Rayner’s towns and villages building blitz branded ‘perverse’

Angela Rayner is wrong to target towns and villages in her quest to build 1.5m extra houses, an influential think tank has said.

The Resolution Foundation said building more properties in expensive areas that were not near particularly productive jobs would do little to help the Government boost growth.

The think tank highlighted Cromer and Sheringham on the Norfolk coast, or Kingsbridge and Dartmouth in Devon, as examples of areas targeted for development that it thought were misguided.

Lord Willetts, who has helped to oversee the report, branded the Government’s building targets “perverse”.

Ms Rayner, the Housing Secretary, should instead target cities such as Manchester and Birmingham for new homes, he said. It is urban hubs like these where properties are actually needed to house workers and boost growth.

The critique of the Government’s housing policy came in a report on Labour’s growth plans overseen by former Tory universities and science minister Lord Willetts and Rupert Harrison, a BlackRock economist who was chief of staff to former chancellor George Osborne.

Lord Willetts said: “The issue is the criterion the Government is using is the gap between property prices and average incomes in the area.

“This has the effect that it makes Cornwall and Norfolk, for example, high priorities for more housing. But it means London and some other cities where house prices might be high but also incomes are relatively high don’t get such high priority.”

Sir Keir Starmer has said he wants Britain to become the fastest-growing economy in the G7, which would require a substantial acceleration in activity.

The Resolution Foundation’s analysis suggested that the Prime Minister would only get halfway to his growth target on current plans, in part because the new housing plans would put homes in the wrong places.

Lord Willetts said: “The best way of getting growth going is to focus on cities and the towns around them, and particularly the twin second cities, Birmingham and Manchester.”

Building near urban centres is vital for the economy to get “lots of workers and lots of consumers all within easy distance of a city centre”, Lord Willetts said.

“Instead of prioritising cities and the routes and towns around them, by applying this one criterion you have ended up with a slightly eccentric set of priorities. It has had some perverse effects.”

Labour has promised to build 1.5m extra homes by 2029. As part of this effort, Ms Rayner has set up a New Towns Taskforce to identify more rural areas that could handle a significant expansion of their population.

Homes England, the government body responsible for housebuilding, recently struck a deal with developer Barratt and Lloyds Bank to build thousands of homes in new garden towns.

Just building them will boost the economy. However, the impact can be magnified by putting more workers in the right places, economists said.

The report said: “Building houses can also boost GDP by allowing more people to relocate to more productive – and ultimately higher-paying – jobs.

“Under the new Government’s housing targets, housebuilding will increase only slightly more in the most productive travel-to-work areas as it will in the least productive. So, the new housing targets are not tailored to maximise economic growth.”

Meeting the Prime Minister’s goal of becoming the fastest-growing economy in the G7 would mean accelerating growth from the current rate of around 1pc to at least 1.5pc.

Policies so far announced on housing and infrastructure “could do around half of what is necessary,” the economists said.

Boosting trade by tweaking Brexit arrangements could also boost growth, the analysis said.

“Given that UK firms will seek to trade with our large neighbouring market, there is a case for making regulatory alignment the default, only diverging when there is a strong domestic case for different regulation,” said the report.

“Alternatively, the Government could assess which sectors and products are most exposed to regulatory divergence and align these rules with the EU.”

The Resolution Foundation estimated that closer alignment with EU rules “could add 0.6pc to GDP by 2035, a small but meaningful boost to annual growth”.

A Government spokesman said: “Our plans to get Britain building again will deliver both vital economic growth as well as the homes that we desperately need.

“All areas of the country must play their part in building more homes so that we meet the housing need in our towns, cities and villages and build in places facing the biggest affordability pressures.”