Building Homes Will Fuel Economic Growth

The new Chancellor will have very little economic room to manoeuvre, as he has stuck to the Manifesto pledge of keeping within the Fiscal Rules set by his predecessor, Rachel Reeves, when Labour took office in July 2024.

Emma Reynolds, as the new Chief Secretary to the Treasury, will be hard at work as she ensures that Secretaries of State find savings in their departmental budgets in preparation for the Budget on 28th October.

The big areas of concern are going to be Defence and Welfare. In a comparatively short space of time, Defence Secretary Wes Streeting will try to tackle the very complicated procurement process, which in some cases has meant big overspends on projects and has resulted in further defence cuts elsewhere. His difficulty is that there are no easy quick fixes, and the Chancellor knows first hand where the skeletons are hidden in MOD budgets.

John Healey, when he was Defence Secretary, announced last year a 10-year investment plan worth £9 billion to improve housing for Armed Forces’ families, so there is little chance this will be rowed back at the Budget. It was only a few weeks ago that he resigned as Defence Secretary, citing inadequate funding as his main reason. There will be enormous pressure on him to show he can put more resources into defence, both at home and from the USA.

On Welfare, particularly following the Milburn Report, the emphasis will be to get people, particularly young people, off benefits and into work. This was an issue where the Starmer Administration could not get the support of its MPs to back welfare reforms, following on from the problems with the handling of the winter fuel allowance.

The challenges still exist and it will not be easy for the Government to push through reforms again given the rebellion last time, apart from which any changes will take time to filter through.

In education, the Government’s emphasis is to develop technical skills, as there is a desire to have more local and young people going into such industries as the building trade, where there is a need for more plumbers, electricians, carpenters, bricklayers, painters and decorators, to give one range of examples.

In health, the priority is to free up pressure on the NHS by tackling social care.

Then there are the many other priorities, on such things as transport infrastructure, energy costs and countless others for the Government to handle. None of the options are easy.

When it comes to house building, the Prime Minister, the Chancellor and the Housing Secretary all want to retain the 1.5 million new homes target, although, as reported, Angela Rayner accepts it will be difficult to achieve. The evidence proves it.

Last year, according to the Office for National Statistics, an estimated 150,600 new home starts were recorded, the vast majority of which were in the private sector. However, for most quarters in the last three years, completions have outnumbered starts, which will mean a decline in completions over the next year or so. Even if new starts were to increase dramatically overnight, it would take time for completions to add up. The fear for Government is that it could be a long way short of its target.

Then there is the issue of council house building. In the fourth quarter of 2025 in England there were only 300 local authority starts and just under 6,500 in housing associations, compared with just over 25,000 in the private sector. The UK total number of new starts for that quarter was up to 38,000 (up on the corresponding quarter for 2024 by 25%), but if the Government wants to get near its target, then it would require an average of 75,000 new starts per quarter.

On the question of providing council homes, it would require the Government to take drastic action to fund it. One suggestion is to write off local authority housing debt, which could release £billions into a house building programme, but there would be a cost. Only an average of 5,000 new council homes is started in the UK each year, and that has almost flatlined.

In economic terms, the Chancellor is desperate for growth. House building and construction is one area which can help kick start the economy, and he knows this from his time leading on housing for Labour in Government and in opposition, on and off, over the last 20 years. He also knows that well over three quarters of new homes are built by the private sector, so in theory it should be a win/win for both house builders and the Exchequer, as it creates jobs and boosts the economy.

Major infrastructure projects such as port and airport developments are funded by the private sector, where often they are required to pay for other infrastructure normally paid for through public money. The same applies to many regeneration projects in town and city centres. The economic benefits can be great, but take time.

There are challenges though, and achieving this growth will require private investment. In construction generally there are skills shortages as well as supply chain problems which limit the ability to build. Planning remains a challenge, where some schemes cannot get approved due to local opposition or, in other cases, serious concerns about the impacts on local industry, transport and close proximity to housing.

Only this week the Secretary of State Angela Rayner overturned Gravesham Council’s decision on plans to build 3,500 new homes in Northfleet and to regenerate the area, including a new football stadium for Ebbsfleet United. The scheme had been turned down due to various impacts, such as the surrounding industries being too near to housing and access problems to the wharfs essential for supplies such as aggregates.

The Government is keen to cut through red tape on planning, but there are still certain criteria which will always feature in any housing proposal.

So, as we approach this autumn’s Budget, the Chancellor and Prime Minister will be looking for actions that will boost the economy, and with a limit on public spending it is clear the private sector will be key to developing economic growth. Building homes will be a key part of that.