Danny Alexander's 2014 Shelter Scotland Lecture

Chief Secretary to the Treasury, Danny Alexander talks housing policy in the 2014 Shelter Scotland lecture.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Danny Alexander

Let me start by saying thanks to Shelter.

Thanks for the services you provide in the Highlands and across Scotland, and for your passionate campaigning on housing issues. Ever since your formation in the 1960s, you are a formidable voice.

Thanks also for giving my dad a job!

My father worked for Shelter Scotland back in the 80s, helped set up Lochaber Housing Association, then went on to found The Highlands Small Communities Housing Trust, and now he’s retired works harder than ever for local and affordable housing.

Housing – and having it available, appropriate, and affordable – is not only fundamental to a successful economy…

A functioning community…

It is absolutely key to people’s wellbeing.

Whether you own it or rent it, the place you go back to at the end of the day is one of the most important aspects of your life.

As William Pitt the Elder said two hundred and fifty years ago: “The poorest man may in his cottage bid defiance to all the forces of the crown. It may be frail - its roof may shake - the wind may blow through it - the storm may enter - the rain may enter - but the King cannot enter”.

Economics is often defined as the study of how you allocate scarce resources.

Sadly housing, that most basic of human needs, is a scarce resource in this country.

Shelter is notably on record as saying we need to be building a quarter of a million now homes every year in England alone.

I’m in a similar ball park – across the UK, we need to be building 300,000 new units every single year.

And one of the things I will be exploring today is how we can reach that number.

I’ll be frank: this is tough. As you all know better than I do, housing is one of the issues of our time to which there isn’t an easy answer.

These are lots of difficult questions and there’s no short answer. I’m afraid there’s no simple long answer either.

Tonight I would like to discuss three of these issues.

First, welfare reform, and in particular social housing.

Second, localism and devolution.

And third, homebuilding: how many, how soon, where, and how.

When we formed a coalition government in 2010, we were confronted with an economy that was in the grip of the worst economic crisis since the 1930s.

We had to deal with the biggest budget deficit in peacetime history, and the painful effects of a financial crash, the reverberations of which affected households up and down the country. A strong stable government was essential.

Responsible government is about squaring up to the difficult decisions – no matter how temporarily unpopular that might make you.

Our first priority was to pull our economy back from the brink.

When a country loses control of its public finances, it’s not the rich who are hit first and hardest.

It’s the poorest and the most disadvantaged – the very people we came into politics to help.

You can see the consequences of that in those countries that did lose control and then had nationally important decisions taken out of their hands.

Confronting unsustainable public finances is at the heart of good government. It’s a vital precondition to growth. And it’s absolutely necessary in delivering fairness.

Because it’s only with a healthy economy that we can properly carry out the core tasks of government – providing high quality public services to the people who need it most.

One of the fundamental principles of the growth-oriented reforms we put in place is that every person who can should stand on their own two feet. Being in work; making their contribution to society – supported by a system that enables, encourages, and incentivises, that ensures opportunity for everyone.

Even before the financial crisis, there were around 5 million people in the UK of working age on out-of-work benefits. 1.4 million of them had spent the last decade unemployed. The number of households where no-one had ever worked almost doubled between 1997 and 2010 – at the same time as we were being told that “boom and bust” had ended.

Correcting that needs a two-pronged approach. On one side, incentivising people to work, and correcting problems in the system. On the other side, providing the right environment for job creation.

It is working. Last week, ONS figures showed that unemployment fell by 154,000 to below 1.97 million in the three months to the end of August, the first time it has been below two million since 2008.

Since May 2010, Britain has created over two million more jobs for people to go to. That’s more than the rest of the EU combined, the fastest rate of job creation of any major economy.

The job is nowhere near done, of course. The challenge now is to get wages up, to get productivity up, and all while finishing the job of balancing the books and doing so fairly.

One of the key principles must be that people should be better off in work than on benefit. That’s why I am a strong supporter of Universal Credit. It simplifies the convoluted existing system. It puts work back at the heart of the system, where it belongs.

It particularly helps the under-25s, those with caring responsibilities and, through expanded childcare support, one-parent families. All can be certain they will be better off in work, and will get better help to get there. It focuses support on those who need it and is being carefully rolled out.

The referendum on independence was a momentous event, a life changing experience for many, including me.

And while I was delighted with the decisive result, we now have a huge opportunity – and a solemn responsibility - to deliver the right sort of change for Scotland within the UK. A responsibility I take personally.

The Smith Commission has been established to make greater devolution for Scotland a reality.

I will be working for a package of new powers that is radical, far-reaching, and comprehensive. That enables the Scottish parliament to be financially self-sustaining and puts Scotland in a federal relationship with the rest of the UK.

There will be plenty of debate about that, but tonight I want to talk about one aspect that is relevant to our topic, and that is how we empower communities.

I strongly believe that the transfer of power that Scotland needs is not just from the UK to the Scottish parliaments, but from Holyrood to communities in Scotland.

Federalism means decisions being taken at the most appropriate level.

So we also need to reverse the tide of centralisation that we have seen in Scotland in recent years. On some measures, Scotland is now the most centralised part of the UK.

I believe that local communities are more often than not best placed to make decisions which affect them.

Clearly there are certain issues which are quite rightly within the remit of central government. Foreign affairs, defence, monetary and macroeconomic policy, the UK single market and the labour market spring to mind.

But if a community wants to develop and invest in their local infrastructure – who are we to get in the way?

So I want to tell you about a few of the things that the coalition government has been doing to help communities deliver for themselves.

I daresay most of you have not read the Localism Act 2011; after all it doesn’t apply in Scotland. But it is a groundbreaking piece of legislation putting power back into the hands of people.

We didn’t think it was right that regional strategies – including housing targets – were set by central planners. So we abolished those strategies to allow local authorities, working with communities, to decide how best to provide housing for their needs. And we introduced “neighbourhood planning”, a new right for communities to draw up their own local plan – giving them the say on where they think new houses, businesses and shops should go and what they should look like, and giving those plans full legal force.

1,200 communities have now started this process, with 140 plans published for consultation. The first 28 neighbourhood plans are already in force – and just today, in Winsford, Cheshire, one is being voted on which, if agreed, will allocate sites for over 3,300 houses.

We have introduced the community right to build. This enables a community organisation, formed by members of the local community, to bring forward development proposals. Providing they meet certain minimum criteria and can demonstrate local support through a referendum, these proposals will be able to go ahead without requiring a separate planning application at all.

And for the first time, local authorities have been given a “general power of competence”: if they want to do something and it’s not against the law, then they can get on with the task – giving local authorities increased confidence to create and innovate.

In England, the Localism Act has been a vitally important move towards the devolution of powers as close as possible to the people they affect.

We’ve been working too to empower our great cities to provide the economic leadership that was once their hallmark.

Recognising that the world over great conurbations are drivers of growth, our City Deals return to Cities real powers to shape their economic destiny. One of my proudest moments as Chief Secretary was signing the Glasgow City Deal – a £1.13bn package of improvements across the board, agreed with the 8 local authorities across Glasgow and the Clyde Valley and with the Scottish government making a financial contribution.

These are prime examples of how government can empower local communities. Empowered communities are better able to help themselves, more willing to take difficult decisions, as the substantially higher housing number in communities with neighbourhood plans shows.

Holyrood too often behaves as if it knows best, just as Westminster often does. A stronger Scotland needs stronger, more powerful communities, and that means power leaving Edinburgh not getting stuck there.

So I will be arguing very strongly that the Smith Commission should not only set out further devolution to Scotland, but how further devolution within Scotland could work.

Moving towards a much more devolved, much more federal model of government will ensure that local communities have a far greater say in the decisions that most affect them.

But it won’t answer all the big questions. Like how do we build 300,000 new housing units a year?

We need to do this for two reasons. The first, and perhaps the most obvious, is the social one: supply needs to keep up with the demand of a growing population.

But there is also an economic reason: too often our volatile housing system has been a magnifier of financial instability, rather than a source of economic sustainability.

I see the coalition government’s activity in this area since 2010 as falling into four key areas:

  • access to finance
  • simplification of the planning system
  • public investment in affordable housing – including in the rented sector – and regeneration
  • and measures helping people to move up, or get on, the housing ladder.

Let me talk a little further about each of these.

My caveat, which I should make clear at the outset, is that some of these measures are England-specific because of devolution. Some have been replicated in Scotland, others not. They are all nonetheless relevant.

Since the financial crisis, which saw the number of housing starts fall by 65% from peak to trough, we know that access to funding has been an issue for developers of all sorts.

So we have invested £3.6bn to provide access to finance for developers – getting work started on stalled developments, helping SME developers, nurturing build-to-rent schemes, and building infrastructure to support schemes of more than 1,500 units. Financial guarantees are helping housing associations and private developers attract large scale funding at a lower cost, like the Countesswells development building 3000 homes near Aberdeen.

We have radically reformed the planning system.

These reforms are having significant effects. In the last 12 months alone, planning permissions have been granted for 230,000 new homes – a six-year high.

Still, more can be done. As the proposed developments at An Camas Mor and Tornagrain in my own constituency show, well thought through new settlements have a significant role to play and can command public support.

But as well as being plentiful, housing should be affordable.

We have put significant public investment into this. £4.5bn during this Spending Review period to provide 170,000 new homes. A further £3.3bn to deliver 165,000 more homes over 3 years from 2015.

This is the fastest rate of affordable house building for more than 20 years.

In the first half of this year alone, councils in England built more houses than in the whole of the 2005-2010 Parliament.

We’ve set up a ten-year mechanism to ensure long-term rental certainty for social landlords – giving them the certainty to plan for long-term housing development.

So we have expanded the “rent to buy” scheme, for people who want to rent affordably now, save for a deposit, and then buy the new home (or a different home) later. We’ve done this through committing £400m in low cost loans to support housing associations and other providers to build 10,000 new homes across the country. As Shelter have said, these routes to lower cost home ownership are critically important today.

And we have had real success in the Help to Buy scheme – supporting creditworthy households who can’t afford the large deposits needed to get on to, or move up, the property ladder.

When we introduced Help to Buy, there were a lot of nay-sayers. People who thought it would overheat the market and just drive house prices up. Or that it would only help rich Londoners.

But sometimes you have to argue against the classical economists – and get involved in the market.

The figures prove this scheme right. Over 50,000 sales, over four fifths of which to first time buyers, four fifths outside London and the South East, over 2,000 in Scotland. The vast majority of them newbuilds. As the Executive Chairman of the Home Builders Federation, Stewart Baseley, said: Help to Buy “has reinvigorated the home building industry”.

The Bank of England’s independent Financial Policy Committee has judged the scheme does not pose material risks to financial stability in the UK and has not been a material driver of recent house price growth.

I said at the start of this lecture that we need to be building around 300,000 homes a year.

Not meeting that target is an economic risk to the country, as well as making housing of all sorts progressively less affordable.

The blizzard of policies I have just listed are all directed towards raising the number of homes built in this country.

The 12 months to June 2014 saw 137,780 housing starts. That’s 22% more than the year before – our policies are working – but, to be honest with you, we are not in the order of magnitude we need to be.

Of course, you’d be right to say that we will have to wait for the recovery to be in really full swing before being able to judge how much difference these changes have made. And I think they will deliver big results.

But I suspect that even our most ambitious policies – releasing enough public sector land to build 100,000 homes by April 2015, or removing planning obstacles on brownfield sites to support up to 200,000 houses over the coming years – will be hard pressed to take us to the magic number.

Too often housing policy makers and organisations focus on very specific problems. How do we get more houses of a certain sort, or in a particular place.

These produce good schemes, meeting important needs, but they don’t add up to what the country needs overall.

We cannot be content with the status quo. We cannot spend another decade coming up with good individual schemes, but as a country falling short. Our economy will be less stable, our society less fair, homes even less affordable.

It’s not often you’ll find a Treasury minister speaking warm words about the policies they have in France – so treasure this moment! France, with a comparable population, has built on average 200,000 more homes per year than we do, and it has recently set out a target to build 500,000 per annum.

So I have tasked my officials to explore radical ideas to introduce a real step change in our activity.

Radical ideas which might seem counter-intuitive – just as Help to Buy was…

But if we are going to be really ambitious about this then we have to explore all the avenues – and, as in Help to Buy, see where we can harness the power of government in the market.

As I said at the start, there are no easy answers.

A good start is asking the right questions.

And now is the right time to be asking them.

The policies we put in place today will have direct bearings on the lives of our children.

It’s a huge challenge. But the prize – delivering both a stronger economy and a fairer society, which provides opportunity for all – is perhaps the greatest of them all.

Thank you for listening.

Published 24 October 2014