Chancellor of the Exchequer George Osborne plans to spur construction in his budget by extending the Help-to-Buy program for new homes to 2020 and fostering the expansion of a commuter town southeast of London.
The U.K. will invest a further 6 billion pounds ($10 billion) in Help-to-Buy, which allows people to purchase a newly built home worth as much as 600,000 pounds with a 5 percent deposit, according to an e-mailed statement from the Treasury yesterday. The additional funding will help support the construction of 120,000 properties, the Treasury said. The initial plan for a so- called garden city in Ebbsfleet, Kent, includes 15,000 homes.
“Britain has got to get building,” Osborne said in an interview on the BBC’s “Andrew Marr Show” yesterday. “A key part of economic security is the security of being able to afford your own home.”
Two days until his budget statement on March 19 and 14 months before a general election, Osborne is hitting back at opposition Labour claims that his Conservative-led government is benefiting only the richest in society. He also acknowledged that while he sees the recovery as a sign of success, Britain’s economy needs to rebalance to address its weakesses.
Bank of England Governor Mark Carney told lawmakers last week that while a recovery is under way in the U.K., investment and exports need to keep growing for it to be sustained. Osborne said that Britain can build resilience by addressing long-term weaknesses and by boosting ties with emerging markets.
“We don’t export enough, we don’t invest enough, we don’t build enough, we don’t make enough,” Osborne said. “We’ve got to go a lot further and we’ve got to make sure we’re really getting to the bottom of what it is that provides economic security for the people of this country.”
Osborne’s announcement on Help-to-Buy fights back at Labour criticism that the government has failed to build enough homes and the Help-to-Buy plan’s cap was too high, helping fuel a surge in prices in London and the southeast.
Writing in the Sunday Mirror newspaper yesterday, Labour treasury spokesman Ed Balls pledged a Labour government would get 200,000 homes built a year by 2020. He also reiterated his party’s pledges to freeze energy bills until 2017, introduce a lower 10 percent starting rate of income tax, reverse the tax cut for top earners, and implement a one-time levy on bank bonuses to raise money to help young unemployed people get back into work.
Almost three-quarters of 33 analysts in a monthly survey by Bloomberg said the British property market is at risk of overheating, and report from Acadata last week showed house prices soared the most in almost two years in February, powered by the capital.
‘Ambition to Build’
The government will provide as much as 200 million pounds to develop infrastructure and community facilities in the new city near the high-speed rail station on former industrial land at Ebbsfleet, 19 minutes from central London with direct trains to Paris, the Treasury said. It will be the first development of its kind in almost 100 years.
“Our predecessors had the ambition to build for Britain,” Osborne said. “Britain has to up its game. Britain has to earn its way in the world. Yes, the economy is recovering, but that is not enough. We’ve got to finish the job.”
Osborne also indicated he may not yield to demands from lawmakers in his Tory party to use the budget to increase the threshold at which people start paying a 40 percent tax rate. Restrictions to the threshold at which people start paying tax at 40 percent instead of the basic 20 percent rate -- currently about 41,500 pounds a year -- mean more people are being dragged into a tax band originally aimed at the well off.
“My priority has been to increase the personal allowance,” Osborne said on the Marr show. “What that means is, yes, you’re taking the low-paid out of tax -- which, by the way, has always been a Conservative ambition -- but we’re also helping those on middle incomes.”
Deputy Prime Minister Nick Clegg, whose Liberal Democrat party first proposed the policy, has urged him to add at least 500 pounds to the minimum threshold as a “workers’ bonus” in the budget. Osborne has used every one of his budgets to raise the income-tax allowance, from 6,475 pounds when the coalition took office in 2010 to 10,000 pounds as of next month.
“It helps people watching this program whether they’re earning 20,000 pounds or 50,000 pounds,” he said. “It is a very effective instrument for making sure that hardworking people keep more of their money.”
Osborne also indicated he will use the budget to announce the cap he will impose on overall welfare spending. Earlier this year, he said that more benefit cuts will be needed after the 2015 election.