Our Open Letter on resolving the local government and housing crises quoted a Guardian editorial which said that the next government would either “have to repudiate Jeremy Hunt’s cuts or enact them”. A similar point has been made by Jim Pickard and Sam Fleming in the Financial Times (‘Hemmed in’: Labour stores up trouble with long list of tax pledges Party risks being forced to embrace current trajectory of brutal spending cuts if it wins the election, experts warn). Picard and Fleming write
“But experts said the shadow chancellor would, if Labour won the general election, have to raise some taxes, boost borrowing, or else embrace the current trajectory of brutal spending cuts pencilled in by Conservative chancellor Jeremy Hunt.”
Jim Pickard and Sam Fleming, FT
If Rachel Reeves sticks to the departmental spending plans of the Tories, then for “unprotected” departments, including local government, “Hunt’s plans imply steep real-terms cuts for unprotected departments.” The Autumn Statement programmed in a £19 billion cut for these. It also included the reintroduction of a freeze of Local Housing Allowance from 2025, one of the main drivers of the crisis in relation to temporary accommodation. The growing gap between the rising cost of temporary accommodation and income from LHA is pushing some councils towards issuing section 114 notices. Will Labour really reintroduce an LHA freeze? If not they will have to find more money from somewhere.
Labour in government is faced with a big choice. It either has to carry on with austerity or it will have to find the means of raising money through tax increases on wealth and unearned income.
It is caught in a contradiction of its own making, highlighted by Martin Wolf in the FT.
“The danger is that Labour feels it cannot get away with offering any of it. The party instead seems set on sticking as close as it can to government policy. That strategy might indeed increase its chance of winning the election. But it will deprive it of a mandate for much change. If it keeps to its cautious approach it risks presiding over another period of stagnation and failure. If it shifts to radicalism, it will be rightly accused of acting without a mandate. Either way, the cynicism of the public is likely to grow. At worst, posturing will go on substituting for radical policy, leading to prolonged stagnation and declining public confidence. This is a path to failure. Sometimes, as now, politicians must dare to be bold.”
Reeves is painting the future government into a corner. We are told that “there is no money”. As our Open Letter says: “That is only true if the regressive taxation system we currently have is left in place rather than moving back to a progressive one”. Even Polly Toynbee in the Guardian has now called for Labour to equalise capital gains tax with income tax, a demand taken up by many, including the TUC. To say that taxes cannot be increased because “they are at the highest for 70 years” ignores the question of how they are distributed. They are not high for some people and businesses.
Ironically, as Toynbee points out, it was Thatcherite Nigel Lawson who equalised capital gains tax with income tax in 1988, declaring “There is little economic difference between income and capital gains.”
No honeymoon period in local government?
If Labour is elected then there will be no honeymoon period in local government because planning for the new financial year, 2025/26 will be well advanced (unless it’s a May general election). If a Labour government does not provide the £4 billion extra which the LGA is demanding of the current government then more councils will fall over the section 114 precipice (declaring that they cannot balance their budget).
Labour’s Shadow Housing Minister has said that Labour in government would not increase the grossly inadequate funding currently available in the Tories Affordable Homes Programme. This position is based on Rachel Reeves economic straitjacket. Yet if the housing crisis is to be addressed we need a big increase in the funding for new build/acquisition of council housing. Councils will build council housing if they are provided with the funding to do so. It makes no sense to keep on subsidising private landlords and to keep millions of people locked into insecure, and often poor quality private rented accommodation. The 100,000 households in temporary accomodation and most of the 1.2 million households on waiting lists are not going to be able to afford mortgages. They need council housing.
Some people are keeping their criticisms of the Labour leadership’s policies under wraps, because of the approaching general election. But it is necessary to tell the truth; even to those who do not want to hear it. A Labour government implementing austerity will fail to address any of the material problems which require radical action. As we said in our media release, decarbonisation of housing is not an optional extra. A policy of dealing with the climate emergency ‘if fiscal rules allow’ is hardly liable to galvanise support is it?
Martin Wicks
Secretary, Labour Campaign for Council Housing
Read our Open Letter on resolving the local government and housing crises. To sign it email us at labourcouncilhousingcampaign@gmail.com
Labour Campaign for Council Housing 