rose slightly in recent years from 62.6 to 64.6 per cent, despite 80+ per cent wanting to own. As the Planning Bill undergoes examination, a few key points are set out below on both supply and rescuing ownership more widely.

1. Supply is not everything – but it is critical
Supply is not the only factor. The Centre for Policy Studies has argued for long term fixed rate mortgages (see Resentful Renters) for those who earn good money but lack family wealth for a deposit. Immigration and housing policy needs to be adjusted in order to ensure that the Liberal Democrats cannot be pro-migration and pro-NIMBY, which makes Tory MPs fret (see here on what to do).

In addition, damping down housing speculation both from UK and overseas buyers via tax might help – limiting BTL interest probably helped in the late 2010s to boost ownership.

That said, there are limits to non-supply levers to pull, (i.e. interest rates). Gove has to ignore siren voices that planning reform is just too difficult and irrelevant. In the 2010s fewer homes were built than any previous decade since the 1960s – this obviously impacts prices.

House prices globally rose in recent decades due to low interest rates, but as the Bank of England notes, excluding inflation richer country house prices roughly doubled, but roughly tripled in the UK.  Our supply side failures have exacerbated an asset price bubble.

2. Supply relates to build out – and who and what is permissioned is crucial
Our system of rationing land means the large house builders and land promoters dominate land markets, with over one million plots that could obtain permission locked up in strategic land banks.

Housing actually tracks transactions more than raw land – as the Letwin review noted, large house builders only build when they can sell homes at a sufficient price, so more transactions and more sales mean more land pulled through to build homes on.

Our report Stamping Down also showed transactions link to new supply very clearly. In our report The Housing Guarantee we noted new housing supply in the 2010s was best explained not by planning restrictions being loosened under the Osborne reforms but by house builders slowly increasing supply as they realised they could do this without lowering sale prices and expanding reliance on Help to Buy Equity Loan.

To get to 250,000+ homes consistently this means three things, as set out in The Housing Guarantee. First, with planning permission house builders need to agree a build out rate with real sanctions for those who do not deliver in normal circumstances. This doesn’t just mean a tax of say £1,000 a year on unbuilt permissions, but loss of land where homes remain unbuilt.

Second, land must be given to a wider range of house builders to diversify the market. You need multiple routes to market, with different tenures (including rental, self-build and retirement homes), more SMEs and smaller sites. We recently proposed more part-ownership for key workers as part of this (see here).

Finally, councils need to be required to put this build out issue at the heart of local plans. It is no good just earmarking a few huge sites that the large builders simply snaffle up and either sit on or at best build out very slowly. Planning for delivery year in, year out, is what local plans should be for.

3. Give greater say to local people on everything but the principle of development
There is a huge amount of money made in the endless shuffling of planning permissions, and in parts of the planning system, a belief people’s preferences can be reshaped by enlightened planners (e.g. anti-car, neglecting popular designs).

It really is a simple dichotomy. You can either have a legalistic and complex formal planning system, or you have a system that says development will happen, but that local people will shape it.

The system either asks whether new homes fulfil policies on sustainable transport, environmental standards, anti-obesogenic environment etc or genuinely asks local people what new homes should look and feel like. Otherwise, if something ticks all the planning policy boxes but local people are not happy, who wins?

And if not local people, they are irrelevant. You have to give power to local people and less to planners to impose on local people. Once planners judge a site as viable in the local plan and add in any necessary constraints (e.g. flood protection), local views should control what that development looks like.

This would turbocharge design quality which local people are passionate about. Gove’s speech to the CPS in 2013 which touched on good design was absolutely right.

Better quality homes mean less opposition to new housing (see astonishing Create Streets polling that shows support ranges from 75 to 23 per cent toward new homes given different pictures of proposed new homes).

4. Nail your colours to the mast on house price rises
Gove should aim that house prices will be no higher in five years now in nominal terms. Not having an explicit target, but acknowledging there is an obvious trade-off between more owners and higher prices.

A major drop in prices would have negative macroeconomic effects, but Gove should not be afraid of saying he wants broadly stable prices and forcing Government to agree – not least as this will have an impact on lending, speculation and so on.

There is an utterly misjudged view that most people want higher house prices. In fact, the most popular view in a 2017 poll was that nationally people wanted the Government to push prices down a moderate amount. This was backed by 59:25 per cent and among Tories by 51:35 per cent.

Price rises were very unpopular – even small house price rises were opposed by 70 per cent and backed by just 13 per cent. And of course since then prices have risen yet more. There is a levelling up aspect here. Too often policy and media debate is set by affluent Londoners with large mortgages, not the typical voter. Broad price stability should be the aim, and small falls are better than small rises.

5. Get some wins in before you bring out the Planning Bill
Gove needs some wins before he brings out the Planning Bill. One quick win could be a capital fund at the Spending Review for each home, released when new homes are started. For example, £25,000 toward infrastructure per home, including roads, schools and GP surgeries. Local communities and councils could then decide what to spend this on.

This funding could be top sliced from existing budgets. Within the huge increase in capital funding up from £70 billion in 2019/20 to £100 billion in 2021/22, assuming 250,000 new builds this would cost just £6.25 billion. This would be a clear sign that the Government was in listening mode.

Similarly, measures above on immigration, on local control, on build out would all help roll the pitch and weaken the opposition to any remaining controversial aspects.

Gove’s new brief is absolutely critical, and the points above just scratch the surface. But this is a complex area with many moving parts. Fortunately, if anyone can tackle this area, it is the new Secretary of State.

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.