A Budget and its blunders

The furore over the government’s plans to cut disability benefits has meant that last week’s Budget has come in for more public and political scrutiny than any other since George Osborne first took an axe to public spending in 2010. And that scrutiny is only intensifying as the fallout from those proposed cuts - the resignation of Iain Duncan Smith and the government’s subsequent u-turn on the policy - spirals into a much bigger argument over whether the Budget favoured rich at the expense of poor.

In the wake of the controversy the government now somehow needs to find £4.4bn to balance its books, but there won’t be any direct knock-on effect on the industry. With the Budget’s headlines for construction focused around big ticket infrastructure schemes that have received repeated government support, spending attached to these projects is not up for debate, despite the black hole in the chancellor’s accounts.

However, the sustained presence of the Budget high up the news agenda has perhaps encouraged more people than usual to dwell on the measures announced, including those policies buried in the detail which could have an impact far greater than the amount of space devoted to them in the chancellor’s announcement. And as far as construction is concerned, the centre of debate has been the decision not to exempt institutional investors in the private rented sector from additional stamp duty on homes.

We reported last week that within minutes of the chancellor sitting down, this surprise decision had been attacked by property leaders for undermining the nascent build-to-rent sector. Now, a surprise but heavyweight voice has joined the criticism - President Obama’s former chief of staff for housing.

The concerns expressed by Mark Linton are significant because the US, along with Germany, has one of the largest and most established private rented sectors in the world. They are particularly important to the UK because, despite the government’s dogmatic preoccupation with home ownership, one in five people in England is projected to be living in rented accommodation by 2040.

It is not as if government decision makers have not recognised - however reluctantly - the part PRS has to play in addressing the housing crisis in the UK, and in London in particular. The introduction of funding for developments under the Build to Rent scheme in 2012 demonstrates that. So hamstringing the sector with unexpected stamp duty rises looks at best a missed opportunity borne out of oversight; and at worst, ignorance of the market mechanisms that will make the government’s own policies work.

Either way, the consequences of such short-sightedness are likely to quickly ripple through a fledgling sector which, if it were supported in its infancy, would have the potential to alleviate the UK’s desperate need for decent quality, affordable homes. And the consequence for people living in rented accommodation if a more professional private rented market does not take off are, as Linton points out, not hard to see. Sky high rents, low security of tenure, disrupted access to education and healthcare - and all of the wider societal problems that can be traced back to those roots. To say nothing of the possible damage that an angry electorate might mete out on the politicians they will hold responsible - if they don’t take to the streets first.

This may all seem a long way from a few lines in a Budget statement about stamp duty, and a policy that will provide a short-term boost to the government’s coffers when it is desperately seeking savings. But understanding the longer-term consequences of decisions before they are enacted is policy makers’ responsibility - and so far, it’s not at all apparent that this has happened. Otherwise, why was the housing minister spending time courting international investors in PRS at Cannes last week, just at the moment that his own chancellor was busy making the chances of them spending in the UK much, much lower?

Sarah Richardson, editor