Chancellor Philip Hammond yesterday promised to turn Britain into a prosperous nation of homeowners, yet was rocked by a sweeping set of downgrades to the UK’s future growth prospects.
Hammond used the Autumn Budget to abolish stamp duty for thousands of first-time buyers, and reveal £15.3bn of new funding to encourage housebuilding.
“As we invest in our country’s future I have a clear vision of what Global Britain looks like,” he told MPs.
“A prosperous and inclusive economy where everybody has the opportunity to shine... Where the dream of home ownership is a reality for all generations.”
However, the outlook for UK growth is now weaker than at any point for decades after the Office for Budget Responsibility (OBR), Britain’s fiscal watchdog, slashed its GDP forecasts for each of the next five years.
The OBR blamed the downgrades on Britain’s exceptionally poor level of productivity. “Regrettably, our productivity performance continues to disappoint,” Hammond said.
A tighter fiscal outlook has forced the chancellor to slow the rate at which he plans to cut government borrowing, while yesterday’s Budget was also light on giveaways. Yet he found space for the extra £15.3bn of investment, loans and guarantees committed to the housing sector, announced alongside a series of planning reforms as well as the cut to stamp duty.
Encouraging higher density building in cities would enable “the strong protection of our green belt”, Hammond said, resisting calls for more building in areas surrounding major cities.
Hammond announced he was abolishing stamp duty for first-time buyers on properties worth up to £300,000. First-time buyers will also receive a stamp duty holiday for the first £300,000 on purchases up to £500,000.
While the move was initially met with cheers in the House of Commons, it quickly faced criticism after the OBR said it would have the unintended consequence of ramping up house prices.
“Thus the main gainers from the policy are people who already own property, not the first-time buyers themselves,” it said. The OBR believes only an extra 3,500 homes will be bought by first-time buyers as a result of the change.
Nonetheless, Tory MPs rallied behind Hammond, whose position at Number 11 had been questioned in recent weeks following a series of Brexit-related clashes in the cabinet.
“Money is still very tight so he was never going to pull great big rabbits out of hats [but] among colleagues it’s gone down very well and it’s a Budget that will be very easy to explain to constituents,” said James Cleverly, MP for Braintree.
Harlow MP Robert Halfon added: “He’s gone from Eeyore to Tigger. He was brilliant today, I’ve never seen him like that, and it was a well-crafted Budget on the whole. It was a ‘direction of travel’ Budget… it was a good start. They will have to [address] green belt reform in the future, but today was about going in the right direction.”
Hammond also announced a review of so-called “landbanking”, saying that there was an unacceptable gap between the number of planning permissions granted and the number of housing starts.