‘Labour’s housing plans are the most ambitious in half a century – but don’t go far enough to drive growth’, top economist says

In his contribution to the series for the Social Market Foundation (SMF) – a cross-party think tank –LSE economic geography professor Paul Cheshire (who has been a consultant to World Bank, the UN, the OECD, and several UK government departments) sets out why Labour’s plans for housebuilding fall short of being economically transformative for, despite being the most ambitious plans for 50 years.

With Labour party having vowed to achieve the fastest growth in the G7, the SMF has brought together leading economic experts to provide independent analysis of the party’s proposed approach– and the gaps it needs to fill. The collection comes with the UK is months away from a general election that Labour is expected to win, but with questions remaining over how it plans to deliver on its central promise.

Contributors to the collection include: economist and life peer Baroness Alison Wolf, who was the Prime Minister’s skills adviser; Sir Tim Besley, who has served on the Bank of England Monetary Policy Committee; Anna Valero, LSE Policy Fellow and a member of the government’s Green Jobs Delivery Group; and Giles Wilkes, former business and No. 10 special adviser. The series is edited by SMF Interim Director Aveek Bhattacharya and Neil Lee, Professor of Economic Geography at the London School of Economics and Political Science (see notes for full contributor and contributions list).

The collection is published by the Social Market Foundation. The authors retain full editorial independence, and the analysis is intended to be non-partisan.

According to Cheshire, the reason Labour’s plans fall short are because “it is not likely 300,000 houses will be built in any year before about 2030 at the earliest – even with the most stringent and urgent application of [Labour’s] proposals”. For instance, Cheshire notes that while Labour plans will impose housebuilding targets on local authorities, there is still no guarantee these will be met because the current planning system is discretionary, not ‘rules-based’, and any sanctions for missing targets are weak. While he credits Labour for an innovative approach to tackling the stranglehold of NIMBYs and local councillor opposition to housing, Cheshire suggests it may be too little too late. If Labour is serious about increasing housing supply, he argues there are a number of additional policies it could follow including trialling a rules-based system in a big city, relaxing restrictions on building height, and reviewing property taxes.

Whilst Cheshire’s contribution examines Labour’s plans on housing, the collection’s topics are wide-ranging and comprehensive, examining net zero and sustainability, education and skills, business environment, immigration, and levelling up, to name a few. Some key lessons for Labour from the notable economic thinkers are:

• The prospect of greater predictability, coordination, and competence will reassure investors and markets – but it is not enough for a strategy for economic growth, as pointed out by Giles Wilkes, Margarida Bandeira Morais and Neil Lee
• Labour’s industrial strategy will rightly target sectors where the country or particular geographies have comparative advantage, but there is a risk that it gets captured by ‘convenient business narratives’ as noted by Anna Valero
• Baroness Alison Wolf says education and skills are relatively neglected in Labour’s plans despite the importance of human capital, in stark contrast to the last Labour government’s economic strategy.

While there many buzzwords floating around the Shadow Chancellor Rachel Reeves – e.g.  “securonomics”, “productivism”, “modern supply side economics” – these ideas remain in need of further exposition, as it “less clear how [Labour] will address [the UK’s dire economic challenges]”, the essay collection’s editors note.

Still, from what can be discerned from Labour’s strategy, the party needs to follow through on it, even when it becomes “hard, inconvenient, or expensive”, the editors said. To this end, Labour’s backsliding on the scale of its green investment is “worrying”. Future resistance and trade-offs will be sharper – whether on favouring certain sectors over others in industrial strategy, or reforms to the planning system – but “they are unavoidable for a government that wants to leave a significant mark on the economy”.

Aveek Bhattacharya, Interim Director at Social Market Foundation and co-editor of the collection, said:

“Some commentators continue to suggest that it is unclear or uncertain what approach Labour would take to the economy, but they haven’t been paying close enough attention. Though still a bit heavy on buzzwords and light on detail, as is understandable for an opposition party, the outlines are apparent.

Labour believes the key levers for raising economic productivity are a more systematic industrial strategy, raising investment, planning reform and rising labour standards. By contrast it looks set to make less use of educational investment, trade and migration to drive growth.

The key challenge – as the party’s positions on housing and planning demonstrate – is developing policies that match the rhetorical ambition.”

Neil Lee, Professor of Economic Geography at London School of Economics and co-editor of the collection said:

“Labour’s first mission, if elected, will be economic growth. But doing so will be challenging. As the essays in this collection show, they have done much of the groundwork, but they have not yet translated this into a grand strategy.

In 1997, Labour came to power with a clear vision of economic growth. That they lack this now is perhaps a reaction to politics of the past decade, where grand visions have so often had harmful consequences for the economy. But we should all hope that their more incremental policy agenda will be enough to increase growth.”

Notes

1. The SMF essay collection, Labour Economics, is published at https://www.smf.co.uk/publications/labour-economic-agenda-essays/ on Monday 22nd April 2024.
2. The full author and essay topic breakdown:
   1. Business environment by Giles Wilkes; Net zero and sustainable growth by Anna Valero; Innovation by Margarida Bandeira Morais & Neil Lee; Universities by David Soskice & Andrew McNeil; Education and skills by Baroness Alison Wolf; Labour market reform by Alan Manning; Immigration by Jonathan Portes; Trade by John Springford; Housing and planning by Paul Cheshire; Infrastructure by Dan Turner; Levelling up by Henry Overman; Fiscal and monetary policy by Jagjit Chadha; and, Cohesive capitalism by Sir Tim Besley.
3. The collection is published by the Social Market Foundation. The authors retain full editorial independence.

Contact

• For media enquiries, please contact Impact Officer Richa Kapoor at richa@smf.co.uk

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