Rt Hon Grant Shapps MP is Minister of State for Housing & Local Government. Follow Grant on Twitter.
At this time of year it’s almost traditional to speculate on which levers the Chancellor should grab, push or pull in order to keep our economy on track.
But you don’t need to enter that debate to understand that our economy just wasn’t robust enough when the credit crunch hit. And that’s why this Prime Minister has focussed on rebalancing the economy. Yes we should have a first class Service Sector and remain the world’s financial centre, but none of that is incompatible with manufacturing things once again.
Of course the problem with making stuff is that you have to find a consumer. Even the shining example of Chinese growth has been tarnished this month with disappointing, by their standards, expansion. Indeed the Government in Beijing has called for the development of an internal Chinese market as a consumer base. An acknowledgement that if you make things, but have few consumers, then there is a limit to your growth potential.
One thing we have always manufactured in this country is houses. Unlike cheap white goods from China, we have over several decades, experienced a chronic undersupply of homes. Housebuilding fell to its lowest level since the 1920s under the last Government. Since the General Election there have been some signs of recovery with the value of housing construction up by 33% in 2011 compared with 2009. But ultimately the number of homes being built will remain low if there are too few consumers, courtesy of the well-publicised mortgage drought.
That is why I launched our NewBuy Guarantee last week. This scheme will mean that as many as 100,000 buyers currently locked out of the housing market will now be able to use a 95% mortgage to get a foot on the property ladder. Rather than saving a £40,000 deposit, the typical home buyers can now put down a more attainable £10,000.
As it happens, the homebuilding manufacturing process involves bulky items which are expensive to transport. So it turns out that around 90% of our UK construction products are actually produced here in the UK.
But building homes is also people intensive. As the snappily titled “Labour Needs of Extra Housing Input” by professor Michael Ball demonstrates – every home built creates 1.5 direct jobs and 3 more in the supply chain.
Housebuilding is also a major contributor to growth; £1 spent in construction generates £2.83 in the wider economy. So our Affordable Homes programme – now due to deliver 170,000 affordable homes, rather than the original 150,000 originally estimated – could add approximately significantly to GDP. As well as seeing 50,000 jobs created and safe-guarded on sites all around England, with even more established in the supply chain.
A few commentators have argued that we shouldn’t be backing mortgages in this way. I disagree. When I started my printing business 21 years ago, I got my break by taking up a Government backed Loan Guarantee. Without that initiative I would never have been able to start my print company, which in turn has created jobs to this very day.
In any case, why should the few who have access to the Bank of Mum and Dad, be the only people who can buy a home before they’re forty?
Our support for both the NewBuy Guarantee and the reinvigorated Right To Buy are not just public signals that the Conservative Party remains the party of aspiration, but also a clear sign that we believe in equality of opportunity for everyone in society.
The lasting legacy of the last government will be nearly bankrupting this country. They ended up needing to nationalise major clearing banks and destroying the mortgage market. I believe that together with other measures, the NewBuy Guarantee will contribute towards the beating heart of a recovery which will in every sense be home built.