Chancellor Philip Hammond has given a sobering assessment of the economy, saying it is expected to grow more slowly than previously thought. But he sought to rally Conservative MPs in his Budget by scrapping stamp duty for the first £300,000 spent by first-time buyers, a saving of up to £5,000. The cut will apply to buyers in England, Wales and Northern Ireland.
The Chancellor also promised £1.5bn to "address concerns" about the flagship universal credit scheme, and said £3bn would be spent on Brexit planning, so that the government could prepare for "every possible outcome”.
Housing had been billed as one of the key themes of the Budget, and the chancellor promised the "next generation" that getting on the housing ladder would not be just a "dream".
Promising the government would deliver 300,000 new homes a year, he pledged £44bn capital investment and measures aimed at kick-starting building projects.
It was towards the end of his speech that he made the pledge on stamp duty, Rates vary across the UK - in England, Wales and Northern Ireland it kicks in at £125,000 - and in Scotland, which has its own devolved tax, at £145,000.
Mr Hammond said his change would benefit 95% of first-time buyers. It will operate only in Wales until the matter is devolved next April and stamp duty replaced by a land transaction tax.
Amid the £44bn package was a pledge to make it easier for councils to build in areas of high housing need.
There was also a threat to intervene with compulsory purchase orders if landowners and developers were found to be holding back on building "for commercial rather than technical reasons".
Mr Hammond said investing more money alone would simply inflate prices and make matters worse. "Solving the housing challenge takes more than money, it takes planning reform,” he said. “We will focus on the urban areas where people want to live... building high quality, high density homes."
As well as spending announcements, the chancellor also uses his Budget to update MPs on the state of the economy. Opening his statement, Mr Hammond said the economy "continues to confound those who talk it down" - but he then unveiled lower growth forecasts and said that UK productivity remains "stubbornly flat".
The Office for Budget Responsibility (OBR) now expects the economy to grow by 1.5% this year, down from the estimate of 2% it made in March. Growth, it says, will drop to 1.3% by 2020 and then rise to 1.5% in 2021. The OBR also expects borrowing as a share of economic output will fall, but not as fast as it expected in March.
Responding in the Commons, Jeremy Corbyn predicted the Budget would unravel, warning that "misery" will continue for people across the country. He cited falling wages and added that economic growth in the first three quarters of this year was the lowest since 2009.
The BBC’s Laura Kuenssberg commented: “When ‘Box Office Phil’ was given that nickname, it wasn't because he has a reputation for delivering political thrillers. What he tried to do was to act on concerns expressed at the general election and by rebels on the Tory backbenches as well as the Labour opposition.
“So there were changes to the universal credit benefit; some, but certainly not all the money the NHS says it needs; and an enormous sounding figure of £44bn for housing over the next five years, although it’s vital to wait for the detail of how much will go to getting spades in the ground, and how much will guarantee loans for the housing industry.”
She noted, however, that Mr Hammond had made a “bigger-than-expected move to ‘revive the home-owning dream’ by scrapping stamp duty on the first £300,000 of any property bought by a first-time buyer.” The prime minister, she said, has set her own personal reputation on fixing the housing crisis, so there is a lot riding on the mixture of moves that has been promised by Philip Hammond in this Budget.
Commenting on the Budget. Steve Olejnik, COO at Mortgages for Business said: “We applaud the abolition of stamp duty for the majority of first-time buyers and we welcome the revival of Help to Buy. Reducing the burden on first-time buyers is an essential stepping stone to creating freer movement on all rungs of the property ladder. We look forward to helping first-time buyers access the scheme.
“The UK needs a comprehensive, sustainable and joined-up housebuilding programme and, while Mr Hammond has stated that by the mid-2020s there should be 300,000 homes being built every year, more needs be done and it needs to be done more quickly. This means helping developers with a wholesale revolution of our planning system. This means more social housing and more affordable homes – particularly in the South East where property prices are largely out of reach for most people – not the Oxford-Cambridge corridor. What about tax incentives for Housing Associations that shoulder some of the burden? And shouldn’t councils be able to borrow to build?
“Property prices remain out of reach for the vast majority of potential first-buyers and only a dramatic increase in supply can begin to rectify the problem. In September, when the average first-time buyer paid £204,549 for a property in England, removing £1,590 of Stamp Duty is piecemeal – the very tip of the iceberg.”
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