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.

A protest in 2016. Getty
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Fewer teachers, more pupils and no more money. Schools are struggling

With grammars and universal school meals, both main parties have decided to answer policy questions no one is asking.

If you ask people in Britain what the ­biggest political issues are, schools don’t make the top five. Yet last week Labour set its first party political broadcast in a fictional classroom where a teacher described Jeremy Corbyn’s plans for schools’ future. Without a Labour government, the teacher opines, there will be no more libraries, or teachers, or school trips. Though the scenario is a flagrant breach of the law – teachers must remain politically impartial – education isn’t a bad place for Labour to start its campaign. Schools really are quite screwed.

Three things are hitting hard. Schools have less money, fewer people want to be teachers, and an avalanche of under-sevens is hitting the playgrounds and won’t stop for several more years.

How did we get here? In 2015 the Conservatives pledged to keep school funding at the same rate per pupil over the lifetime of the parliament. Yet while the money coming in has remained flat, schools have faced huge hikes in costs, particularly staffing. Big increases in mandatory pension contributions and National Insurance have taken their toll; so has the apprenticeship levy. The
Institute for Fiscal Studies estimates that all told, schools will have lost about 8 per cent of their budget by 2020. That’s £3bn of savings that must be found. Or, more bluntly, the starting salaries of 100,000 teachers.

It is worth remembering at this point how huge the schools sector is and how many people are affected. About half a million teachers work in the 20,000-plus state schools. A further 300,000 people work in allied professions. There are eight million children and an estimated 12 million parents. Lump in their grandparents, and it’s fair to say that about 20 million voters are affected by schools in one way or another.

The budget squeeze is leading many of these schools to drastic measures: firing teachers, increasing class sizes, cutting music from the curriculum, charging parents for their child’s place on a sports team, dropping transport provision, and so on. Begging letters to parents for donations have become commonplace; some have asked for contributions of up to £60 a month.

On top of money worries, teachers are abandoning the profession. In 2015, an additional 18,000 went to work in international schools – more than were trained at universities over the same year. They joined the 80,000 teachers already working in British schools abroad, attracted by higher pay and better working conditions.

Graduates are also snubbing teaching. With starting salaries increasing at less than 1 per cent a year since 2010, new teachers are now paid about 20 per cent less than the average graduate trainee. Changes to higher education are also such that trainees must now pay £9,000 in order to gain their teaching qualification through a university. The government has missed its target for teacher trainees for five years now, and there is no coherent plan for hitting it.

No money and no teachers is less of a problem if you are in a demographic dip. We had a bizarrely low birth rate at the turn of the century, so we currently have a historically small proportion of teens. Unfortunately, the generation just behind them, of seven-year-olds and under, is enormous. Why? Because the “baby echoers”, born in the 1970s to the baby boomers, had children a bit later than their parents. Add to that the children recently born to immigrants who arrived in their twenties when the European Union expanded in the early 2000s, and Britain is facing an El Niño of toddlers. By 2025 a million extra children will be in the school system than in 2010.

To keep on top of the boom the government has been creating schools like a Tasmanian devil playing Minecraft. But 175,000 more places will be needed in the next three years. That’s the equivalent of one new secondary school per week from now until 2020.

In fairness, the government and councils have put aside money for additional buildings, and roughly the same number of parents are getting their first-choice school as before. The free schools policy, which delivers new schools, has not always been well managed, but it is now more efficient and targeted. However, many more children combined with squeezed budgets and fewer teachers typically leads to bigger class sizes. Most classrooms were built to house 30 pupils. Exam results may not get worse, but no parent wants their child working on a makeshift desk improvised out of a windowsill.

Instead of addressing these challenges, both main parties have decided to answer policy questions no one is asking. Theresa May wants more grammar schools, ostensibly because they will give more choice to parents – though these are the only schools that pick pupils, as opposed to the other way around. And she says they will aid social mobility, though all the evidence (and I really do mean all) suggests the opposite.

Jeremy Corbyn, meanwhile, is offering free lunches to all seven-to-11-year-olds, which sounds worthy until you realise that children from low-income families already get free lunch, and that feeding every child a hot sit-down meal is virtually impossible, given the limited space and kitchen facilities in most schools. Plus, the evidence this £1bn policy would make any significant difference
to health or attainment is pretty sketchy. Labour has also sensibly talked about cash and promised to “fully fund” schools, but it isn’t clear what that means.

What’s missing so far from the Conservatives and Labour alike is a set of policies about teacher recruitment or place planning. The sector needs to know how schools will be built, and where the teachers will come from for the extra kids. In other words, the message to both sides is – must try harder.

Laura McInerney is the editor of Schools Week and a former teacher

Laura McInerney taught in East London for six years and is now studying on a Fulbright scholarship at the University of Missouri. She also works as Policy Partner at LKMCo.

This article first appeared in the 27 April 2017 issue of the New Statesman, Cool Britannia 20 Years On

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