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Budget announcement will include fund to build new council homes
Alistair Darling will unveil an emergency £1bn package for Britain's housing market tomorrow with a fund to build council houses, extend the stamp duty holiday on buying, and restart work on projects mothballed during the recession.
Amid speculation last night that the chancellor plans to restrict tax relief on pension contributions in order to fund a modest overall boost to growth, government sources said a key part of the package would be a five-point programme to build homes and support property owners.
Sources said the chancellor was making housing a priority despite the poor state of the government's finances, amid signs that the UK was facing a twin crisis of a falling supply of homes and a rapid increase in people failing to keep up with mortgage payments due to unemployment. Tomorrow's announcement will co-incide with grim news from the jobs market.
Last night an ICM poll for the Guardian offered clear evidence that rising unemployment, falling house prices, and the likelihood that 2009 will see the sharpest fall in output in a single year since 1945 are having an impact on the government's reputation for economic competence.
Asked which party they trusted most to manage Britain through the recession, respondents said they preferred the Conservatives by 45% to 35% - an eight-point improvement for the opposition since January.
Darling remains confident that the government's measures to ameliorate the downturn's impact will pay off later this year, and that measures to help construction, 6% of the economy, is vital to any recovery. Despite admitting that state borrowing will increase to £170bn in the current financial year, he will find cash to deal with unemployment, and support for key industries and the construction sector.
The £1bn housing plan will include:
• A fund for the state to take a stake in housing projects where work has stalled. Government money may also be used to finance infrastructure such as roads
• Financial help where houses have been built but cannot be sold because of falling prices. Sources said this would be through a combination of joint equity schemes and by converting houses intended for the private sector into social housing
• A fund to reverse the trend of 30 years and build thousands of council houses
• Extending stamp duty holiday on properties over £175,000 until the year's end
• Extra cash for the mortgage rescue scheme, amid evidence that rising unemployment is threatening more people with repossession than anticipated last autumn
Tomorrow's announcement follows concerted lobbying by the construction sector, which has said the government is well off track to hit its target for house building. Richard Diment, director general of the Federation of Master Builders, said yesterday: "We're sinking deeper and deeper into a massive housing crisis, and we cannot afford to use the state of the economy as an excuse for doing nothing about it. For too long the government has offloaded its responsibilities for housing and infrastructure onto the private sector. Now that the market has finally collapsed, the government needs to face up to its responsibilities."
"The facts speak for themselves. We have been under-building for years. We need 223,000 new homes per year to keep up with demand but were only building 185,000 a year before the crash. Last year we built 80,000 and this figure will fall to 70,000 this year."
Whitehall sources said Darling recognised that unless it acted there was a risk of the government missing its targets for house building, and there was a need to prevent capacity being lost in the sector.
Although the budget is likely to offer a smaller growth stimulus than the £25bn provided by last November's pre-budget report, a leading economic thinktank said last night that there was scope for a fresh £30bn package. The National Institute for Economic and Social Research said that despite warnings from Mervyn King, the governor of the Bank of England, there was no evidence the financial markets were concerned about the level of government debt. "Market based perceptions for borrowing costs over the next decade remain below 5%. Increased borrowing in the budget would make virtually no difference to these costs," it said.
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Alistair Darling will unveil an emergency £1bn package for Britain's housing market tomorrow with a fund to build council houses, extend the stamp duty holiday on buying, and restart work on projects mothballed during the recession.
Amid speculation last night that the chancellor plans to restrict tax relief on pension contributions in order to fund a modest overall boost to growth, government sources said a key part of the package would be a five-point programme to build homes and support property owners.
Sources said the chancellor was making housing a priority despite the poor state of the government's finances, amid signs that the UK was facing a twin crisis of a falling supply of homes and a rapid increase in people failing to keep up with mortgage payments due to unemployment. Tomorrow's announcement will co-incide with grim news from the jobs market.
Last night an ICM poll for the Guardian offered clear evidence that rising unemployment, falling house prices, and the likelihood that 2009 will see the sharpest fall in output in a single year since 1945 are having an impact on the government's reputation for economic competence.
Asked which party they trusted most to manage Britain through the recession, respondents said they preferred the Conservatives by 45% to 35% - an eight-point improvement for the opposition since January.
Darling remains confident that the government's measures to ameliorate the downturn's impact will pay off later this year, and that measures to help construction, 6% of the economy, is vital to any recovery. Despite admitting that state borrowing will increase to £170bn in the current financial year, he will find cash to deal with unemployment, and support for key industries and the construction sector.
The £1bn housing plan will include:
• A fund for the state to take a stake in housing projects where work has stalled. Government money may also be used to finance infrastructure such as roads
• Financial help where houses have been built but cannot be sold because of falling prices. Sources said this would be through a combination of joint equity schemes and by converting houses intended for the private sector into social housing
• A fund to reverse the trend of 30 years and build thousands of council houses
• Extending stamp duty holiday on properties over £175,000 until the year's end
• Extra cash for the mortgage rescue scheme, amid evidence that rising unemployment is threatening more people with repossession than anticipated last autumn
Tomorrow's announcement follows concerted lobbying by the construction sector, which has said the government is well off track to hit its target for house building. Richard Diment, director general of the Federation of Master Builders, said yesterday: "We're sinking deeper and deeper into a massive housing crisis, and we cannot afford to use the state of the economy as an excuse for doing nothing about it. For too long the government has offloaded its responsibilities for housing and infrastructure onto the private sector. Now that the market has finally collapsed, the government needs to face up to its responsibilities."
"The facts speak for themselves. We have been under-building for years. We need 223,000 new homes per year to keep up with demand but were only building 185,000 a year before the crash. Last year we built 80,000 and this figure will fall to 70,000 this year."
Whitehall sources said Darling recognised that unless it acted there was a risk of the government missing its targets for house building, and there was a need to prevent capacity being lost in the sector.
Although the budget is likely to offer a smaller growth stimulus than the £25bn provided by last November's pre-budget report, a leading economic thinktank said last night that there was scope for a fresh £30bn package. The National Institute for Economic and Social Research said that despite warnings from Mervyn King, the governor of the Bank of England, there was no evidence the financial markets were concerned about the level of government debt. "Market based perceptions for borrowing costs over the next decade remain below 5%. Increased borrowing in the budget would make virtually no difference to these costs," it said.
- Budget
- Economic policy
- Alistair Darling
- Recession
- Housing
- House prices
- Housing market
- Property
- Mortgages
- First-time buyers
- Stamp duty
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