The UK Government is aiming to meet its ambitious targets of boosting economic growth and housebuilding, while also making substantial savings in welfare spending. However, concerns remain over the impact of welfare cuts and how effectively the planned housing reforms will translate into tangible improvements in the property market.
Housing and planning
Reeves announced that Labour’s planning reforms are projected to have a significant impact on economic growth. According to the Office for Budget Responsibility (OBR), these reforms are expected to permanently increase real GDP by 0.2% by 2029/30, generating an additional £6.8 billion. The impact could reach 0.4% of GDP within the next decade, translating to £15.1 billion.
The OBR has also assessed that Labour’s planning reforms will lead to housebuilding reaching a 40-year high. Changes to national planning policy alone are expected to facilitate the construction of over 1.3 million homes across the UK over the next five years. This would bring Labour close to fulfilling its election commitment to build 1.5 million homes during this parliamentary term.
Further reforms not reflected in the forecast, such as the Planning and Infrastructure Bill, the government’s long-term housing strategy and the new Affordable Homes Programme should all contribute to the new homes target.
The Spring Statement had a clear focus on the vital role housing plays in the UK economy and as part of the UK Government’s plan for growth, so it is encouraging to hear that planning reforms will boost national income.
However, workforce challenges remain and it’s vital that local councils have the resources required to deliver effective planning and infrastructure so communities up and down the country and the wider economy really benefit.
Welfare benefits
The Chancellor also outlined several changes to benefits, which include a substantial cut to the Universal Credit health element. The health element will be reduced by 50% and then frozen for new claimants. This policy shift, which was not expected to include a freeze, aims to save £4.9 billion in welfare spending.
She further stated that the Universal Credit standard allowance will gradually increase from £92 per week in the financial year 2025/26 to £106 per week by 2029/30. The overall package is estimated to save £3.4 billion in the welfare budget.
Major Universal Credit changes will affect rent payments from April 2025
The Universal Credit Fair Repayment Rate will drop from 25% to 15%, reducing the amount available to service an individual’s monthly debts, including housing payments. Furthermore, the Department for Work and Pensions (DWP) is set to overhaul the system of the automatic deduction of arrears and ongoing rent payments directly from tenants' Universal Credit or other benefits, following a court ruling which deemed the practice unlawful.
Economic outlook
According to the OBR, Labour’s fiscal approach will result in real household disposable income growing at nearly double the rate previously forecasted. This will leave households an average of £500 better off compared to previous predictions. Reeves also highlighted that inflation, which peaked at 11% under the previous government, is projected to hit its 2% target by 2027.
