From where Rishi Sunak sits, he might regard Taylor Wimpey’s bumper set of first-half figures as a triumph of policymaking.
Nils Pratley www.theguardian.com
The chancellor threw subsidies at the housing market during the pandemic in the form of stamp duty holidays and probably hoped to see what has now materialised: record house completions and the UK’s third largest builder talking about profit upgrades and “excellent momentum into the medium term”.
From a policy perspective, though, the proper way to look at events is the precise opposite: the stamp duty giveaway was a waste of public money.
The savings inevitably cling to the seller as much as the buyer, and, as should now be clear, the big housebuilders did not need a helping hand to get through lockdown.
The boom would have happened anyway because the basic ingredients of a helpful trading backdrop were in place. Interest rates were at rock-bottom, mortgage availability was good and pent-up post-Brexit demand was still being released.
At a push, one could argue that the initial holiday, announced early in the pandemic, helped to create a little confidence in a sensitive corner of the UK economy.
But the extension, announced by Sunak in his budget in March this year, was indefensible. By then, take-off had happened and the housebuilders were busy buying land again. Indeed, Taylor Wimpey, wisely, had raised £500m from investors in mid-2020 to get ahead of the rush.
The company was never a member of the industry chorus intimidating Sunak with talk of a “cliff edge” if the holiday wasn’t extended, it should be said. Others were, though, and the chancellor should have ignored them and looked instead at how fat 20% profit margins (more in some cases) were coming back.
The net cost of the extension was put at £1.3bn by the Treasury in the current tax year. That’s small beer in the context of the overall Covid support package for business, but it is still money that could have been directed at sectors genuinely in need. Sunak was naive.