I am not a Conservative supporter – but come bearing an idea that should appeal to One Nation and progressive Conservatives, not least because it will make work pay, save the taxpayer potloads of money in the long run and garner electoral support for the Conservative cause among hard-working people.
Build social housing.
If that sounds like anathema, let me explain. For me, Harold Macmillan was a great housing minister. Along with Aneurin Bevan, he transformed the post-war housing landscape. From a standing start in 1945, Bevan boosted housebuilding to over 163,000 homes by 1950. That’s about 30,000 more than we’re building now. The Conservative Government of 1951saw the sense of continuing this trajectory, not least because it helped to grow the economy. The manifesto of that year said:
“Housing is the first of the social services. It is also one of the keys to increased productivity. Work, family life, health and education are all undermined by crowded houses. Therefore, a Conservative and Unionist Government will give housing a priority second only to national defence.”
When Macmillan was appointed as Housing Minister, he described it as a “war job”. By 1955 he was building 293,000 homes in England, and 60 percent of them were council houses. Many One Nation Conservatives look back on the 1950s as a golden age. In housebuilding terms, it was.
Today we face a similar housing crisis to 1945, and it’s no good just blaming this on immigration: even Nigel Farage accepts the need to build 200,000 homes a year. Millions of people cannot get on the housing ladder, and millions are stuck on council waiting lists. There is a danger of social unrest if present trends continue.
Meanwhile, despite the best efforts of the last Government, housebuilders simply refuse to boost their production to the levels required. Small builders have been squeezed out by red tape and the financial muscle of the big firms who now dominate the industry. The largest house-builders are more interested in their profit margins than in mass production.
The fact is that we don’t have a free market in housing because the state has nationalised the right to develop land. Labour’s Town and Country Planning Act of 1947 started the process, but it has tended to be Conservative voters, often elderly home owners, who are most vocal in upholding this state control of land by opposing new housing developments in their areas.
As a result, we’ve been building around half the number of homes that are required for the past 20 years. Simple economics means that this shortage of homes has pushed up rents and prices – a 20 per cent increase in London last year. But this costs the taxpayer. The Housing Benefit bill is edging £25 billion a year – that’s about a fifth of the amount that we spend on the NHS – and 40 percent of it goes to private landlords. The average Housing Benefit paid to private tenants is £110 a week, compared to £89 a week for social rented tenants. For taxpayers, this is pouring money down the drain. Ask yourself this question: why am I propping up high rents and baling out employers who fail to pay a decent wage?
If present trends continue, the Housing Benefit bill will increase to £197 billion by 2056 and private tenants will account for 63 percent of the total. We can’t go on like this.
So if the state won’t allow a free market in housing, does it not have a responsibilty to ameliorate the worst impacts of this policy for those at the bottom of the ladder?
There is a solution. Our campaign recently commissioned Capital Economics, one of the most reputable firms in the business, to look at the long-term economic benefits of building genuinely affordable housing, old-fashioned Macmillan-style council housing if you like.
Their findings are clear: “From our analysis, we have a stark and clear finding: the government would achieve better value for taxpayers’ money, as well as improve the living standards of many low- income households, if it were to part fund the delivery of 100,000 new social rent homes each year rather than continue with its existing policy.”
By failing to think about the long term impact of housing benefit, the government is guilt of “fiscal myopia: saving pennies in the short term only to waste pounds in the future.”
Capital Economics looked at a range of case studies around the country and found that, in almost every case, it would make more sense for the Government to invest in affordable housing today, by increasing the level of grant it pays to councils and housing associations as a one-off payment, rather than face decades of paying out rising levels of housing benefit to claimants stuck with high rents. Lower rents mean people can work without recourse to benefits. It would make work pay.
Of course, there will be a short-term cost – but by investing upfront in high quality homes this is more than made up for by savings in the long-term. The Exchequer would be in net profit by 2034 and by 2056, under our proposals, public sector net debt would be 80.8 per cent of gross domestic product compared to 86.0 per cent if current policies continue.
That’s a saving of almost £1 trillion, and the structural deficit would be 1.2 per cent of national output rather than 1.7 per cent, an annual saving of £91 billion. But there are additional public benefits attached to investment in genuinely affordable housing. Every additional pound of investment in construction is estimated to stimulate an extra £2.84 of economic output in supply chains and through the higher spending of employees, and an extra 56 pence of new tax revenues for the exchequer. And beyond this, there are massive benefits in terms of public health and wellbeing. People would have more surplus cash to spend on goods and services rather than wasting it on high rents. Society would be more at ease with itself.
By building 100,000 social rented homes a year, alongside around 150,000 homes for sale, it would help to ease pressure on the private rented sector and slowly bring down rents and house prices in the long-term to a level that would be more affordable to young people – your children and grandchildren, perhaps. It would cut the cost of the housing benefit bill and save the taxpayer money. And for the first time in decades we would be building enough homes to meet our needs. David Cameron has said he wants to reclaim the mantle of One-Nation Conservatism. Our proposal is firmly in the One Nation, progressive mould. Harold Macmillan would approve, and so should you.