Housing and Planning

It’d be a Christmas miracle if the Chancellor delivered on these three festive reforms


While Philip Hammond hasn’t been chancellor for long, he has already adopted George Osborne’s style of giveaways – the gifts aren’t simply bought by taxpayers, but are often funded by taxpayer money that hasn’t been raised yet.

Of course, this kind of gift-giving rarely places the goods in the hands of the people who need it most. The near 45 per cent of GDP the government spends each year somehow finds its way towards protecting the state pension triple lock, while certain disability benefits are cut back.

The fiscal Grinch in me could go on and on – but ‘tis the season for giving. So rather than lament these past few months of irresponsible spending pledges, I thought I’d lay out three major reforms the chancellor could gift us in the new year which wouldn’t require increased spending – just a bit of boldness – to reduce day-to-day financial burdens in a spectacular way: liberalisation of the planning system, deregulation of the childcare sector, and scrapping the sugar tax.

First, and most crucially, the chancellor could overhaul the current planning system and allow for hundreds of thousands of new homes to be built. Housing costs in the UK are some of the highest in the world, thanks to severe under-building over the past few decades. Indeed, the UK has had lower rates of housebuilding (relative to population size) than any comparable country for which data is available.

Hammond’s “gift” of banning letting fees is chump change in comparison to how the liberalisation of planning restrictions could lower people’s rent and mortgage costs, in turn providing them with substantially more disposable income, without any kind of top-up or subsidy.

As the Adam Smith Institute highlighted a few years back, building on just 3.7 per cent of London’s greenbelt, all within walking distance of a railway station, could provide over 1m new homes to meet demand. Couple liberalisation with sensible tax changes like fiscal devolution, as laid out in the IEA’s most recent housing briefing, and there would be a real incentive for local authorities to permit development.

Next, Hammond would be saintly indeed to peel back much of the red tape around another costly necessity: childcare. UK childcare regulations remain some of the harshest in Europe; Ofsted is especially strict on mandatory staff-to-child ratios (1:3 for children aged one or younger, 1:4 for children aged two to three, and 1:8 for children aged three plus), while countries like Denmark and Germany have no mandatory ratios and still manage to deliver safe, high-quality care.

These requirements, coupled with increased childcare subsidies on offer, which have the unintended effect of driving costs up even higher, mean that many families find the burden too high to justify having both parents in work. The loosening of restrictions and increased provision could work to bring costs down by thousands of pounds, enabling parents – mainly women – to make the work-life balance choice that’s right for them.

Lastly, if he were in a really jolly spirit, the chancellor would consider doing away with the ridiculous sugar tax before it comes into play in 2018. There is no worse tax than one that tries to manipulate the lifestyles of individuals unnecessarily. Seeing as the tax was sold as a means of decreasing consumption (and there’s little evidence that it will do that) rather than raising revenue, the chancellor should scrap the tax now. This would set a precedent that this new government won’t be slapping regressive taxes onto those who are already struggling to get by.

Rather than increasing costs, scrapping distortionary subsidies in the housing and childcare sectors and rolling back regulations could save all of us – the chancellor included – quite a bit. Given Hammond’s current trajectory, it’s unlikely we’ll see anywhere near this level of bold policy-making in the New Year, but the festive side of me says never rule out a Christmas miracle.

 

This article was first published in City AM.

Kate is Associate Director of the IEA. Kate oversees the IEA’s Media Centre and digital platforms, creating and commissioning content for the website, social media, and ieaTV. Kate regularly features across the national media, including appearances on BBC News, Sky News, Channel 4, Channel 5, ITV and BBC’s Question Time.


1 thought on “It’d be a Christmas miracle if the Chancellor delivered on these three festive reforms”

  1. Posted 20/12/2016 at 20:23 | Permalink

    The right to exclude others from a scarce resource, supplied free by nature, without paying compensation to those excluded is an implicit State subsidy enjoyed by freeholders worth £250bn per year (minus £70bn in taxes on immovable property).

    This subsidy not only distorts resource allocation, leading to excessive vacancy, under occupation and an artificially wide North/South divide, it is capitalised into rental income and selling prices. The benefits of which are creamed off by those that own more land by value compared to the taxes they currently pay.

    In other words we have economy that rewards parasites and punishes producers.

    Without this subsidy house prices would be more than halved and disposable incomes increased for most UK households. Resulting in housing being four times more affordable, as a ratio of discretionary income, for typical households than it is now.

    Free of market distorting subsidy, the rationalization of existing housing stock, would negate the need to build any extra new homes for the foreseeable future. Saving the UK many hundreds of billions of pounds on wasteful infrastructure spending that fair and efficient markets, would deem unnecessary.

    Planning protects our shared environment. It has not caused shortages (we have more dwellings per capita than ever) and is not responsible for affordability/excessive inequality issues. It is however a convenient and simplistic diversion for those wishing to protect the interests of economic parasites that will no doubt continue do well from the Housing Crisis Big Lie.

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