Taking control of the economic debate: Why Labour should commit to a mass house building programme and a living wage

Labour should challenge the Tories to match pledges on house building and the living wage. We will see then if they really are on the side of those who want to work hard and 'get on'.

Matthew Whittley is a recent graduate, Labour party member and works as a researcher for a Midlands-based housing association

Despite Osborne failing on every conceivable measure of economic competence, Labour still lags behind the Tories in the polls on the economy. To start restoring trust, Labour needs to take control of the economic debate.

For too long the Labour Party has been on the back foot. One area where Labour could gain ground on the economy is the ballooning housing benefit bill, currently costing the taxpayer £24 billion a year. A commitment to reduce this would demonstrate that Labour is serious about tackling the deficit.

Despite the coalition’s attempts to cut it, the bill is forecast to increase over the coming years. As has become clear, the housing benefit bill cannot be meaningfully reduced without tackling the root causes – high rents and low wages – something the Tories haven’t even begun to attempt. Two things are required: a mass house building programme and the introduction of a living wage.

Investing in new homes is both economically sensible and socially necessary. We are in the midst of nothing short of a housing crisis. Home ownership is in decline and out of reach for the vast majority of young people without access to a bank of mum and dad; it would take 22 years for someone on an average low to middle income to save for a deposit.

This wouldn’t be so much of a problem if there was social housing, but thanks to Thatcher’s Right to Buy scheme (which has facilitated the sale of 1.8 million homes to date), as well as successive governments failing to replace them, there are now 1.8 million households on the waiting lists.

That leaves private renting as the option of last resort. But research by Shelter has shown that two thirds of private renters are struggling to keep a roof over their heads as rents continue to soar while wages remain flat.

The coalition government, whose 2010 Comprehensive Spending Review slashed capital funding for new homes by 60 per cent, has presided over the lowest levels of house building since the 1920s. In doing so they have demonstrated a reckless complacency and clearly haven’t grasped the scale the crisis.

Labour should make a manifesto commitment to build 1.5 million homes over a five year parliament. That may sound a lot, but this is what we need just to keep pace with demand. Around 220,000 new households are forming annually, but last year only 115,620 homes were built.

We also need to ensure that work really does pay, which can only be achieved by legislating for a living wage, not by slashing benefits. The case for a living wage is compelling. A living wage – £8.55 per hour in London and £7.45 for the rest of the UK – is what the Centre for Research in Social Policy has calculated to be the minimum required to meet basic living costs, yet a fifth of workers don’t receive it.

Over 90 per cent of recent housing benefit claimants are in work.  The National Housing Federation has estimated that by 2015 1.2 million working people will be reliant on housing benefit to stay in their homes. The Institute for Fiscal Studies projected a saving to the Treasury (in higher income tax receipts and lower benefit and tax credit spending) of £6 billion if all private sector employers increased wages to a living wage, not to mention the boost it would provide to consumer spending.

Low wages and high rents are not only costing tenants, but taxpayers too. The state is subsidising landlords who charge extortionate rents and employers who fail to pay enough to cover basic living costs. This is absurd. With the General Election only two years away, Labour should add flesh to the bones of the one nation theme by committing to a mass house building programme and a living wage.

Investing in housing would help kick-start economic growth and boosting supply would bring rents under control. A living wage would put money into people’s pockets, helping to stimulate local economies and reducing the burden on the taxpayer in the process. Moreover, it would show that Labour has answers to the housing and living standards crises, while at the same time sending the message that Labour understands the importance of deficit reduction.

Last month, a ComRes poll found that 58 per ent think the coalition’s economic strategy has failed and that it will be ‘time for a change’ in 2015. There couldn’t be a better time for Ed Miliband to outline an alternative.

The spiralling housing benefit bill presents an opportunity for Labour to show that borrowing for investment can stimulate growth and reduce the deficit in the long-term; an opportunity to show that social justice can be combined with economic efficiency; and an opportunity to start making up ground in the economic debate.

Labour should challenge the Tories to match pledges on house building and the living wage. We will see then if they really are on the side of those who want to work hard and ‘get on’.

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