An alternative plan on housing

By Ed Balls MP / @edballsmp

As Labour Party members prepare to decide our next leader, too many questions remain unanswered. The now daily episodes of the Miliband soap opera suit those who want to keep this a two-horse race, but do not do justice to the issues at stake in this election.

It is wearily familiar of the general election campaign when serious questions went unasked or unanswered as the media obsession with personalities dominated all discussion.

As we have seen since the election, politics – for good or bad – is in the end about practical decision making that affects people’s lives. It is about having the strength and belief to turn ideas into reality, and take a stand on the issues that matter.

That’s why, as ballots go out, my focus is on one of most important issues affecting all our lives, critical to the coming decade: housing.

Today, alongside former London Mayor Ken Livingstone, shadow housing minister John Healey and shadow employment minister Yvette Cooper I am setting out an alternative plan on housing which directly affects the future of the economy, and which encapsulates my approach to the leadership of our party.

Throughout this campaign, I’ve argued that the biggest challenge facing the country is the economy and public spending.

I believe the coalition’s plans are savage, unnecessary and deeply destructive, and they need to be fought and exposed every step of the way.

But we also need to set out a clear alternative, explain why it is credible, and persuade people to start listening to us again.

Getting lost in debates about New and Old Labour may generate lots of headlines, but will get us nowhere with the public.

We need to show why our ideas will help meet the challenges of the next decade rather than the last one, and will help us win back the voters we lost.

And housing, an issue too often neglected, goes to the heart of these challenges.

For a start, housing exemplifies the economic alternative we need right now, and exposes the myth that cuts can somehow produce jobs and growth.

For every pound spent on house building an estimated £1.40 in gross output is generated across the economy. Every two homes built create an estimated three full time jobs plus up to four times that number in the supply chain.

That is why Kevin Rudd’s fiscal stimulus in Australia focused on public sector construction, and succeeded in averting a recession.

In Britain, the construction industry has so far been hit harder than any other by the recession, with 300,000 job losses so far.

Figures from April to June suggested a strong recovery, but they were a misleading guide to the future: they included businesses catching up with work after the bad winter, and they were buoyed by Labour’s public sector building programme, which the coalition has now slashed.

Plans pioneered by Labour’s last housing minister John Healey would have seen some 176,000 social homes built over the next four years, created by £11 billion of government funding, with as much again from councils and housing associations.

The coalition is set to cut that investment, as well as driving through changes to planning rules which will stop homes being built, and remove the requirement to include lower-cost housing in developments.

And while Ken Livingstone led the way as Mayor of London to boost social housing in the capital, those plans have been put into reverse by Boris Johnson.

Our first priority must be to fight those cuts, but I believe we must also recognise that Labour’s plans were too cautious, and make the case now for a major expansion in house building.

There can be no doubt that the extra homes are needed. With four and a half million on housing waiting lists and two and a half million in overcrowded accommodation, more affordable homes would meet an acute social need.

Since Alistair Darling’s March budget – thanks to our economic recovery plan – tax revenues have been higher and spending on welfare and unemployment lower than predicted. The public finances are around £12 billion healthier than forecast at the time of the Budget.

The coalition wants to use that extra money to pay down the deficit faster.

I think that at a time when the economy is still so fragile and other countries are already tipping back into recession, we should instead use that money to boost construction jobs and build new homes.

By using half of that £12 billion, a £6 billion investment this year and next, we could build 100,000 extra affordable homes which it’s been estimated would create up to 750,000 new jobs, directly in the construction industry and indirectly in the supply chain including thousands of apprenticeships for young people.

And rather than raising VAT on the repair, maintenance and improvement of housing to 20% from January, we should create a temporary rate of 5%, cutting the costs for households investing in the value of their home, and creating thousands more jobs. In the short term this could be paid for by part of the remaining £6 billion windfall, but the evidence from when this has been tried in other countries is that the actual tax take increases as a result.

Crucially, all the extra growth and tax revenues these plans would create would help us pay down more of the deficit later on when the economy is fully recovered.

But our campaign against the coalition’s housing policies does not just mean fighting for the new affordable homes families badly need, but also standing up for people who can’t afford their own homes.

As Yvette Cooper will argue today as a result of the coalition’s housing benefit cuts, from next year 50,000 of the poorest pensioner households face cuts of £11 a week. Working families on low pay face cuts of £12 a week. Severely disabled people face cuts of £13 a week. And that just covers a quarter of the government’s housing benefit cuts plans.

Hundreds of thousands of the poorest and most vulnerable people in our society will not have the money to pay their rent if these plans go through. And George Osborne has the gall to describe this as progressive.

But let’s admit where Labour got it wrong too.

We were late in recognising the importance of building more homes and more affordable homes. So whilst 2007 saw the highest numbers of homes built for thirty years, progress stalled when the financial crisis struck.

By the election, we looked out of touch with voters’ aspirations of a secure home for themselves and their children. Worries on the doorstep about people ‘jumping the queue’ usually reflected despair at being unable to find an affordable home – because there were simply not enough of them.

And for many aspirant first time buyers, hit first by high house prices and then by the mortgage crisis and tougher lending terms, we weren’t able to do enough to help. We made a major difference to helping existing home-owners avoid repossession compared to previous recessions, but too many are still struggling to get on the ladder.

The truth is that whilst we made progress, Labour leaders over several decades never paid enough sustained attention to housing to make it the priority it deserved. That must change.

We now need a strong housing policy to support our economy, to provide the homes Britain badly needs and to reconnect with the voters we lost, both young families who want a home of their own and those queuing patiently for social housing.

That means building more affordable homes, new deals on mortgages to help first time buyers, more council house building, and fair reforms to housing benefit that support work – such as housing tax credit – not just blanket cuts.

For me politics is practical – it’s about how you put values into practice and make ideas into reality. That’s what I did in my 13 years in government, and that’s what I’m determined to do now. Not debating but delivering. And Labour’s leader needs to deliver now.

Details of Ed’s housing event can be found here.