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Don’t bet your house on the budget delivering a modern building boom

We are in a world of change. Once we waited for chancellors to emerge, bleary-eyed, from weeks of purdah and hand down their budget secrets from the dispatch box like tablets of stone.

Now they do pre-budget interviews with the better Sunday papers and happily chat about their forthcoming announcements on the Sunday morning political programmes. Philip Hammond may yet surprise us today, but these days budgets are mainly about dotting the “i”s and crossing the “t”s.

I regret the passing of the spring budget, which chimed with the rhythm of the seasons. Even bad news does not seem quite so grim when the days are warming up and getting longer. A gloomy November day, on the other hand, can cast a pall over even the best bits of a speech by the most upbeat chancellor. And even Mr Hammond’s best friends would concede that he is not the most upbeat chancellor.

Brexit hangs like a huge cloud over the economy over the next few years. The cabinet’s Brexit sub-committee has agreed in principle to increase the EU divorce bill offer by tens of billions of pounds, as was inevitable.

The Office for Budget Responsibility’s expected productivity downgrade, meanwhile, has dominated the chancellor’s budget preparations, though the short-term news on the public finances has been good. Figures show that, despite a rise last month, public borrowing from April to October, at £38.5 billion, was the lowest since 2007 and £4.1 billion down on last year. But public sector net debt, at £1.79 trillion, or 87.2 per cent of gross domestic product, remains scarily high.

Some traditions remain. Amid these shifting tectonic plates, there will be something rather comforting about today’s rituals, a reassuring “business as usual” approach. Later today, I and others will be guided by the chancellor’s advisers through the budget “scorecard”, the detailed tax and spending decisions, of which many, in public finance terms, will be tiny; in the low millions of pounds. The moment the Treasury gives up on that kind of detail is the moment that you really start worrying.

We will see a new tradition playing out today, one that we could do without. This is the tradition in which chancellors set themselves ambitious targets and proceed to miss them; overpromising and underdelivering.

Though he can blame Brexit and the productivity chickens coming home to roost, Mr Hammond has set himself a target for the public finances by 2020-21 that is less demanding than the one George Osborne set himself in 2010 to be achieved in 2015. Mr Osborne missed his target, though he got close in 2016. Mr Hammond’s aim, a structural budget deficit of less than 2 per cent of GDP, looks less demanding, but it would be wise not to bet on it being achieved.

An even bigger miss was Mr Osborne’s target to double Britain’s exports from £500 billion a year in 2012 to £1 trillion by 2020. That target, which has been quietly dropped, was perhaps the ultimate triumph of hope over experience. Even with the fillip provided by sterling’s devaluation, which is helping manufacturers, exports will be only about £600 billion this year. We are unlikely to get to £1 trillion of exports by 2030, certainly not 2020.

There is another target that I can say with confidence will not be achieved. This is the one championed by Sajid Javid, the communities’ secretary, and taken up by Mr Hammond to build 300,000 homes a year. Imprecision is useful in this area; it is not clear whether this target refers only to England or to the UK as a whole. Either way, it is not going to be hit. Housebuilding figures are something of a statistical minefield. Last week the prime minister celebrated 217,350 net additional dwellings in England in 2016-17, the highest since 2007-08. On the face of it, the journey to 300,000 is not that far. That figure, however, includes tens of thousands of conversions, in which commercial properties and larger houses are turned into flats, as well as a few hundred caravans and houseboats.

A more conventional statistical series for housebuilding shows that 170,450 new “permanent dwellings” were completed last year, of which 140,850 were in England.

Harold Wilson oversaw a housebuilding boom in the 1960s

It is a very long time since 300,000 new homes were built in the UK, 40 years to be precise. Since the 1970s, even 200,000 would have been too ambitious a target. The postwar golden age of housebuilding, of slum clearance and new buildings on bomb sites, was the 1950s and 1960s. Though many people think that Harold Macmillan was the master builder, that accolade goes to another Harold — Wilson. No fewer than 425,830 homes were built in 1968.

A glance at the figures for that period provides one reason why the 300,000 target is unattainable. Local authorities, supplemented by housing associations, built on a huge scale, typically between 150,000 and 250,000 new homes a year. Now they build just over 30,000 a year and an increase to those historic levels is not in prospect. Only once in the past 45 years, in 1988, has private building exceeded 200,000 homes a year.

That is not the only problem. Housebuilding companies report serious skill shortages even at present levels of construction and expect Brexit to make this worse. Ideas about getting the builders to use or lose their land banks, or encouraging the re-emergence of the small and medium-sized builders wiped out by the financial crisis, will mean nothing if the capacity does not exist. It does not and it most probably will not.

We should welcome the fact that the government, not for the first time, is addressing the issue of housing. But we should take the 300,000 target with a cement-sized sack of salt.