New towns plan 'needs guarantees'

Hampshire Chronicle: Shadow chancellor Ed Balls will challenge George Osborne to back construction in the same way he has mortgage lending through the Help to Buy scheme Shadow chancellor Ed Balls will challenge George Osborne to back construction in the same way he has mortgage lending through the Help to Buy scheme

Ambitious plans to create a fresh wave of new towns and garden cities will need government guarantees to get them started, Ed Balls will say.

Labour believes a revival of the post-war developments is a vital part of its aim to see 200,000 new homes being built a year by 2020.

And the shadow chancellor will challenge George Osborne to back construction in the same way he has mortgage lending through the Help to Buy scheme.

"The challenge for Autumn Statement and the next Labour government is to match support for first time buyers with action now to boost housing supply," Mr Balls will say in a speech to the National House-Building Council.

"We have to be more ambitious.

"That is why at our conference in September, Ed Miliband set out our commitment to build at least 200,000 new homes a year by 2020 - through a road map to support the private sector in building more homes, including more affordable homes, and a planning system that helps, not hinders.

"I have a very clear message: a Labour Treasury will make house building a priority and play its full part in delivering the scale of change we need.

"And because of the scale of the deficit we can now expect to inherit in 2015, we will need to find innovative ways of supporting private sector investment to deliver that priority."

Nick Clegg and David Cameron have publicly backed the idea of a new generation of garden cities as a solution to the housing shortage but Mr Balls will say any momentum behind the idea has "stalled".

Opposition leader Mr Miliband has proposed giving local authorities the right to expand their towns and cities without being stopped by neighbouring councils, and also identify sites for new towns and garden cities.

The lowest levels of housebuilding since the 1920s had left the UK on course to be two million homes short by 2020 - the equivalent of five cities the size of Birmingham, he warned in his party conference speech.

He announced the creation of a commission, headed by ex-BBC Trust chairman Sir Michael Lyons, to draw up a "road map" for a major increase.

Mr Balls will use his speech to set out further details of its remit, including examining the idea of giving town development corporations the right to: keep increased revenue from business rates; use the increased value of land to generate further capital for investment; acquire and assemble land, plan and develop the infrastructure needed, and bring together the relevant agencies and utilities.

But he will suggest it will also need Treasury backing to succeed.

"We should draw on the lessons from the past of how the new towns were developed after the Second World War by development corporations, which had the powers to acquire, own, manage and dispose of land and property, undertake building operation, provide public utilities and do anything else necessary to develop the new town.

"But as we concluded when considering this issue in government, these powers alone are not enough.

"These corporations generated revenue by selling land and housing, receiving rental income and receiving commercial income. However, they needed up front funding to build the infrastructure and housing which could later be sold at a profit.

"George Osborne has shown himself willing to use the Government's balance sheet to guarantee some house building - but in particular demand through guaranteeing household mortgages. And yet we read that the new towns which you heard about a year ago have stalled.

"The Government is providing guarantees of up to £12 billion for Help to Buy. He should now step up to the plate to back the supply of new houses in new towns.

"Providing guarantees to development corporations could be essential to provide backing for a large-scale growth programme to provide confidence, reduce risk and give credibility to the development.

"We cannot afford to dither any longer - and I cannot see a stronger case for the full throated backing of the Chancellor than a step change in housing supply.

"To do that we will need the full backing of the Labour government, including the Treasury, for new towns - willing to devolve the powers, determined to provide the resources, and showing the leadership and vision that is sadly lacking in Government at the moment."

Mr Balls will say that while Labour supports the Help to Buy scheme, a planned review by the Bank of England should take place straight away amid fears it will fuel a new house price bubble without action to boost supply at the same time.

"We have and continue to support 'Help to Buy' as one element in a balanced housing plan to secure economic recovery," he will say.

"It is vital that we give those with some savings who want to buy a home access to the housing market."

But he will add: "Commentators are right to question why the Chancellor has decided that a policy, which should be about helping first time buyers, is available for homes worth all the way up £600,000 and why this policy will allow existing mortgage holders to re-mortgage their current property with a taxpayer-backed mortgage.

"The Chancellor has said he will ask the Bank of England to review the details of the scheme in a year's time. We believe a year is too long to wait. So I propose the details of the scheme should be reviewed now and then every six months thereafter, to make sure that is contributing to a balanced recovery that is built to last.

"But the fundamental flaw in the Chancellor's current plan is to rely on securing lasting recovery by boosting housing demand, while failing to take any action to boost housing supply.

"If Help to Buy merely boosts demand for housing without being matched by action to increase housing supply, then house prices will rise and rise.

"The danger with this kind of unbalanced approach is that home ownership will be pushed even further out of reach for the aspiring first time buyers that Help to Buy should be helping.

"And at the same time, boosting demand without building more homes risks delivering an unbalanced recovery that will only make the economy more vulnerable in the future."

Mike Quinton, chief executive of NHBC, said: "We are pleased to see that housebuilding will be given the full backing of a Labour Government. While our figures show a sustained broad-based recovery in the UK new housing market this year, this growth is from an extremely low base.

"Mr Balls is right to say that we are not building enough homes to meet demand. The Labour policy to build 200,000 new homes a year is clearly a positive step in the right direction, however many within the industry believe we will need to exceed this to meet the housing needs of the country.

"It is essential that government initiatives such as help-to-buy continue as we believe these have significantly contributed to the new housing growth seen this year. We therefore welcome the commitment by the shadow chancellor to continue to support help to buy."

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