I’m not sure I’d go so far as to say that the Chancellor’s Spring Statement was ‘a damp squib’ but given the contents then I suspect everyone was right to play down its significance. This was certainly not a Budget in any other name and, watching proceedings, one couldn’t help but wish for something a lot more substantial even if the recent history of two Budget-type events per year was perhaps over-egging the pudding.
Philip Hammond himself had assured us this would be a mere update on the performance of the economy, a brief look at progress made on measures announced in last November’s Budget, and details on a few more consultations that are now underway. And he wasn’t wrong – what he failed to tell us beforehand was that he would spend most of his time barracking the Labour Party and their Shadow Chancellor, John McDonnell, which leant proceedings a far more edgy political air than we have come to expect from Budget-type announcements.
That said, when it came to the housing market there was perhaps more to get our teeth into than any other sector, with news about ongoing negotiations with Local Authorities in terms of sharing out housing development money, plus more money for new affordable homes in London, and extra funds for smaller house-builders. This latter point is particularly positive given that the Government (at present) is utterly relying on the big developers to deliver its house-building targets; ever since the Credit Crunch smaller and medium-sized builders have struggled to get a foothold and this money will I’m sure be welcome to them.
In other mortgage matters, there was an update on last November’s decision to cut stamp duty for first-time buyers. Hammond revealed that 60,000 first-timers had benefited from this cut since then, costing the Treasury a not insubstantial £300m in lost stamp duty revenue. As some have been quick to point out, if the flow of first-timers onto the housing ladder continues at this pace then the Treasury’s estimate that this would cost them in the region of £600m per year will be outstripped.
Now, the argument might be made that this is a price worth paying in order to incentivise potential first-timers to buy, but you might well argue that what this actually does is ‘reward’ those who were going to buy anyway. The saving – which at most would be a couple of thousand pounds – might allow individuals to get to their deposit goals a little bit early but I’m not sure it’s going to be the difference between someone buying or not. In fact, as the OBR pointed out last year, the big winners from this will be existing homeowners who will see the value of their homes go up, as potential first-time buyer purchasers are able to put in higher offers.
So, what we might have here is a policy that ends up costing the Government north of a £1bn every year, and has no material impact on the number of first-timers purchasing their first home. And it doesn’t really help that demographic confront the biggest obstacles in their way, namely high house prices, saving for large deposits, meeting affordability and criteria measures, and securing access to high LTV mortgages. Perhaps we might see more action in these areas in November’s Budget?
Finally, I did think Hammond was going to go through his entire Spring Statement and not mention the biggest issue – Brexit. He did eventually get to it, and was rather vague about any progress made, although he assured us, progress had been made. The Government is still ‘preparing for all eventualities’ and has set aside £1.5bn of Brexit preparation funding for all departments in 2018-19 but apart from some political slogans such as Britain would remain a ‘free trading nation’ and ‘our best days ahead of us’, one couldn’t help thinking that Hammond’s version of the future is a ‘jam tomorrow’ one – unfortunately by then we might not have any bread to spread it on.
Richard Adams is managing director of Stonebridge Group