Miliband considering National Investment Bank for social housing

Published by Jon Land for 24dash.com in Housing and also in Central Government

Labour leader Ed Miliband is considering plans for a National Investment Bank to boost social housing delivery, it has been revealed.

As the Labour Party Conference gets underway in Liverpool, Miliband says he is 'exploring' an idea put forward by the cross-bench peer Robert Skidelsky that extends the thinking behind the Government's Green Investment Bank to cover public development projects including housing and transport infrastructure.

In an interview with the New Statesman magazine, Ed Miliband said: "It's something we're looking at. It's an interesting idea. It's something Ed [Balls] and I have talked about. It's definitely an idea worth exploring."

According to Lord Skidelsky, the biographer of economist John Maynard Keynes, the UK National Investment Bank should have a mandate to finance not only environmental initiatives but capital projects that can contribute to economic growth, particularly transport infrastructure and public housing.

Writing in the Financial Times earlier this year, Lord Skidelsky said: "There are two main arguments for establishing such a venture. The first is the traditional rationale for public development banks.

"Private capital markets are prey to short-termism and other market failures, and tend to provide less finance than is optimal to projects that generate economic benefits to the wider economy in excess of their private returns.

"A public development bank can circumvent these shortcomings by taking a longer-term view, and by including these external benefits in its project appraisals.

"This role has long been widely acknowledged in continental Europe and east Asia. However, until recently the conventional view in the UK and US was that a government bank would be bound, for one reason or another, to “pick losers”, and thereby pile-up non-performing loans.

"But surely only those with a vested interest in denigrating the state will have the nerve to make that argument now, after the catastrophic misjudgments of private banks in the run-up to the crisis.

"But it is (the) second argument that should clinch (the) decision now: a national investment bank could play a significant role in short run stabilisation too. A limited fiscal commitment – say, £10bn in subscribed capital, with contributions drawn down over the next four years – would allow the new bank to finance enough spending to more than offset the £87bn of reductions in public investment planned before 2015. In this way it could provide a way to bolster confidence and increase demand, without adding significantly to the deficit.

"The difference between the total and government contribution would be funded from the bond markets. This is the magic of leverage, of course: that magic which got such a black name as a cause of the crisis. But a national investment bank is an opportunity to turn that magic to a constructive end."

Last week the National Housing Federation (NHF), called on the Government to invest in housebuilding to stimulate economic growth, fix the 'broken' UK housing market, create thousands of jobs and deliver thousands of new affordable homes for first-time buyers.

Research commissioned by the NHF before last year’s Comprehensive Spending Review indicated that for every £1 billion invested by the Government in housing delivery, £1.4bn extra spending is generated in the wider economy.

The Home Builders Federation states that every home built creates 1.5 full-time jobs plus up to four times that number in the supply chain. So, increasing the output of homes by 100,000 would generate around 750,000 real jobs.

The NHF says the figures suggest that spending £1bn over three years on building shared ownership properties would deliver:

• 66,000 homes
• 99,000 jobs directly in the construction industry
• 396,000 jobs within the wider supply chain
• Generate £15.25bn within wider economy

NHF chief executive David Orr, said: "If government is serious about boosting the economy, housing offers it the best opportunity to deliver growth and new jobstoday rather than tomorrow.

"Investment in housing for first time buyers would reap multiple benefits. There is a one-off opportunity to stimulate a wider economic recovery, create jobs and fix our broken housing markets."