Until last night’s resignation of a junior Minister over the delay in reduced bets on fixed-odd betting machines, the Budget had been unusually welcomed. Most normal budgets unravel in some way over the week, and the hidden increase in NI contributions had been the only blot on the landscape.
The budget revealed the UK economy to be in a much better shape than previously thought, due to borrowing coming in significantly lower than forecast, to the tune of £11 bn this financial year. It also saw the OBR upgrade its growth forecasts for next year.
The budget included a plethora of spending commitments, signalling that Phillip Hammond is happier to allow a small amount of borrowing as a percentage of GDP to continue, rather than maintain the previous Conservative paradigm, started under George Osborne, of cutting spending to create a budget surplus.
For the housing sector there was relatively little in this budget. Considering many believe the ‘housing crisis’ to be one of the biggest domestic issues facing the UK at the moment, one may have thought there would be even more policy announcements and ideas to get the UK building.
The biggest policy announcement on housing had already been made a month earlier, at Tory Party conference, when the PM said the government were lifting the council borrowing cap to boost housebuilding. With a Housing White Paper already published back in February 2017, a revised NPPF earlier in the year and an array of spending and policy announcements in budgets from the past couple of years, the chancellor may have simply run out of ammunition to throw at the subject.
Despite the Chancellor coming under sustained pressure from members of his own party to reduce top rates of stamp duty, currently doing harm to the London market, the budget merely extended, and backdated, stamp duty abolition to those in shared ownership properties.
He also announced an extra £500m for the Housing Infrastructure Fund, the pot of money councils can apply for help with building homes. This money he claimed would help deliver an extra 650,000 homes.
Perhaps the most important and potentially radical policy announced on the subject was entwined with the aim of saving Britain’s high streets. Philip Hammond released £1.5bn to help the UK’s struggling high streets, included within this was a £675m fund to help councils transform retail areas. This could be spent on turning unused high street shops or vacant commercial spaces into housing. With various big retailers collapsing recently, this policy was clearly aimed at utilising these brownfield sites for housing in sustainable places, consistent with the policy aims of the NPPF.
The budget had slightly rosier forecasts for the UK economy than the spring; growth was revised higher for 2019 to 1.6% from 1.3% previously, although growth for this year was unchanged at 1.3%, mainly due to the slowdown at the start of the year caused by the prolonged cold snap.
Government borrowing is now forecast to come in a whole £11.6bn lower than the OBR’s original estimates in March of £37bn for the financial year. Rather than pocket this windfall to get closer to the fabled budget surplus, Philip Hammond spent the money on income tax cuts and the massive funding boost for the NHS announced earlier this year. The OBR’s forecasts for government borrowing in future years show Hammond is happy to let government borrowing continue at a small percentage of GDP, rather than balance the books by the early 2020’s as previously indicated.
Have the Conservatives crossed the Rubicon in their economic policy? With an increasing tax burden overall, the Conservatives are taking the clothes of a social democratic Labour party, in opposition to the Corbynite socialist variety. This was a budget designed to deliver stability, rather than announce any controversial policies that may get voted down. The budget is only a footnote in the broader political landscape. Brexit hangs over everything and what happens in March 2019 will affect the UK economy and consequently the housing sector, arguably more than this budget will.