Why won't Osborne let councils borrow to build housing? Even Tories want him to

Conservative councillors and Boris Johnson are among those calling for the Chancellor to lift the "artificial cap" on borrowing but, for entirely ideological reasons, he still won't act.

Demand for housing might be surging owing to George Osborne's Help to Buy but supply remains pitifully constrained. The Local Government Association reveals today that 381,390 homes have been given planning permission but have yet to be built. Rather than the planning system (as many on the right claim), it is a lack of finance that is blame. 

Tory councillor Mike Jones, the chairman of the LGA's environment and housing board, has responded by calling for the government to lift the "artificial cap" placed on councils' borrowing and allow them to build more affordable homes. He said:

While there has been progress made, this risks being undermined if we do not find a way to ensure developers keep up with demand. These figures conclusively show that it is not the planning system holding back the building of much-needed new homes.

The challenge now lies in actually getting houses built. Government schemes to help buyers access finance risk creating a bubble if there isn't an increase in house building to match it.

Government has an unrivalled opportunity to create jobs, provide tens of thousands of homes and help the economy without having to find a single extra penny.

New homes are badly needed and councils want to get on with building them. The common sense answer is for the Treasury to remove its house-building block and let us get on with it.

In his recent manifesto for London 2020 Vision, Boris Johnson similarly argued: 

We should allow London’s councils to borrow more for house building - as they do on continental Europe - since the public sector clearly gains a bankable asset and there is no need for this to appear on the books as public borrowing.

In policy terms, it is a no-brainer. The Chartered Institute of Housing estimates that raising the cap by £7bn could enable the construction of 60,000 homes over the next five years, creating 23,500 jobs and adding £5.6bn to the economy.

So what's holding Osborne back? In a word, ideology. Unlike in other European countries, borrowing by councils appears on the national balance sheet making the deficit appear larger than it is. For a Chancellor determined to ensure that borrowing falls every year (to the extent that he delayed payments to institutions such as the World Bank and the UN and forced departments to underspend by £10.9bn), regardless of other policy objectives, lifting the cap is out of the question. 

In an attempt to win Osborne round, Vince Cable proposed allowing councils to pool their borrowing limits so those not using their full entitlement can donate it to authorities with housing waiting lists, but this too was blocked. As Cable recently told the Social Liberal Forum: "What is stopping them? Frankly, Tory dogma. And the Tories are hiding behind Treasury methodology, saying that more borrowing by councils beyond permitted limits will break the fixed rules.

"So even though freeing up this borrowing space would result in tens of thousands more homes being built, and many times more jobs, they would rather start talking about the cuts they want to make, rather than the houses that we should build. That is the difference between Lib Dems and Tories on this matter."

Cable's housing plan will be put forward for endorsement at the Lib Dem conference next month. So long as Osborne continues to resist any reform, he risks being outflanked on an issue of increasing political significance. 

 

 

George Osborne at the Berkeley Homes Royal Arsenal Riverside development in Woolwich. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty Images/AFP
Show Hide image

Is Yvette Cooper surging?

The bookmakers and Westminster are in a flurry. Is Yvette Cooper going to win after all? I'm not convinced. 

Is Yvette Cooper surging? The bookmakers have cut her odds, making her the second favourite after Jeremy Corbyn, and Westminster – and Labour more generally – is abuzz with chatter that it will be her, not Corbyn, who becomes leader on September 12. Are they right? A couple of thoughts:

I wouldn’t trust the bookmakers’ odds as far as I could throw them

When Jeremy Corbyn first entered the race his odds were at 100 to 1. When he secured the endorsement of Unite, Britain’s trade union, his odds were tied with Liz Kendall, who nobody – not even her closest allies – now believes will win the Labour leadership. When I first tipped the Islington North MP for the top job, his odds were still at 3 to 1.

Remember bookmakers aren’t trying to predict the future, they’re trying to turn a profit. (As are experienced betters – when Cooper’s odds were long, it was good sense to chuck some money on there, just to secure a win-win scenario. I wouldn’t be surprised if Burnham’s odds improve a bit as some people hedge for a surprise win for the shadow health secretary, too.)

I still don’t think that there is a plausible path to victory for Yvette Cooper

There is a lively debate playing out – much of it in on The Staggers – about which one of Cooper or Burnham is best-placed to stop Corbyn. Team Cooper say that their data shows that their candidate is the one to stop Corbyn. Team Burnham, unsurprisingly, say the reverse. But Team Kendall, the mayoral campaigns, and the Corbyn team also believe that it is Burnham, not Cooper, who can stop Corbyn.

They think that the shadow health secretary is a “bad bank”: full of second preferences for Corbyn. One senior Blairite, who loathes Burnham with a passion, told me that “only Andy can stop Corbyn, it’s as simple as that”.

I haven’t seen a complete breakdown of every CLP nomination – but I have seen around 40, and they support that argument. Luke Akehurst, a cheerleader for Cooper, published figures that support the “bad bank” theory as well.   Both YouGov polls show a larger pool of Corbyn second preferences among Burnham’s votes than Cooper’s.

But it doesn’t matter, because Andy Burnham can’t make the final round anyway

The “bad bank” row, while souring relations between Burnhamettes and Cooperinos even further, is interesting but academic.  Either Jeremy Corbyn will win outright or he will face Cooper in the final round. If Liz Kendall is eliminated, her second preferences will go to Cooper by an overwhelming margin.

Yes, large numbers of Kendall-supporting MPs are throwing their weight behind Burnham. But Kendall’s supporters are overwhelmingly giving their second preferences to Cooper regardless. My estimate, from both looking at CLP nominations and speaking to party members, is that around 80 to 90 per cent of Kendall’s second preferences will go to Cooper. Burnham’s gaffes – his “when it’s time” remark about Labour having a woman leader, that he appears to have a clapometer instead of a moral compass – have discredited him in him the eyes of many. While Burnham has shrunk, Cooper has grown. And for others, who can’t distinguish between Burnham and Cooper, they’d prefer to have “a crap woman rather than another crap man” in the words of one.

This holds even for Kendall backers who believe that Burnham is a bad bank. A repeated refrain from her supporters is that they simply couldn’t bring themselves to give Burnham their 2nd preference over Cooper. One senior insider, who has been telling his friends that they have to opt for Burnham over Cooper, told me that “faced with my own paper, I can’t vote for that man”.

Interventions from past leaders fall on deaf ears

A lot has happened to change the Labour party in recent years, but one often neglected aspect is this: the Labour right has lost two elections on the bounce. Yes, Ed Miliband may have rejected most of New Labour’s legacy and approach, but he was still a protégé of Gordon Brown and included figures like Rachel Reeves, Ed Balls and Jim Murphy in his shadow cabinet.  Yvette Cooper and Andy Burnham were senior figures during both defeats. And the same MPs who are now warning that Corbyn will doom the Labour Party to defeat were, just months ago, saying that Miliband was destined for Downing Street and only five years ago were saying that Gordon Brown was going to stay there.

Labour members don’t trust the press

A sizeable number of Labour party activists believe that the media is against them and will always have it in for them. They are not listening to articles about Jeremy Corbyn’s past associations or reading analyses of why Labour lost. Those big, gamechanging moments in the last month? Didn’t change anything.

100,000 people didn’t join the Labour party on deadline day to vote against Jeremy Corbyn

On the last day of registration, so many people tried to register to vote in the Labour leadership election that they broke the website. They weren’t doing so on the off-chance that the day after, Yvette Cooper would deliver the speech of her life. Yes, some of those sign-ups were duplicates, and 3,000 of them have been “purged”.  That still leaves an overwhelmingly large number of sign-ups who are going to go for Corbyn.

It doesn’t look as if anyone is turning off Corbyn

Yes, Sky News’ self-selecting poll is not representative of anything other than enthusiasm. But, equally, if Yvette Cooper is really going to beat Jeremy Corbyn, surely, surely, she wouldn’t be in third place behind Liz Kendall according to Sky’s post-debate poll. Surely she wouldn’t have been the winner according to just 6.1 per cent of viewers against Corbyn’s 80.7 per cent. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.