Boris Johnson has faced further criticism from the Labour Party after it was announced that most housing funds will be channelled towards London at the expense of York and other northern regions in the UK. The Home Building Fund and the Housing Infrastructure Fund, which represent over £10 billion of government funds for housing investment, have both been disproportionately allocated in favour of the more affluent constituencies. With geographical inequalities rife in the UK, it was presumed that most additional funds would be channelled into northern regions given they are currently massively underfunded compared to their southern counterparts.
However, estate agency Knight Frank revealed earlier this week that over 80% of the new funds allocated for housing investment will be distributed towards London and south-west England instead of areas that need it most. The Conservative government have protested their innocence by deflecting the blame onto a Treasury rule. The rule stipulates that areas with prices massively exceeding the national average warrant the most investment, as the fund’s primary focus is to tackle house prices that are deemed to be the most unaffordable. The rule has come under scrutiny by critics as it is one of many agendas that have arguably shown bias in government spending towards London and the south-east.
The prime minister has come under increasing pressure to tackle the regional inequalities that persist in the UK. This is a result of the importance he placed on the government’s ‘levelling-up agenda’ during his election campaign.
The Levelling-Up Agenda:
The ‘levelling-up agenda’ – aimed to address the north-south divide that exists across the United Kingdom – was one of the factors that influenced Boris’s victory in the general election in 2019. The north-south divide has been a prominent issue since the decline of manufacturing in the 1970s, with northern areas unable to replicate the revenues and employment generated by industrialisation. Whilst the prime minister claims fervently that the UK will prioritise the agenda even during the pandemic, recent evidence suggests this could be one of many empty promises. The disproportionate allocation of the fund alongside Rishi Sunak’s decision to axe his planned three-year spend review ultimately undermines the credibility of the agenda.
Stamp duty and Covid’s impact on the Housing market:
The government’s stamp-duty holiday for the first £500,000 of each transaction has spurred housing demand in the UK over the past few months. The average house price has now risen to £250,000 with prices rising 7.5% a year to date despite the economic challenges incurred by the pandemic. With face-to-face viewing allowed during the second lockdown, many homeowners will be keen to move whilst the stamp-duty taxes have been temporarily revoked. However, the rise in demand for homes can be partially attributed to the changing dynamics of the workplace induced by lockdown restrictions.
The housing market has enjoyed a tailwind from the pandemic as lockdown measures accelerated the transition from working in offices to working at home. The argument of working from home has its merits for both workers and employers. Employees can avoid the crowded train journeys or the tedious traffic jams on their way to work in addition to the added convenience of staying at home. This also presents firms with a great opportunity to reduce the staggeringly large capital costs associated with renting office space, allowing them to potentially gain a huge competitive advantage against its rivals.
Online working can also help address the structural challenges that play a pivotal role in the disparity of wealth between those in the north and those in the south. It will allow skilled workers to overcome the geographical immobility that has previously prevented them from accessing skilled jobs in southern areas. The substantial divergence in house prices has exacerbated wealth inequalities throughout the UK, with northern workers simply unable to afford to live in southern areas where most skilled jobs are based. However, the emergence of platforms such as Zoom enables workers to overcome that difficulty. In addition, the wages earned by workers in these professions will be spent on local goods and services and could also have a positive boost for the regional economy. The subsequent multiplier effect could play an important role in bridging the gap in wealth between these regions even when there is a lack of funding for the north.
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