Millennials got a toe on the housing ladder in chancellor Philip Hammond’s first – and otherwise rather unremarkable – Budget since the election, writes Alec Marsh
By abolishing stamp duty for first-time buyers (on up to £300,000), and unveiling a somewhat vague package of £44 billion in ‘capital funding, loans, guarantees’, the chancellor Philip Hammond has pinned the government’s colours to the mast of the millennial generation’s housing needs. The move should also allow people to move up the housing ladder, thereby alleviating pressure further up the chain.
In what was an otherwise unremarkable budget – from a tax and spending perspective in any event – the chancellor duly announced that the government was committed to building 300,000 more homes a year, the ‘biggest annual increase in housing supply since the 1970s’. Following the speech, the pound rose to $1.327, the FTSE 100 was up but stocks of major house-builders slid 2 to 3 per cent.
In an effort to show that the government was listening to voters, he also found money for healthcare, some £7.5 billion over two years for the NHS in England, and a further £10 billion for capital investment in the NHS. All welcome, but critics will say it’s not enough.
In another eye-catching manoeuvre, Hammond announced that digital companies – the likes of Uber, Apple, Facebook, Google – which reduce their tax liabilities by using royalty structures will be charged income tax on the revenues raised in the UK, bringing another £200 million into government coffers a year. In the aftermath of the ‘Paradise Papers’ this will be welcomed by many, though in his own words it ‘does not solve the problem’.
The other problem is that much of the speech was focused on giveaways, with little sense of what was being taken away. Well, the government will increase revenues by delivering increases to the income tax thresholds more slowly; and there was still no sighting of the manifesto pledge to lower corporation tax to 15 per cent. When coupled with the OBR’s forecast that another 600,000 people will be in work by 2022, then perhaps the chancellor is banking on rising tide of prosperity to do the work that the raid on digital firms and a slight rise in tobacco duties could not possibly achieve alone.
The fundamental challenge, of course, was the fact that the OBR revised the UK GDP growth downward, to just 1.4 per cent next year, 1.3 per cent in 2019, 1.5 per cent in 2021 and 1.6 per cent in 2022. As Ed Conway, the Sky News economics editor, pointed out, that’s the first time in modern British history that the prediction has been below 2 per cent for every year in the forecast horizon. Against this background, and with the giveaways above – which included attempts to respond to complaints about Universal Credit – Hammond announced that 2018 would be the ‘tipping point’ for borrowing and that the deficit would nonetheless be ‘eliminated’ by 2025, in what he called ‘the first sustained decline in debt in 17 years’.
Aside from support for electric cars, another £500 million towards tech, £20 million for T-levels technical qualifications, he also announced a drive for more maths tuition, adding one of his speech’s better jokes: ‘More maths for everyone. Mr Speaker, don’t let anyone say that I don’t know how to show the nation a good time.’
He also committed to triple the number of science teachers to 12,000, and dished out a fair amount on the environment – with action on single-use plastic items and cranking up of tax on diesel cars, in a decidedly ‘Blue Planet’ section of the speech.
All in all, with his stated intention ‘to build a Britain fit for the future’, this was a Budget that tinkered at the edges and made few adjustments to the fundamental dials of UK plc. With small adjustments here and there, it may just help build a ‘stronger, fairer, more balanced economy’ and one that will help ‘all parts of the UK [fire] on all cylinders’, but there was no action on reform of state pensions, which arguably would have done more for millennials than the stamp duty move.
‘The top 1 per cent are paying a larger share of income tax than at any time under the last Labour government,’ Hammond noted, in what might be regarded as an attempt to set the record straight. ‘The poorest 10 per cent have seen their real incomes grow faster since 2010 than the richest 10 per cent. And the proportion of full-time jobs that are low-paid is at its lowest for 20 years.’
Whether anyone was listening by this point – and whether it will help the Conservatives at the ballot box when the next election comes – remains to be seen. Overall, it’s probably less interesting than having a roof over your head, and that’s where Hammond has put the government’s focus: on homes fit for millennials. Let’s just hope that the stamp duty cut actually helps younger buyers onto the housing ladder, rather than simply spurring prices to rise as the OBR has suggested.
Alec Marsh is editor of Spear's