Reflections on the Chancellor’s Budget 2018

This year’s Budget was not the quiet, blink-and-you’ll-miss-it fiscal event that many anticipated. With Brexit on the horizon and significant uncertainty persisting, many were ready to forgive Philip Hammond if this Budget had passed relatively unnoticed.

Instead, in what was a highly political Budget, the Chancellor threw aside his fiscal hawk reputation, promising money for social care and high streets, the armed forces and potholes. There are to be tax cuts too (which will disproportionately benefit those on higher incomes). What deficit, you might ask? The giveaways were carefully choreographed, with the Government’s lack of a parliamentary majority in mind, to placate dissenters on the Conservative benches. With the Brexit vote around the corner, the Government cannot afford critics.

The extra spending was made possible by a windfall from higher than expected tax receipts and stronger growth. According to the Resolution Foundation, the Chancellor spent 97% of this bonus. Post-Budget, there is legitimate debate to be had about how far away the country is from the end of austerity – with most commentators describing this as an easing rather than an ending. It is undeniably a change of direction from the path the country has been on since 2010.

What were the key housing announcements?

While there were some important announcements for the housing sector in the Chancellor's red box, it’s fair to say that the Budget did not deliver the wholesale changes needed to fix our broken housing market.

The Federation had called for robust action to reform the land market, in particular by ensuring a fairer proportion of the uplift in land value is captured for affordable housing and community benefit. At the moment, landowners make huge profits simply through the granting of planning permission, and too little of this value is captured for the community.

Disappointingly, the Government has missed a real chance to bring about this reform and overhaul how land is sold. The Letwin Review on Build-Out recognises the phenomenon of vast increases in land value but falls short of recommending the revision of the 1961 Land Compensation Act that we had called for.

We’ll continue to push for this with the Government, because it’s the missing part of the puzzle we need to really achieve a step change in the supply of new affordable homes. There’s much housing associations can do with the measures that have come earlier this year – additional funding, real political support – but ambitious reform to the land market would unlock even more potential.

There were, however, some positive measures in the Budget. The next wave of strategic partnerships between housing associations and Homes England was announced, with ambitions to deliver 13,000 new homes. There will be a £500m boost to the Housing Infrastructure Fund. First-time buyers’ Stamp Duty relief will be extended to purchasers of shared ownership homes and Help to Buy will be reformed over the coming years, as part of its phasing out by 2023. And the Housing Revenue Account (HRA) borrowing cap has been lifted from this week, allowing local authorities to borrow more to build new homes.

There was particularly good news on Universal Credit, the roll out of which is affecting many housing associations and their tenants. The Chancellor announced a £1.7bn package of measures including increases in work allowances, and a slower pace of overpayment repayments. The cash injection must be used urgently to ensure that people are relieved from the financial and emotional distress, debt and arrears they have been experiencing under Universal Credit.

So what next?

I’m inclined to agree with the Institute for Fiscal Studies, which has described the Budget as “a bit of a gamble”. Upcoming uncertainty, especially around Brexit, is likely to affect heavily the Chancellor’s figures and there is a strong possibility of another fiscal event in the Spring, as well as next year’s Comprehensive Spending Review. 

We’re already thinking ahead to these. The substantial settlement for the NHS will mean that other public services and departments will continue to feel the squeeze, including MHCLG. But in line with the Prime Minister’s pledge to fix housing as the number one domestic priority, we will continue to make the case for more long-term support for housing associations as key partners in ending the nation’s housing crisis.