What surprises will George
Osborne's Budget speech next Wednesday hold? Some of its contents
should come as no surprise, even if their details are not yet
public. The Chancellor's decision to continue plans to reduce
Government debt to 2018/19 means that further dramatic cuts in
public spending are planned, despite the better economic news.
The Institute for Fiscal
Studies estimates that even with £12 billion a year of
additional cuts to social security spending, the Chancellor's plans
would imply cuts of more than 30% in "unprotected" public service
budgets since 2010.
In fact, the challenge could be even greater than these headline
figures imply, since the government has already made additional
spending commitments of more than £6 billion a year after 2015-16 -
implying additional cuts elsewhere.
The population is projected to grow by about 3.5 million between
2010 and 2018, and over the same period, the number of individuals
aged 65 and over, who, on average, place greater demands on the
NHS, is set to grow by two million. This implies a rising demand
for public services which will put pressure even on those budgets,
like the NHS, which are supposed to be protected.
The likelihood of a major new initiative on housing that costs
money is therefore low. Existing schemes, such as Help-to-Buy,
which are due to end during the next three years are unlikely to be
extended without good reason. Already the House Builders Federation
has issued a pre-emptive warning against ending the Help-to-Buy
scheme in March 2016 as planned, and the Chancellor is reported to
be considering a phased wind-down of the scheme.
The Royal Institution of Chartered Surveyors makes the more
interesting suggestion that the government should consider
adapting Help to Buy to suit individual regions' needs. Sixty per
cent of RICS members surveyed believe that adjusting the scheme on
a regional basis would make the market more sustainable.
Furthermore, half of those who are in favour believe that the
funding should be limited purely to first time buyers. RICS would
like to see the government reassess the scheme with a view to
providing the relevant help according to an individual region's
RICS also calls for reform of stamp duty to replace the current
"slab" system, which hikes the tax percentage payable at prescribed
thresholds - which then become effective price limits - with a
fairer, marginal rate to replace the current structure which sees
few homes come onto the market at between £250,000 and £275,000
whether or not they are worth that price.
It seems unlikely that the Government will risk major reform of
Stamp Duty this time around, but RICS's intervention is a timely
reminder that reform of housing taxation is a neglected topic in
current debates about future housing supply, prices and
The one exception is some recent work
commissioned by the Joseph Rowntree Foundation. In a paper
published last week exploring the possible future replacement of
council tax by a tax based on actual property values, the authors
report that econometric modelling suggests that a property tax
could also play a "supporting role" in reducing house price