Introduction
1.Ahead of its publication, it was widely reported that the Autumn Budget would address two persistent concerns about the UK economy: low productivity growth and insufficient housing supply.1 The Chancellor duly identified these problems in his Budget speech, and the Autumn Budget itself contained measures that sought to address them.
2.In the course of its inquiry on the Autumn Budget, the Committee took oral evidence from economists on the causes of weak productivity growth; and it took evidence from housebuilders, housing associations and local authorities on the structural constraints on housing supply, and the Government’s policies to address them.
Productivity
3.Since June 2016 the Government has sought to improve productivity through a series of policies including reducing taxes, improving education opportunities and the creation of the National Productivity Investment Fund (NPIF). In the Autumn Budget the Government updated its productivity plan to include additional investment in research and development for new technologies, further funding for the NPIF and plans to stimulate investment.
4.Despite these measures, the Office for Budget Responsibility (OBR) significantly downgraded its outlook for productivity growth in its forecasts, published alongside the Budget. The OBR expects productivity growth to be 0.7 per cent in 2018 (down from 1.4 per cent in its March 2017 forecast). Over the longer term, productivity growth is expected to be 1.2 per cent by 2022 (down from 1.9 per cent). These were the largest downward revisions to productivity growth in the 17 forecasts that the OBR has produced since its creation in June 2010.
5.The Committee took evidence highlighting that the causes of the UK’s weak productivity performance remain poorly understood, and that, as a result, the proper policy response is not obvious. Despite this, there was a consensus among the witnesses from whom the Committee heard that a greater level of investment would help to improve productivity. While the level of public sector investment in the economy by 2020–21 will reach its highest level as a proportion of GDP for 30 years, the Government has acknowledged that private sector investment has been affected by the current level of uncertainty.2 The Committee’s conclusions on productivity can be found in paragraphs 26 to 30.
Housing
6.The Autumn Budget announced a target to raise housing supply by 300,000 per year by the end of the Parliament. To achieve the target, the Budget proposed measures to increase the level of financial support for housing, introduce planning to increase the availability of land, provide funding for training a workforce to build new homes, and lifting the Local Authority Housing Revenue Account borrowing caps for “councils in areas of high affordability pressure”.3
7.Despite the policies announced in the Autumn Budget to address insufficient housebuilding, the OBR revised down its forecast for residential investment, which is expected to remain below its pre-financial crisis rate for the five-year forecast horizon.
8.The Committee took evidence that increasing housing supply requires measures to address issues in each sector of the housebuilding market: private builders, local authorities and housing associations. Although the Budget identified some of the principal constraints on housing supply—planning controls, access to land, availability of infrastructure, and access to finance—the measures announced would be unlikely to be sufficient. The Committee’s conclusions on housing can be found in paragraphs 95 to 102.
The inquiry
9.The Committee took evidence on the Autumn Budget during five meetings as follows:
28 November 2017: Housing experts
Brian Berry, Chief Executive, Federation of Master Builders; Councillor Nick Forbes, Senior Vice Chair, Local Government Association; and David Orr, Chief Executive, National Housing Federation.
29 November 2017: Economists and the Institute for Fiscal Studies
Professor Jagjit Chadha, Director, National Institute of Economic and Social Research; Ann Pettifor, Director, Prime Economics; and Paul Johnson, Director, Institute for Fiscal Studies.
30 November 2017: Office for Budget Responsibility
Robert Chote, Chairman, Office for Budget Responsibility; Professor Sir Charles Bean, and Graham Parker CBE, Members, Budget Responsibility Committee.
5 December 2017: Tax experts
Andrew Courts, Member, Global Forum for Taxation, Association of Chartered Certified Accountants; Frank Haskew, Head of Tax Faculty, Institute of Chartered Accountants in England and Wales; and Ray McCann, Deputy President, Chartered Institute of Taxation.
6 December 2017: HM Treasury
Rt Hon. Philip Hammond MP, Chancellor of the Exchequer; and Clare Lombardelli, Director of Strategy, Planning and Budget, HM Treasury
10.The Committee received written evidence from the Institute of Chartered Accountants in England and Wales (ICAEW), the Chartered Institute of Taxation (CIOT), the Association of Accounting Technicians (AAT) and the Association of Chartered and Certified Accountants (ACCA) for their overall assessments of the tax measures in the Autumn Budget 2017.
19 January 2018