This time last week, the former chancellor and Treasury economic secretary respectively, and now comfortable podcast bloviators, George Osborne and Ed Balls interviewed Steve Baker, who had just lost his seat in Wycombe to Labour, on Good Morning Britain. As Baker railed against policies they had enacted which led the Tory party to its worst ever defeat, Balls asked “are you in denial?” while Osborne sniggered.
Baker replied that he had “wasted a lot of breath” trying to explain to Osborne and others the injustice being manufactured by cheap credit. “Much good did it do everybody,” he concluded, “and now we have a nation seething with a sense of economic injustice – of course they are, they can’t afford house prices if they’re young. Why? Because cheap credit was pumped into a housing market in which supply was constrained by planning laws, about which neither of you did anything.”
New research released today by the property industry confirms Baker’s astute summing-up of the most important single cause of Conservative defeat. Labour’s gains were highest in seats in which voters are most likely to own their home with a mortgage, a study by the estate agents Hamptons has found, while in seats in which the most common tenure is social housing or private rental, the Conservatives were entirely wiped out.
This is the detail behind the broader trend that took Labour to power: winning votes where it needed them (in more affluent areas) and losing votes where it could afford them (in more deprived areas). You could describe this as taking your base for granted, but as Jeremy Corbyn demonstrated in 2019, you can be as successful as you like with people who already agree with you and still lose catastrophically. Labour’s success – like Margaret Thatcher’s success a couple of generations earlier – is at least partly built on recognising how vital home ownership is as a political issue.
This isn’t clearly reflected in polling – “housing” as an issue lags far behind immigration, “the economy” or health – but housing is one of the main reasons people worry about immigration, one of the most important factors in public health, and when people say “the economy”, they mean how much of their salary is left over from their rent or mortgage payments.
It’s for this reason that Rachel Reeves’s first public speech on Monday focused on planning – not just for growth but to fulfil Labour’s promise to become, as she and Keir Starmer have repeatedly intoned, “the party of home ownership”.
However, this was a much easier proposition for Thatcher, who had a short cut to increasing home ownership: selling off all the affordable housing built by the state in the previous three decades. It was also easier for Osborne, who not only enjoyed the excessive stimulation of the property market through low interest rates and quantitative easing (which forced mortgage rates below 1 per cent, in some products) but compounded the problem by subsidising the already inflated market with £24.7bn in Help to Buy loans.
The bill for these short-term gains was always going to be due at some point, and that point arrived in September 2022 when the surge in bond yields caused by the Truss-Kwarteng mini-Budget caused a sharp rise in mortgage rates. This, it seems, is what lost the Tories the election – Sunak’s campaign was a disaster, but he was already doomed.
Will Labour be able to turn things around? For roughly three million households who will refinance their mortgages in the next two years, there will be no return to the good old days of cheap rates, but things will become a little more affordable as the Bank of England reduces its base rate, inch by inch. The sunnier forecasts for the British economy suggest some continued growth in GDP and real incomes.
However, the supply of houses is a trickier question. Councils lack the funds to build more housing and Labour is entirely reliant on the private sector to build homes at a time when Britain’s biggest house-builder, Barratt Developments, has announced it will actually build 7 per cent fewer homes this year. Constrained supply is one of the most important factors in keeping house-builder profits high and it is hard to see how that would change without some incentives, such as looser regulations.
Even if Labour can bulldoze Nimby opposition to new housing, housebuilding is time-consuming and expensive, and the short cuts have already been taken. But unless Labour finds a way to address the combined horrors of sky-high rents, poor-quality housing and unaffordable home ownership, it may find itself facing the same sense of seething economic injustice in five years’ time.
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