Chancellor Philip Hammond’s plans to tackle the housing crisis will fail without fresh reforms, a powerful Commons committee has warned.
A cut in stamp duty to help first-time buyers get on the housing ladder is likely to push prices by at least the amount the reduction is supposed to save, MPs said.
Borrowing caps on councils must be lifted if the target to build 300,000 new homes a year is to be met, the Treasury select committee found.
Nicky Morgan chairs the Treasury select committee, which has warned Budget measures to fix the housing crisis are on course for failure (Lauren Hurley/PA)
Mr Hammond promised to fix the housing crisis in his autumn budget but the Government will “find it very difficult to meet this ambition” without further action.
The report states: “Greater measures are needed to increase housing supply.
“300,000 homes a year will not be achieved with the current measures.
“The Government will need to show greater commitment to housing supply to achieve its aspiration and will need to bring forward additional policy measures.”
The committee’s analysis of the Chancellor’s budget called for “unfair” RPI measures used to calculate interest rates on student loans, rail fares and air passenger duty (APD) to be ditched.
MPs also called for the Office for Budget Responsibility to issue a special forecast on the economic impact of Brexit before Parliament votes on crucial exit laws.
Nicky Morgan, who chairs the Treasury committee, said: “The OBR expects a fall in private sector investment due to Brexit-related uncertainty. An agreement between the UK and the EU27 on a ‘standstill’ transitional arrangement is therefore urgent.”
The committee said there “needs to be a step change” in help for first-time buyers.
Councils are limited in how much they can build by a cap on borrowing.
The Chancellor raised the limit for councils in areas of high affordability by £1 billion but it should be abolished, the committee said.
Private housebuilders create around 150,000 homes a year so without significant local authority building, the target will not be reached, it warned.
Stamp duty reforms announced in the autumn Budget mean a cut for 95% of all first-time buyers who pay it and no stamp duty at all for 80% of first-time buyers, with savings of up to £5,000.
Forecasts by the OBR found a reduction in stamp duty in isolation will increase the affected first-time buyer house prices by double the reduction.
The committee said the only sustainable way to address housing market affordability is to significantly housing supply, adding: “The autumn budget alone is unlikely to achieve this”.
Mrs Morgan said: “The Chancellor pledged to ‘fix the broken housing market’, but the Government is going to find it very difficult to meet this ambition.
“The increase in the cap on borrowing for local authorities to build homes is a step in the right direction, but it doesn’t go far enough.
“The borrowing cap restricts the number of homes that local authorities could deliver. To achieve the Government target of 300,000 new homes per year, the cap should be abolished. The potential of local authorities to build should be unleashed.”
Local Government Association Chairman Lord Porter said: “This is significant recognition of our central argument about the vital role councils must play in solving our housing shortage.
“Our national housing shortage is one of the most pressing issues we face and, as a nation, we have no chance of housing supply meeting demand unless councils can build again.”