It’s early days regarding this new Labour government, but early signs call for cautious optimism regarding the direction of travel for the UK.
No more Nimbyism?
The party’s move to lift the effective ban on onshore windfarms hopefully acts as an indication of how the party looks to operate when it comes to housing construction projects.
For too long Nimbys have been blocking progress when it comes to installing new infrastructure.
I feel the Nimbys are somewhat to blame for the partial failure of HS2, as bowing down to the whims of various then-Tory constituencies resulted in the construction of 27.4 miles of tunnels, which helped the cost of the project spiral out of control, and ultimately resulted in most of it being cancelled.
Now things look to be changing, as Labour looks to be getting tough on councils by demanding they have an up-to-date housing plan, and saying it will step in if they fail to make sufficient progress. We need progress up and down the UK, whether or not it angers some locals in leafier parts of the UK.
I think the old adage of you can’t make an omelette without breaking a few eggs comes to mind here, so Labour needs to be true to its word and make sure the whole country pulls its weight when it comes to constructing new housing.
Housing target – what’s the point?
I question the point of changing the homebuilding target from 300,000 to 370,000, as the former figure already seemed unrealistic – the higher target will no doubt just give the Tories a stick to beat Labour with when they don’t reach it.
Research shows the public felt cynical about the target when it was still 300,000, and I completely agree. https://www.propertywire.com/news/the-public-feel-cynical-about-labours-housebuilding-target/ After all, house building volumes would need to double to meet that original pledge.
There are so many challenges to overcome when it comes to building new homes fast. Doing so requires ample materials, construction workers, as well as ample land. It would take even a flawless government years to quickly solve all of these challenges.
In terms of having more workers on site, perhaps the UK needs to offer Europeans a new work visa to make it happen? It’s not the worst idea in my view, in terms of getting new workers on site fast. Labour has no time to waste, given the lofty target it’s set. Meanwhile it would improve relations with Europe after Brexit.
Land banking
Another area Labour could look to explore is finding new ways of promoting competition between developers, perhaps by ensuring one company can’t buy all the land in one specific area. If two or three are building new stock in an area suddenly there’s an incentive to get it done fast.
Developers tend to deny this, but in my view land banking has been an issue for years, as one major housebuilder controlling a huge swathe of land has no incentive to do anything but drip-feed new housing stock into the market, to maximise the sales price.
While Labour has met with major corporations, I’d like to see more talk about solving this issue, perhaps by giving some tax incentives to smaller housebuilders to stoke competition.
Cash, cash, where is the cash?
The elephant in the room is money, as there’s only a limited amount the new government can achieve without injecting more of it into our public institutions.
Strong arming councils into developing social housing and encouraging private construction is all well and good, but it’ll take resources to make that happen. Having a new housing plan every year takes time for example.
The courts also badly need cash to start operating properly again, which would bring some trust back into the UK market. I know first hand that some landlords who tried to evict tenants and found they couldn’t for months will likely never invest in the UK property market again, unless something changes.
Labour isn’t building homes directly, so it needs to ensure there’s a healthy private rental sector with sufficient stock for tenants to keep rental affordability under control. Affordable homes to buy and rent must sit side by side.
Echoes of George Osborne
Speaking of cash, it’s concerning how Chancellor Rachel Reeves seems to be speaking from the George Osborne school of economics by talking about the country’s finances like a “maxed-out credit card”. To me it feels patronising to talk about public finances like a family budget, and I’d like to see them distance themselves from these old narratives.
I understand why they’re doing it however. The issue is the party has committed to raising so few taxes that making cuts is all that’s left if they want to gain a few coffers.
It’s no wonder people expect a potential increase to Capital Gains Tax, as the party has ruled out almost every other tax hike possible – which probably wasn’t the best idea as they likely would have won the election anyway.
My view is they will likely increase CGT, but I doubt it will end up being in line with Income Tax, as has been speculated. To me this seems like a government that would rather not rock the boat that hard, so I’d expect a smaller increase.
Conclusions
In terms of my initial impressions of the new Labour government, I’m broadly positive.
They are right to put so much of a focus on housebuilding, because expensive housing is increasingly hurting social mobility. Getting that under control is a central component of making society operate properly, by ensuring that people earning different incomes can all afford to live in a given area.
The previous Conservative government seemed more interested in boosting short-term demand than supply, which has helped get us into that mess. How many times did it cut stamp duty to encourage more activity? How many housing schemes were launched, like Help to Buy? Those weren’t necessarily bad, but they weren’t focused on boosting supply.
My only worry is this government needs to be bolder in terms of funding measures to get Britain building. The party seems hyper focused on growing the UK economy, but you can’t do that without investing.
How do you invest? You borrow or tax people and spend it. If you do neither, the best we can hope for is some tinkering around the edges, like cutting the winter fuel allowance or hiring 300 planning officers.
Still, I think we’re seeing some progress, and I’m pleased that expensive and morally dubious policies like the Rwanda scheme have been scrapped. Instead, I’d like to see closer collaboration with the other European countries to share the burden when it comes to taking in refugees.
This Labour government looks more professional than its predecessor already, and it seems there is a focus on competence and expertise, with James Timpson’s appointment as prisons minister being a fine example.
However the bottom line is they don’t have much money to spend, and seem reluctant to take difficult decisions to raise more. In this situation I guess the best that we can hope for is they allocate funding more efficiently, and do all they can to encourage the private sector to pick up the slack when it comes to gearing up development.
