Invest in homes to grow the economy
Kate Davies CBE FRICS
Consultancy to help the property, technology, investor and maintenance sector understand social housing better.
The UK suffers from low growth, low productivity plus a high level of debt. ? I don’t envy the Chancellor, trying to achieve “growth” with this starting point plus impossible fiscal “rules”.
However the government's instinct is right – we need to grow our way out of trouble rather than cutting to the marrow. Our UK's low growth Is closely connected to decades-long, under-investment by government in the large capital projects that could boost our productivity – especially infrastructure, technology and training.?
In August, the Office Budgetary Responsibility published a report in August called Public Investment and Potential Output, which makes interesting (if rather nerdy) reading. The UK's rate of investment has lagged the OECD average by about 3% for the past 40 years. This means that the average UK worker works with about half the level of capital compared to that employed in either Germany or the USA, for example. To catch up with our main competitors would need government investment of about ￡100bn per annum.?
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The OBR report analyses what this level of investment could do for our flagging economy. Over a relatively short period (five to ten years) the investment is not only paid back but it would enable enough growth to repay it twice over, in greater efficiency, more jobs and increased tax revenues. This would be equivalent to a rate of return on the investment of about 9% - obviously significantly higher than the government's current cost of borrowing. The returns vary but are highest on illiquid assets such as homes, roads and public buildings, (but these debts are repaid more slowly as a result).
The report specifically considers investment in social housing alongside other types of national infrastructure such as road and rail. And it's helps to reveal the folly of cutting capital investment in social housing (alongside it's effective privatisation through Right to Buy). ?Meeting much of housing need through revenue (ie housing benefit etc) will not support growth and cuts off the potential of a long term positive revenue stream.
Partner of 2 Halves
4 个月I agree
Property, Transportation and Infrastructure
4 个月Given this is exactly where government borrowing actually makes sense it is indeed a no brainer. But alongside the obvious financial benefit we need to recognise that our planning system is appallingly behind the curve too. If it takes years to get consents for decent amounts of housing and decades for projects like the Elizabeth Line and the Lower Thames Crossing all that borrowing is of no use. Planning reform and fiscal energy have to go together.
Deputy CEO @ Westward Housing Group | Chartered Institute of Management Accountants
4 个月All agreed regarding public/private growth via national level investment. Trouble is, this in itself will only throw more debt onto the PSBR unless it yields long run value for money and results in a permanent shift to higher rates of productivity. With somewhere between 3m and 5million workers out of gainful employment since the Pandemic, the immediate focus needs to be a switch from the status quo to a fuller level of employment. Raising the tax take and driving inward investment into the UK from around the globe. The providers of such capital will more likely have greater success in achieving the shifts in productivity and growth than our Government could ever do via nationalisation or similar command driven economics.
Experienced NED, SID, advisor and former CEO MTVH
4 个月It’s a no brainer Kate. Time to be brave for the long run
CEO at 3C Leading Social Housing Data and Technology Consultants
4 个月Well said Kate Davies CBE FRICS. I appreciate that investment comes with risk, but in my experience if the right leadership is in place you will succeed.