Budget Speech: Rachel Reeves unveils new era of fiscal restraint

Budget Speech: Rachel Reeves unveils new era of fiscal restraint

Chancellor Rachel Reeves delivered her 2025 Spring Statement to the House of Commons on Wednesday, 26 March, outlining a series of measures aimed at addressing the UK's housing market issues. Experts generally view the statement as having a limited immediate impact on first-time buyers but with some important longer-term commitments.

Reeves pledged £600 million for construction training to meet severe resourcing issues, with the aim of training up to 60,000 construction workers over the next four years. This investment is expected to contribute to a potential significant increase in housing supply, reaching a forty-year high in construction levels.

One of the most significant announcements was a £39 billion investment in social and affordable housing over the next decade. This funding is intended to increase the supply of social rent homes and support local communities in building new housing to address the long-standing shortage that affects affordability and availability for first-time buyers and low-income households.

In terms of taxation, an increase in the Stamp Duty surcharge on second homes and buy-to-let properties from 3% to 5% was announced. This measure is designed to discourage property investment purchases that might reduce availability for first-time buyers or owner-occupiers, potentially supporting an additional 130,000 housing transactions by first-time buyers or those moving home over five years.

However, some experts argue that the Spring Statement lacked bold or immediate interventions to tackle house price inflation or mortgage accessibility for first-time buyers. The focus remains on gradual reform and investment, with the economic context and fiscal constraints limiting more aggressive policy actions.

Cllr Sir Stephen Houghton, Chair of SIGOMA, emphasized the importance of local government funding for deprived areas, while Greg Reed, CEO of Places for People, expressed concern about the impact of proposed welfare reforms on their customers.

The government's target to build 1.5 million new homes by the next parliament may also not be met, according to some experts.

Despite these concerns, experts see Chancellor Reeves’ Spring Statement as laying important groundwork for more affordable and sufficient housing supply in the long run, primarily through planning reform and significant investment in social housing. For first-time buyers, immediate relief remains limited to indirect effects from these policies and Stamp Duty changes targeted at cooling investor demand. The overall impact will likely unfold over several years rather than providing instant market relief.

Sheetal Smith, Sales and Marketing Director at Pennyfarthing Homes, expressed concern that many of the new homes will not be deemed 'affordable', and the government has allocated a £2 billion top-up for the Affordable Homes Programme to help deliver ambitious levels of social and affordable housing.

The Office for Budget Responsibility (OBR) projects that changes to the National Planning Policy Framework (NPPF) will have the biggest positive growth effect in the forecast, with no fiscal cost. The OBR also predicts that the increase in housing supply alone will increase GDP by 0.2% by 2029-30, adding £6.8 billion to the economy.

The spring statement took place in difficult economic and global circumstances, including a £20 billion hole in the public finances, a shrinking economy, and potential Trump tariffs. Despite these challenges, Reeves focused on macroeconomic issues, with potential significant impacts on local authorities and the communities they serve.

In summary, Chancellor Reeves' Spring Statement presents a long-term strategy to address the UK's housing market challenges, with a focus on increasing housing supply and investment in social housing. While first-time buyers may not see immediate relief, the policies are expected to contribute to more affordable and sufficient housing in the long run.

1. Local government funding for deprived areas, emphasized by Cllr Sir Stephen Houghton, is deemed essential to address housing market issues, considering the immediate impact on first-time buyers is limited.
2. Chancellor Reeves' Spring Statement has laid important groundwork for more affordable and sufficient housing supply in the long run, primarily through planning reform and substantial investment in social housing, as emphasized by experts.
3. Businesses like Pennyfarthing Homes have expressed concerns that many new homes may not be considered 'affordable', and the government has allocated a £2 billion top-up for the Affordable Homes Programme to ensure delivery of ambitious levels of social and affordable housing.
4. The Office for Budget Responsibility (OBR) predicts that changes to the National Planning Policy Framework (NPPF) will have the biggest positive growth effect in the forecast, with a potential significant impact on local authorities and the communities they serve, given the challenging economic and global circumstances.

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