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No way to run a country

By Perry Miller
20 October 2022

By Perry Miller

‘We cannot give in to the voices of decline’ said Liz Truss to the party faithful in Birmingham earlier this month. It wasn’t the only laugh-out-loud moment in her conference speech, but it was one of the better ones. Because of course, her premiership (wobbling precariously but still intact at the time of writing) has given us little else: a decline in the pound, a decline in the markets, a decline in the value of government bonds, a decline in disposable income for almost everyone (but especially anyone with a mortgage) and, above all, a decline in our international credibility. And all that after Brexit. Less of a dash for growth and more of a tumble into recession. As President Biden succinctly put it: ‘this was entirely predictable and a mistake’.  

Since then, and in a very British coup, Jeremy Hunt has forensically unpicked almost every measure from that ill-fated mini-budget. Truss was left to declare she was ‘sorry for the mistakes’ but went on to say that she had now fixed them. A little too late for those staring down the barrel of a £400 per month rise in their mortgage payments. 

Little wonder then that Bellway became the first housebuilder to warn this week of hard times ahead. It expects sales to flatline over the next 12 months as interest rates inevitably rise and the economy continues to shrink. For comparison, the past 12 months saw it deliver record house sales and record revenue. 

Since the mini-budget, more than 1,000 mortgage products have been withdrawn, many to be replaced with ones offering higher rates. The BBC reported this week that the average 2-year fixed rate deal has now risen above 6.5%, the highest in 14 years. Rates like that would tend to lead to a house price ‘correction’; however, the recent stamp duty cut (a lone survivor from the mini-budget), would tend to lead to a house price rise. A difficult one to call. 

Those of us whose fortunes are regularly determined by the whim of planning committees well understand the pain of amateur decision-making. Months of meticulous work, bearing officers’ seal of approval, can be trashed on the night by councillors with an axe to grind (or noisy constituents to assuage) but little expertise. At a national level, we’ve despaired at DLUHC’s ever-revolving doors that have seen ministers come and go as swiftly as policies have been dreamt up and then discarded: starter homes, first homes, zoning, CIL, housing targets, the on again/off again planning white paper.  

As an example, Lichfields this week forecast that the replacement of the standard method for assessing housing need by something ‘softer’ (Truss claimed the current system to be ‘Stalinist’ and in need of removal) could see housebuilding plunge to just over 160,000 homes a year. Not much growth there. 

To see this now play out in the two highest offices of the land – No. 10 and the Treasury – is intensely disappointing but far from surprising. The sacking by Kwasi Kwarteng of Sir Tom Scholar as Permanent Secretary to the Treasury hinted at what was to come. 

Largely retired and mortgage free, the party members who voted for Truss will have avoided the pain so far. But with more than half aged over 60 and the triple lock on pensions rumoured to be abandoned to fill the fiscal black hole, I’m certain we’ll be hearing more.