Many commentators have already concluded that ‘Spreadsheet Phil’ did the best he could with a bad hand in this week’s Budget.
It’s true that the Chancellor, Philip Hammond, was able to produce a few headline-grabbing giveaways, especially around housing, an issue which the Prime Minister has pledged to take “personal charge” of solving. Cue an apparent injection of £44bn into housebuilding designed to see 300,000 new homes per year delivered by the middle of the next decade.
And those looking to buy a home received the welcome news that purchases below £300,000 will no longer attract Stamp Duty. Elsewhere, largesse was more muted. An extra £2.8bn for the NHS was almost immediately criticised by health service bosses as woefully inadequate and jarred next to the £3bn set aside to deal with Brexit-related costs. The irony will not have been lost.
But try as he might, the Chancellor found it impossible to hide from the swingeing downgrades to the UK’s economic growth prospects from the oft-labelled “independent” Office for Budget Responsibility. The OBR laid the blame for the slowdown in Britain’s GDP rises over the coming years on sluggish productivity, which is set to hit tax revenues.
And even the more positive mood-music on housing quickly came under attack, with experts suggesting the main effect of the cut in Stamp Duty will be further house price rises – potentially wiping out any theoretical savings from the tax cut.
While an expansion in housing supply, plus other measures to encourage NHS bodies and councils to free up surplus land for brownfield development, may (on an optimistic outlook) start to have an effect in a few years, the fact is housing affordability will remain a huge challenge for most people for the foreseeable future.
According to the Joseph Rowntree Foundation, an anti-poverty charity, the poorest fifth of households spend around a third (31%) of their income on housing costs, compared to less than one tenth (9%) for the richest fifth. Worryingly, this proportion has been rising consistently for those least able to afford it for the past 15 years.
This is perhaps no surprise given the explosion in those housed in the private rented sector over that time: between 2002 and 2015, the numbers of households in this category grew from 2.3m to 5.4m – 21% of all families. And all too often, high rents on top of low wages become a trap: Research by Shelter has found that typical new homes built today are out of reach for over eight in ten (83%) working families living in private rented accommodation across the country – even if they use the Government’s Help to Buy scheme.
Recently, the Institute for Global Prosperity put forward a radical new proposal to overhaul our public services and make them fit for the 21st century. We’ve called this idea ‘Universal Basic Services’, or UBS. At its heart is a simple premise: that the services all of us need for a minimum standard of living in modern Britain – shelter, food, transport and information technology – should be provided free at the point of need, just as we already do for healthcare through the NHS. The main benefit of this scheme is that it would dramatically reduce the basic cost of living for many millions of people; for the poorest people in society, it would be worth around £125 per week in saved costs.
On housing, we’ve recommended doubling the existing social housing stock by funding the building of 1.5 million new social housing units by borrowing at the current low rates. The new units would be offered on a needs basis at zero rent. All social housing would be exempted from Council Tax, and include a utilities allowance.
Now of course, this has prompted some accusations that such a plan can’t be afforded in our current circumstances. But our proposals are fully costed. In the document we published back in October, economists Jonathan Portes and Howard Reed have shown how the £42bn total cost of UBS represents the equivalent of just 2.3% of UK GDP and could be paid for by reducing the Personal Allowance.
We’ve also been at pains to point out that the idea for UBS would need to be accompanied by a big expansion of local democracy and accountability, to prevent the creation of new, clunky state monopolies on service provision.
But the fundamental question at stake here needs to be asked: What kind of society do we want Britain to be? Do we want to continue down the path of growing inequality and insecurity we’ve witnessed over the past decade? Or is it time for a new social contract that ensures everyone has the building blocks they need to live a ‘larger life’?