Balls challenges Osborne to offer new Treasury guarantees for housebuilding

If the Chancellor is willing to offer £12bn of guarantees for mortgage lending, why won't he support New Towns?

While pledging to dramatically expand the rate of housebuilding in the UK if elected (to at least 200,000 a year by 2020), Labour has had less to say about how it will achieve this target. But in a speech to the National Housebuilding Council today, Ed Balls will begin to fill in some of the gaps. 

The shadow chancellor will promise to look at reviving development corporations along the lines of those that constructed the post-war New Towns, noting that they had the power "to acquire, own, manage and dispose of land and property; undertake building operation; provide public utilities; and do anything else necessary to develop the New Town." But he will also warn that they are not a sufficient solution to the problem. Balls will say: "These Corporations generated revenue by selling land and housing, receiving rental income and receiving commercial income. However, they needed up front funding to build the infrastructure and housing which could later be sold at a profit."

In a notable challenge to George Osborne, he will call on the Chancellor to expand the level of Treasury guarantees available for housebuilding. Having offered £12bn of guarantees for mortgages on properties worth up to £600,000 (in the form of Help to Buy), why won't he do the same for New Towns? As Balls will say: 

George Osborne has shown himself willing to use the Government’s balance sheet to guarantee some house building – but in particular demand through guaranteeing household mortgages. And yet we read that the New Towns which you heard about a year ago have stalled.

The Government is providing guarantees of up to £12bn for Help to Buy. He should now step up to the plate to back the supply of new houses in New Towns.

Providing guarantees to Development Corporations could be essential to provide backing for a large-scale growth programme to provide confidence, reduce risk and give credibility to the development.

We cannot afford to dither any longer - and I cannot see a stronger case for the full throated backing of the Chancellor than a step change in housing supply.

To do that we will need the full backing of the Labour Government, including the Treasury, for new towns - willing to devolve the powers, determined to provide the resources, and showing the leadership and vision that is sadly lacking in Government at the moment.

One issue not mentioned in the extracts released by Labour is that of council borrowing. Were the current cap on borrowing to be lifted, local authorities could fund a major expansion of social housing. The Chartered Institute of Housing estimates that raising the caps 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. As Boris Johnson argued in refrence to London in his recent manifesto 2020 Vision, "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."

Yet for entirely ideological reasons, Osborne has rejected this suggestion. 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.

But if Labour is to even get close to building the number of new homes required, it will surely need to do so. As a recent Policy Exchange report noted, he UK needs a minimum of 1.5 million new homes from 2015 to 2020 simply to meet need, 300,000 a year. Around 221,000 new households are expected to be formed each year over this period and there is a significant backlog. Thus, even the eventual target spoken of in Labour circles - a million in five years - falls short. Unlike the Tories, with their reckless aim of stoking a new property boom, Balls and Labour are certainly asking the right questions, but they're not offering all the answers yet. 

Ed Balls speaks at the Labour conference in Brighton earlier this year. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Theresa May gambles that the EU will blink first

In her Brexit speech, the Prime Minister raised the stakes by declaring that "no deal for Britain is better than a bad deal for Britain". 

It was at Lancaster House in 1988 that Margaret Thatcher delivered a speech heralding British membership of the single market. Twenty eight years later, at the same venue, Theresa May confirmed the UK’s retreat.

As had been clear ever since her Brexit speech in October, May recognises that her primary objective of controlling immigration is incompatible with continued membership. Inside the single market, she noted, the UK would still have to accept free movement and the rulings of the European Court of Justice (ECJ). “It would to all intents and purposes mean not leaving the EU at all,” May surmised.

The Prime Minister also confirmed, as anticipated, that the UK would no longer remain a full member of the Customs Union. “We want to get out into the wider world, to trade and do business all around the globe,” May declared.

But she also recognises that a substantial proportion of this will continue to be with Europe (the destination for half of current UK exports). Her ambition, she declared, was “a new, comprehensive, bold and ambitious Free Trade Agreement”. May added that she wanted either “a completely new customs agreement” or associate membership of the Customs Union.

Though the Prime Minister has long ruled out free movement and the acceptance of ECJ jurisdiction, she has not pledged to end budget contributions. But in her speech she diminished this potential concession, warning that the days when the UK provided “vast” amounts were over.

Having signalled what she wanted to take from the EU, what did May have to give? She struck a notably more conciliatory tone, emphasising that it was “overwhelmingly and compellingly in Britain’s national interest that the EU should succeed”. The day after Donald Trump gleefully predicted the institution’s demise, her words were in marked contrast to those of the president-elect.

In an age of Isis and Russian revanchism, May also emphasised the UK’s “unique intelligence capabilities” which would help to keep “people in Europe safe from terrorism”. She added: “At a time when there is growing concern about European security, Britain’s servicemen and women, based in European countries including Estonia, Poland and Romania, will continue to do their duty. We are leaving the European Union, but we are not leaving Europe.”

The EU’s defining political objective is to ensure that others do not follow the UK out of the club. The rise of nationalists such as Marine Le Pen, Alternative für Deutschland and the Dutch Partij voor de Vrijheid (Party for Freedom) has made Europe less, rather than more, amenable to British demands. In this hazardous climate, the UK cannot be seen to enjoy a cost-free Brexit.

May’s wager is that the price will not be excessive. She warned that a “punitive deal that punishes Britain” would be “an act of calamitous self-harm”. But as Greece can testify, economic self-interest does not always trump politics.

Unlike David Cameron, however, who merely stated that he “ruled nothing out” during his EU renegotiation, May signalled that she was prepared to walk away. “No deal for Britain is better than a bad deal for Britain,” she declared. Such an outcome would prove economically calamitous for the UK, forcing it to accept punitively high tariffs. But in this face-off, May’s gamble is that Brussels will blink first.

George Eaton is political editor of the New Statesman.