It’s The Economy Stupid!

Capital & Interests:- What is the plan for Britain’s much maligned housing market?

As the dust settled on Labour’s landslide victory, talking heads across the UK began the inevitable task of predicting what the government may spend their initial political capital on. Having won a wide but thin mandate on a manifesto of caution and limited ambition, would they choose this moment to jolt the electorate with a series of bold but controversial policies? Yes & No.

Down with the Nimbys

Planning reform doesn’t send anyone’s heart (even mine) racing but hidden behind the veil of the image of a clipboard wielding planning officer turning down your request for a larger side return, lies a fundamental shift in how the country could look and feel in 50 years’ time. Ripping up red tape is supposed to be a line from the Tory playbook, however allowing for houses to be built on “greybelt” land and alongside the return of mandated targets and newly imbued powers for Metro Mayors, means at least more houses may well get built in this parliament than did in the last.

This policy should be no surprise to anyone who read the Labour manifesto, but did many understand what it really meant? While many cry out for more homes when asked on a generalised survey, when faced with the prospect of it happening near their home, many are actually against more homes being built, let alone wind farms or train lines. Improved infrastructure has the power to link communities and bring wealth and prosperity to areas of the country that modern Britain has left behind, however many will bemoan more hard hats and cranes coming to a town near you. 

Chaos under Rishi Sunak, strong & stable with Starmer?

Building a good house requires strong foundations, reliable financing and a builder you can trust. Rachel Reeves (congratulations to the first female Chancellor EVER), spent the last 2 years showcasing her credentials as a safe pair of hands and a steward of economic stability. In part the Labour party also have currently high mortgage rates to thank for their election victory, especially in the large swathes of the now crumbled blue wall. With Labour making house building a key plank of their policy platform, house builders will need confidence that young buyers will be there to actually buy these homes. This means keeping interest rates at a level where borrowers can afford to borrow. Reeves spent a good portion of her career working at the Bank of England and while she has no direct control of monetary policy she will be looking for an accommodative rate environment to help with their central growth agenda. Will Andrew Bailey and Co play ball? They will be at pains to de-politicise the bank and ‘follow the numbers' and with no growth targets within their own mandates, as long as inflation remains a threat they may keep their own powder dry longer than the government may like. However with rates already forecast to fall over the coming 12 months, the new government may have timed their coming to power to economic perfection.

What about Tax?

I have already written about the scale of inequality within the UK housing market. As economist and new Labour MP Torsten Bell writes in his new book “Great Britain?”, two ways of making sure you get on in the UK’s bonkers housing market are choosing your parents or your partner carefully. With the government making clear not to raise taxes on “working people” are they leaving the door open to other property or wealth related taxes? Re–banding council tax bands remains a rumour. What impact would this have on the value of high-end London homes and would this be tantamount to the much feared “mansion tax” touted by Ed Miliband? However, for those of you concerned about the enormous divide between the haves and the have nots, can the housing market continue to grow on the back of untaxed wealth moving from generation to generation with little to no controls? 

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