Don’t make the same mistakes as Canada

Canada’s spending cuts solved a debt crisis but also created mass homelessness.

Who can persuade the government not to follow a deficit reduction model that solved a debt crisis but left in its wake mass homelessness and an even deeper housing shortage? Speaking in the Commons this month, the Chancellor said "we need to look to Canada and their experiences in the early 1990s when they too faced a massive Budget deficit".

True, the Liberal administration there turned a 9 per cent deficit into a surplus in just three years. But the cuts, which included slashing funding for affordable housing, had devastating consequences.

They brought homelessness -- previously a marginal problem -- into the mainstream, hitting families and older people for the first time and forcing the Canadian government to spend even more money in emergency funding. The country also faced a shortage of social housing where supply ground to a halt.

The experience shows how cuts to housing can damage the wider economy. So why is George Osborne looking to the same model to slash our deficit?

In next week's emergency Budget, £610m in funding earmarked for new social and affordable homes is at risk. Coupled with the £150m of cuts announced in May, this would mean 12,625 fewer homes built per year and 19,000 job losses at a time of record unemployment.

Shelter analysis released earlier this week shows that for every pound chopped from public investment in new housing, the economy will take a hit of at least £3.50. Predicted cuts could cost the economy £2.7bn, and this couldn't come at a worse time.

Housing doesn't sit in isolation: cuts not only mean fewer homes for the 1.8 million households on waiting lists. They also bring the loss of jobs, skills and economic benefits that new homes provide.

Pulling funding quickly before the housebuilding industry has recovered would drag an industry of critical importance to its knees, and bring housebuilding to a standstill. Every year we fail to build, we sink deeper into a housing crisis, which will eventually become impossible to get out of.

Large-scale job losses would also cause a skills drain that we know, judging by the last recession, could take a decade to recover from. When housebuilding does pick up again, we won't have the capacity or the expertise to build the homes we need. We owe it to future generations to continue investment so they are not saddled with this legacy.

Housing is one of the keys to economic recovery. More homes built means more jobs, more tax revenue and reduced welfare payments at a time when government is desperate to hack back the housing benefit bill.

It also acts as a catalyst for other markets and is the foundation on which many industries are built.

If the government is to make cuts, they must be intelligent cuts. Working closely with organisations such as Shelter will be critical -- or we will all be paying the price.

Campbell Robb is the chief executive of Shelter.

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Campbell Robb is chief executive of the housing charity Shelter.

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Brexit is teaching the UK that it needs immigrants

Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past.

Why did the UK vote to leave the EU? For conservatives, Brexit was about regaining parliamentary sovereignty. For socialists it was about escaping the single market. For still more it was a chance to punish David Cameron and George Osborne. But supreme among the causes was the desire to reduce immigration.

For years, as the government repeatedly missed its target to limit net migration to "tens of thousands", the EU provided a convenient scapegoat. The free movement of people allegedly made this ambition unachievable (even as non-European migration oustripped that from the continent). When Cameron, the author of the target, was later forced to argue that the price of leaving the EU was nevertheless too great, voters were unsurprisingly unconvinced.

But though the Leave campaign vowed to gain "control" of immigration, it was careful never to set a formal target. As many of its senior figures knew, reducing net migration to "tens of thousands" a year would come at an economic price (immigrants make a net fiscal contribution of £7bn a year). An OBR study found that with zero net migration, public sector debt would rise to 145 per cent of GDP by 2062-63, while with high net migration it would fall to 73 per cent. For the UK, with its poor productivity and sub-par infrastructure, immigration has long been an economic boon. 

When Theresa May became Prime Minister, some cabinet members hoped that she would abolish the net migration target in a "Nixon goes to China" moment. But rather than retreating, the former Home Secretary doubled down. She regards the target as essential on both political and policy grounds (and has rejected pleas to exempt foreign students). But though the same goal endures, Brexit is forcing ministers to reveal a rarely spoken truth: Britain needs immigrants.

Those who boasted during the referendum of their desire to reduce the number of newcomers have been forced to qualify their remarks. On last night's Question Time, Brexit secretary David Davis conceded that immigration woud not invariably fall following Brexit. "I cannot imagine that the policy will be anything other than that which is in the national interest, which means that from time to time we’ll need more, from time to time we’ll need less migrants."

Though Davis insisted that the government would eventually meet its "tens of thousands" target (while sounding rather unconvinced), he added: "The simple truth is that we have to manage this problem. You’ve got industry dependent on migrants. You’ve got social welfare, the national health service. You have to make sure they continue to work."

As my colleague Julia Rampen has charted, Davis's colleagues have inserted similar caveats. Andrea Leadsom, the Environment Secretary, who warned during the referendum that EU immigration could “overwhelm” Britain, has told farmers that she recognises “how important seasonal labour from the EU is to the everyday running of your businesses”. Others, such as the Health Secretary, Jeremy Hunt, the Business Secretary, Greg Clark, and the Communities Secretary, Sajid Javid, have issued similar guarantees to employers. Brexit is fuelling immigration nimbyism: “Fewer migrants, please, but not in my sector.”

The UK’s vote to leave the EU – and May’s decision to pursue a "hard Brexit" – has deprived the government of a convenient alibi for high immigration. Finally forced to confront the economic consequences of low migration, ministers are abandoning the easy rhetoric of the past. Brexit may have been caused by the supposed costs of immigration but it is becoming an education in its benefits.

George Eaton is political editor of the New Statesman.