The crowd held its breath. Something had stuck in Mrs May’s throat, something that required more than a lozenge to clear, even if such was gratefully received from an otherwise parsimonious Chancellor.
The final speech at Tory Party conferences have always had an air of, well, conservatism. Only very occasionally does a Party leader allow a modicum of humour and comic relief to puncture the staid ambience.
Some of the more memorable episodes in years gone by include Margaret Thatcher’s 1975 speech where she quipped, “I sometimes think the Labour Party is like a pub where the mild is running out. If someone does not do something soon all that is left will be bitter, and all that is bitter will be Left.”
Or John Major’s 1991 speech which dryly noted that “a great deal has been written about my education. Never has so much been written about so little.”
Even David Cameron got into the mood in 2006: “Tony Blair says it’s all style and no substance. In fact he wrote me a letter about it. Dear Kettle… You’re black. Signed, Pot.”
So it is of no surprise that Mrs May’s eventful speech should cause such a stir.
It is, however, to her key announcement on housing that we must affix our attention.
The British Dream
The build up to her important announcement on housing included some oft-heard statistics of an ailing housing market. She spoke of stagnating wages, of a broken housing market, of housing now costing on average eight times the average salary, of the fact that in the span of a decade home ownership of the 25 to 34 year olds has plummeted from 59% to 38% today.
The British Dream of home ownership, May said, is increasingly out of reach.
At its most rudimentary, the UK housing market is not suffering from lack of demand. It is the lack of supply that has been the main driver causing house prices to reach unaffordable levels.
We are simply not building enough homes.
The government’s official target is to build a million new homes in the five years to 2020, or 200,000 new homes a year. Even that target is predicated on very optimistic business-as-usual assumptions.
Local councils have created their own Objectively Assessed Needs, taking into account more robust data and assumptions, which forecasts a more realistic requirement of 300,000 new homes each year.
We are nowhere near that figure today. House building collapsed in the wake of the financial crisis and is yet to reach pre-crisis levels, from 215,000 homes a year in 2007/8 to 140,000 last year.
What therefore caused such consternation among industry stakeholders was May’s announcement which, rather than relieve the supply shortfall, chose to exacerbate an already dysfunctional housing market by encouraging yet more demand.
A Frayed Knot
The Prime Minister pledged new government funding in two areas: affordable housing and the Help to Buy scheme.
On the former, she said that an additional £2bn funding be allocated for councils and housing associations towards building more affordable housing, taking the total to nearly £9bn.
Mrs May stated it was time the government got back into the business of building houses, quite a statement from a Tory leader.
The new housing drive is considered essential to meet the government target of building a million new homes within five years, and is one tactic aimed at winning back the youth vote from Labour leader Jeremy Corbyn.
However, the biggest surprise was May’s announcement to revive and support the controversial Help to Buy scheme with an additional £10bn.
The government claims this new injection will enable 135,000 additional homeowners to get on the property ladder, with as little as a 5% deposit on a newly built home.
The market movements of the main housebuilders following the speech tell you all you need to know about who will be a major beneficiary of this scheme. Money for old rope.
Help to Supply
The free market think tank the Adam Smith Institute was scathing in its assessment, stating that the housing market is “totally dysfunctional because supply is so tightly constrained by planning rules, and adding more demand without improving the supply of houses is just going to raise house prices and make homes more unaffordable for people who don’t qualify for the help to buy subsidy.”
It is hard to disagree.
Rather than stumping up more taxpayer cash into an already overheated housing sector, the government would be better served by loosening restrictions on planning – although not building regulations, as the Grenfell episode so tragically taught us – and allowing the construction of more homes in high demand areas, including in May’s greenbelt constituency.
There is scant danger of this happening anytime soon.
Getting such changes through parliament would require a clear strategy and substantial political capital, neither of which is in ample supply within a party currently at war with itself.
At the very least it’s a question of picking the right priorities. It would seem, on the evidence of the Tory party speech, that Mrs May choked.