Budget Statement

Lord McKenzie of Luton Excerpts

Wednesday 25th March 2015 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Holmes. It was the FT which described this Budget as making the best of a bad job. We should endorse at least half that assessment. That the Chancellor’s rhetoric was running ahead of reality was most starkly demonstrated by the expressed aim that Britain should become the most prosperous country in the world. Would that it could, but we are reminded in our briefing of the gap in real GDP per head between the UK and not only the US but Germany and France, as other noble Lords have mentioned. In the case of the US, it is a gap that has widened.

I was proposing to speak just on the issue of housing but was encouraged by the contribution of the noble Lord, Lord Freeman, to divert briefly to the issue of pensions because he, quite properly, raised the issue of where we are on the guidance service. We are a few days away from these new flexibilities coming into being. My noble friend Lord Lea pressed this point as well. Can the Minister assure us that everything is in place, as originally anticipated and promised, to make sure that support is there for people having to make these decisions for the first time? It started off, in the Chancellor’s terms, as “advice”, then it became “face-to-face guidance”. Now I think it is guidance either face-to-face, digitally or by telephone. It is crucial that everything is in place; certain concerns have been expressed about whether that is the case. It is important that we hear tonight that things are properly in place.

The Red Book records that more than 537,000 new homes have been built during this Parliament—not all started in this Parliament, of course—as though this should be a source of some satisfaction. But this amounts to less than 110,000 each year on average, way less than half of what is required if demand is to be satisfied. We have another housing initiative in the Help to Buy ISA but, as my noble friend Lord McFall said, it is relatively small beer: it is modest and does not look at the supply side. The noble Baroness, Lady Valentine, referred to housing zones and a number of other initiatives that have been announced. We have had a number of them during this Parliament, but it is the net effect that is concerning.

Instead of getting on and building, the Government have spent almost five years making empty announcements on garden cities. The Ebbsfleet scheme was announced in 2012 and announced again in last year’s Budget, with £200 million of funds but only £100 million allocated in the Autumn Statement. The Northstowe development is already in the planning system. Nick Clegg promised £225,000 in funding for large-scale housing schemes in late 2012. That appears again in the Red Book this time.

It is estimated that England’s population will grow by more than 7 million over the next 20 years and that we need to build 243,000 homes each year to keep pace, let alone to deal with the backlog of more than 1 million homes. That is why we have a housing crisis: the shortfall is making it more difficult for people to buy, more expensive for people to rent, and has driven increased homelessness. Home ownership is at its lowest level for more than 25 years. The building of social homes has fallen to its lowest level in more than 20 years. Affordable housebuilding has fallen to its lowest level for at least five years. As the Lyons review reminded us, the typical first-time buyer now needs a deposit of 65% of their income; the average home now costs eight times the average wage; and one in four adults between the ages of 20 and 34 are still living with their parents. The private rented sector now houses 18% of all households, including 1 million children, with the average household in the private rented sector spending 40% of their income on rent, compared with 20% for those with mortgages.

At the start of this Parliament the Chancellor removed more than £4 billion of funding from affordable housing—a 60% cut. National government spending has steadily switched from investing in new homes to subsidising housing costs via housing benefit. The coalition now spends 20 times as much on housing benefit as on affordable housing building grants. The cost of housing benefit has risen by 9%, despite curbs on entitlements. The Government’s flagship new homes bonus is failing to get new homes built and is diverting money away from local areas with the greatest need. We would replace this with fairer funding arrangements, since the Government’s approach has unsurprisingly been regressive, with low-income households being disadvantaged by benefit cuts and the better-off being able to access the Help to Buy scheme.

What would we do? We need to get at least 200,000 homes built a year by 2020, providing up to 230,000 jobs in construction, with all the training and apprenticeship opportunities that that would bring. To do this, we would give local authorities the powers and resources to build the homes that their communities need. We will ensure that all councils produce a plan for homebuilding in their area and allocate sufficient land for development to meet the needs of local people. We will give local councils the power to designate new housing growth areas, in which they will be able to assemble land, commission development and deliver the homes that their communities need. We will unlock the supply of new homes by giving local authorities “use it or lose it” powers over developers who hoard land that has planning permission so that they can sell it on for a bigger profit, instead of building on it now.

Generation rent has been ignored for too long by this Government. We need to ensure that private renters get a better deal. We need to give security and peace of mind by legislating to make three-year tenancies the norm, giving renters a stable home and landlords more stability too. We need to end excessive rent increases by putting a ceiling on rent increases during the new three-year tenancies. We need to ban rip-off letting agent fees for tenants by legislating to stop agents charging fees to tenants. We need to drive up standards by introducing a national register of landlords and giving new powers to local authorities to drive up standards in their areas.

We need to allow greater flexibility to individual local authorities for their housing revenue accounts where councils present a business case and an investment plan to build more social homes. The Treasury would be able to ensure that the additional flexibility does not see an increase in total borrowing over and above that currently planned for. We need to strengthen the definition of “affordable housing” in the planning system, and we need to reverse the Government’s changes to affordable homes obligations. The Government have exempted developments of less than 10 homes from affordable housing Section 106 levies and have introduced vacant building tax credits, which will have a disastrous impact on the delivery of affordable housing.

The Government’s record on housing over this five-year term is not good. The Budget has shown no recognition of the scale of the challenge and no credible policies to tackle the crisis. This must be left to others.