Budget Statement — House of Lords, 2015-03-25
Topic: Macroeconomics
Josephine Valentine (Crossbench, Unknown): I appreciate that the recent Budget should be treated more as political positioning ahead of the election than as a serious attempt to tackle macro long-term issues, but I want to touch on two things in that latter camp: the north/south divide and the provision of housing. I declare that I am on the boards of London First, HS2 and Peabody I turn first to the north/south divide. I am delighted that early on in his speech, the Chancellor recognised that we do not pull the rest of the country up by pulling London down. In the years since the credit crisis, while London has continued to play to its strengths as a global hub—currently we have more large foreign subsidiaries than any other city in the world—the rest of the country has struggled to keep up. As the Chancellor has reined in spending and cut public sector jobs, those economies which are more dependent on the public sector have suffered. But any future Chancellor is going to be faced with the reality that we are still spending some £90 billion a year more than we receive in tax receipts. Without the more than £30 billion net tax receipts provided by London last year, that figure would be a third higher. So the Chancellor needs to work out how to continue to invest the billions of pounds in the infrastructure that is required to get a return from London while at the same time stimulating growth in the north. Perhaps he can take some comfort from a report published yesterday by London First showing that every £1 invested in London’s infrastructure generates around £2.50-worth of economic benefit Whether you look at Britain from London or from the north, the key issue is the same: productivity. London is by far the most productive part of the country, but its productivity will be increasingly hampered unless the pressure on housing, commercial property prices and transport is eased. In the north, where Birmingham, Manchester and Leeds are all below the national average, poor connectivity is an important contributing factor. Infrastructure is key to turning both around, and our current low interest rates mean that we have a once-in-a-generation opportunity to invest I see HS2 as the backbone of the UK, connecting up social and economic opportunity from north to south. But in order for it to achieve its full potential, it needs to be part of a co-ordinated national transport strategy, and local communities, councils and businesses need to seize the opportunity. The Department for Communities and Local Government should stand ready to support local growth strategies, with serious investment in cities such as Birmingham. In this context, I am very heartened by proposed devolution to Manchester. I am likewise sure that significant investment in London will require some kind of further local tax In the Budget, we heard once again about plans for building many houses. The Chancellor claimed that 20 new housing zones outside London could support up to 45,000 new homes, while inside the capital, funding was promised to help unlock 7,500 homes at Brent Cross and 4,000 in Croydon. However, on its own, increasing targets is no guarantee of more houses. In London, targets have increased from 32,000, to 42,000 and on to 49,000—yet actual completions remain stubbornly at around 25,000. Housing in London has got so bad that, in a recent survey, three-quarters of business leaders identified the housing crisis as one of the biggest threats to our economic competitiveness There is no quick way to sort this out, but one important dimension is making those targets bite. Local authorities, which are at the sharp end of nimbyism, need both stick and carrot. The stick should be the threat of planning applications being taken over where targets are repeatedly missed. The carrot should be a far higher financial incentive. The current housebuilding bonus has had no discernible effect on housebuilding and is simply not enough. Alongside being more generous on the homes bonus, I would urge our future Chancellor to look at freeing up local authorities’ ability to borrow prudentially for housebuilding. I would, though, like to congratulate the current Chancellor on his proposal for the creation of a land commission in London, which will facilitate getting unused public sector land and buildings out into the marketplace for housing I cannot resist finishing on one other small point. The Chancellor has set aside money to help UK exporters to China. It would be very good if a future Chancellor could sort out our airport strategy so that we can actually get to this eastern economic nirvana.