Economy: Budget Statement - Motion to Take Note

Part of the debate – in the House of Lords at 6:18 pm on 13th November 2018.

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Photo of Lord Shipley Lord Shipley Liberal Democrat 6:18 pm, 13th November 2018

My Lords, I remind the House that I am a vice-president of the Local Government Association. I appreciate the opportunity to follow the noble Lord, Lord Horam. I agreed with almost everything that he said, in particular on the need for two extra bands on council tax, which would increase local government revenue, but also his reference to the need to solve long-term economic and social problems. In that respect, he is absolutely right.

This is an important debate. It gives us an opportunity to consider some strategic issues arising from the Budget. The Chancellor said that,

“the era of austerity is finally coming to an end”.—[Official Report, Commons, 29/10/18; col. 653.]

That is not the case for the funding of local services, as we have heard, nor for low earners, who will not see much of the £3 billion in tax cuts because they earn under the threshold or because of the impact of universal credit or national insurance contributions. As the Institute for Fiscal Studies said, the Budget announcements are “sticking plasters” with no sign of a long-term strategy, particularly in relation to the need to find more money for adult social care.

I agree with all those who have said that taxes will have to rise. As my leader, Vince Cable, said, we need a mature debate about that because it will involve people paying more tax. I agree with the noble Lord, Lord Wood of Anfield, who earlier this afternoon raised the issue of the tax base and the need to think about the scope for the taxation of wealth, as opposed to just income or personal spending, to reduce the impact of an eroding tax base. I add to that the need to review business rates, which are proving very difficult for many business to pay in the face of competition from internet companies which can have significantly lower levels of business rates. The Chancellor has made a start, and I am pleased that he has, but we need to go much further and much more quickly.

I fear that the Budget will cause rising inequalities. Inequalities weaken our democracy and trust in our institutions. Inequalities show themselves greatly in housing, where there is now a very sharp divide in housing wealth that seems to be worsening, not getting better. I note that, according a report launched today by the Building Societies Association, one-third of first-time buyers now rely on family financial support. Such financial support is much bigger, the BSA tells us, than Help to Buy. Help to Buy features in the Red Book. I accept that it has been important in helping a lot of people. Without it, a lot of people might not have been able to purchase their own home. I concede that point, but I am bothered by the now substantial evidence which shows that Help to Buy has put up house prices, placed some people in negative equity, been used by many who were not first-time buyers to upgrade, and led to huge profits—and huge and utterly unjustifiable bonuses—for some large builders. The Budget has extended Help to Buy but with greater limitations. It will apply only to first-time buyers. It has been extended from 2021 to 2023. I am unclear why that is happening when there is such a need for more social housing.

In terms of housing overall, I found the Budget a disappointment because it does not deliver a fast enough build-out of housing. I welcome the lifting of the housing revenue account cap, which could build 10,000 homes a year, and the removal of stamp duty on shared ownership is also welcome.

Earlier this afternoon, the noble Lord, Lord Wakeham, talked about stamp duty being a tax on change. He has a point that we ought to consider more fully. He asked whether stamp duty could be reduced for those who are downsizing their property to release it for younger people. There is a proposal in waiting there which I hope the Government might be willing to do some work on.

The Government are committed to building 300,000 new homes, not conversions, a year and say they will do that within a few years. However, I do not think they will achieve that commitment. Indeed, I notice that in paragraph 4.54 of the Budget book it is now referred to as an ambition. Until recently, it was a firm target and prior to that it was a commitment. I will say again what I have said on a number of occasions in this Chamber: the figure will be achieved only with a large increase in the number of affordable and social homes, and that requires government intervention.

That brings me to the Letwin review, stage two of which was announced in the Budget. I welcome one or two things in the final part of the Letwin review. Large sites will be constructed as single large sites for which councils will need clear statutory powers, and I hope they will come very quickly. However, if this happens, the process of building will be speeded up, so that part of the Letwin review is right, but I cannot understand the extraordinary conclusion that there is,

“no evidence that speculative land banking is part of the business model for major house builders”.

I do not wish to get into the realm of semantics, but there is evidence of huge profits and utterly unjustifiable bonuses for major housebuilders, partly because of the shortage of housing. In other words, private builders will generally build between 150,000 and 170,000 homes a year, but we need them to build more than that, and they have to build out more quickly. We need to look again at why the Letwin review—the Government will respond to it early in the new year—thinks that the big builders are building out as quickly as they might.

There is another problem because local authorities are being threatened with losing planning control if they fail to meet housebuilding targets. This is the housing delivery test. I hope due account will be taken of the difficulties that local authorities face if big builders do not build. We must get local authorities building. We need to allow them to capture some of the rising land values created by planning permissions and give them first refusal on public land for social and affordable homes.

My last point relates to second homes. I am very pleased to see paragraph 3.38 in the Budget book, which relates to the business rate treatment of self-catering and holiday-let accommodation. A consultation is promised. As the Minister for Local Government said in a reply to the Members of Parliament for North Norfolk and Westmorland and Lonsdale a few days ago:

“We are aware of concerns that some second home-owners may be exploiting what has been termed a ‘loophole’ to reduce their local tax liability by declaring that a property is available for let, but making little realistic effort to actually let it out, potentially giving them access to Small Business Rates Relief”.

There is to be a consultation. I hope it is speedy and that legislation will speedily follow it.