By DOMINIC LAWSON FOR THE DAILY MAIL PUBLISHED: 00:58, 20 November 2017 | UPDATED: 08:12, 20 November 2017 e-mail 12 shares 137 View comments +4 Anything but joined up:
Leaks about the content of Philip Hammond’s Budget have shown that what 11 Downing Street is thinking appears to be contradictory and confused There was a time when the content of the forthcoming Budget was the most closely guarded secret in government. No longer: now we have a rising tide of leaks authorised, presumably, by the Chancellor.
At least this lets us know, in advance, what the thinking is in 11 Downing Street. On the evidence of what is emerging, that thinking is anything but joined up. To the contrary, it is chaotic, contradictory and confused. That’s when it isn’t merely messy, muddled and mystifying.
We are told this will be a ‘budget for housing’, and that the Chancellor will ‘build 300,000 new homes’ a year — which sounds suspiciously like something out of a Soviet plan with its annual tractor manufacture targets.
But the growing problem with housing cannot simply be expressed in terms of a shortage. The issue is as much as anything a matter of stagnation, with the housing market seizing up through lack of activity. This means people who need to move for reasons of work, or accommodating a growing family, are stuck.
And the swingeing increases in stamp duty implemented by the previous tenant of No 11, George Osborne, are in large part responsible. About this, Mr Hammond has so far been silent.
As the co-author of a recent London School of Economics report on the effects of stamp duty, Prof Christian Hilber, argued: ‘If you are a young family and you have an additional child, you’ll need an additional room, but the stamp duty is discouraging this kind of move because of the additional cost. In a nutshell, the stamp duty discourages the elderly from downsizing and young expanding families from moving to more adequate housing.’
Mr Hammond has followed George Osborne’s lead by plunging money into the Help-to-Buy Equity Loan. Predictably the main effect of the scheme has been to increase the price of new homes Hammond has instead followed Osborne’s ridiculous remedy by plunging more taxpayers’ money into the so-called Help-to-Buy Equity Loan, directed at first-time buyers of new-build homes. Last month, the Chancellor threw another £10bn at this. The main effect (entirely predictably) has been to increase the price of new homes: they have gone up by 15 per cent more than the price of existing ‘second-hand’ homes since the plan was introduced. This boosts only the big housebuilders and, of course, the bonuses of their bosses.
Nor has this efficiently targeted those buyers who most need help: four in ten of those who have used the scheme earn more than £50,000 a year (twice the average wage), and one in ten of the purchasers was earning at least £80,000 a year.
A government survey itself revealed that almost 60 per cent of those using Help to Buy said they could have afforded to purchase without the scheme, and one in five was not even a first-time buyer.
Scrapping this scheme and putting the money saved towards a cut in stamp duty would be a start on the path back to reason. The Treasury would argue that the funds raised by stamp duty are essential to its plans to tackle the national debt. So here’s an alternative suggestion for ‘Fiscal Phil’: why not scrap the absurdly costly HS2 London-Leeds rail scheme?
During the recent general election, Hammond, who as a former Transport Secretary should know better, claimed that the cost of HS2 would be £32bn. If only. The Government’s own figures suggest it will cost £52bn. But Michael Byng, the rail expert who created the method used by Network Rail to cost its projects, has warned the Transport department that the scheme could eventually cost twice that, a staggering £104bn. Mr Byng claimed that ‘HS2 has not questioned the figure, or my methodology’.
Absurdly costly: During the general election, Mr Hammond said the cost of HS2 would be £32bn despite a rail expert suggesting the total could reach a staggering £104bn. Worse still, HS2 is not the answer to the problem it purports to address: the relative lack of transport infrastructure in the North of England. That would best be addressed by a new line from Manchester to Leeds, or a trans-Pennine tunnel between Manchester and Sheffield. But these have not been given the go-ahead — while countless billions are to be frittered on HS2.
The most absurd example of lack of joined-up thinking at No 11 has emerged from its briefings to different newspapers yesterday. Some had Treasury-inspired headlines about a plan to put almost £500 million of taxpayers’ money into funding charging points for electric cars. It is justified by the official policy of trying to wean the public off the use of fossil fuels, specifically oil. All in the great cause of limiting CO2 emissions.
Weird But what’s this? The Sunday Times tells us that Mr Hammond will in this week’s budget ‘throw a tax lifeline to oil and gas producers in an attempt to unleash an estimated £40bn of new North Sea investment’. This is seriously weird. The reason our North Sea oil producers are in a pickle is the fall in the price of oil. And the biggest long-term reason for the fall in the oil price lies with the move to other forms of energy supply — as encouraged by government.
So on the one hand the Chancellor proposes to subsidise us to abandon oil as our fuel for motoring, and on the other he proposes to subsidise oil companies to try to produce more of the stuff. This is the fiscal equivalent of the Pushmi-pullyu, with Mr Hammond as Dr Dolittle.
Still, doing little is better than doing something stupid. And I fear the latter sums up the Government’s self-defeating housing policies.