Bill Jamieson: Homing in on solutions to our economic woes

Let’s be in no doubt of how troubling our prospects are. Barely had the gloom of the Autumn Statement and its projections of four more years of belt tightening set in than the Institute for Fiscal Studies warned that the forecasts may not have been grim enough. It warned that another £27 billion of spending cuts or tax rises might be needed to meet George Osborne’s latest targets.

Then came news last Friday of a 1.3 per cent drop in manufacturing output in October – far worse than expected and adding to concerns that the economy has contracted in the final three months of the year.

There seems little prospect of an economic revival in Scotland in 2013 that could lift us clear of a further relapse. But there is one area where an activity boost is both immediately do-able and highly desirable.

Last week, the Scottish Government lost no time in claiming it had “shovel-ready” projects in place to take advantage of the additional £394 million in capital spending in Scotland as a result of the Autumn Statement.

Doubts over these have been well aired. There is a difference between genuinely stimulative programmes and dog-eared local authority pet projects and wish-lists. And even if efficacious projects are identified, planning protocols could mean delays of many months before those much-cited shovels hit the ground.

However, attention is now focusing on one particular area that would deliver a multiple benefit to Scotland and at a critically important time. An ambitious programme on housebuilding would tick not one but four boxes for an administration desperate to promote activity.

Housebuilding fulfils a self-evident and pressing social need. It is more “shovel-ready” than many transport infrastructure projects that require extensive planning approvals.

The gains in recent years in energy efficiency bring benefits both to home-owners and to a Scottish Government anxious to meet its green energy targets.

And new housing development offers the prospect of new jobs across a range of different aptitudes and skills.

The scale needs to be bold and ambitious, arguably rivalling that of the push on housing by Harold Macmillan in the early 1960s. The housebuilding sector was badly hit by the banking crisis and the nosedive in activity that followed. Total output has fallen to its lowest since 1947.

Back in 2007, Scotland’s Deputy First Minister, Nicola Sturgeon, announced an annual target for the delivery of 35,000 new homes by 2015. Instead, however, total production has slumped from 25,700 in 2007 to barely 15,000 in 2011 – a fall of more than 40 per cent.

Housing projects bring employment for a range of skilled trades and boost “second order” demand for home furnishings, kitchen and bathroom fittings, electronic products and home accessories of all sorts.

This alone constitutes a potent argument for housing to be given priority. And one encouraging development is that mortgage finance is becoming more available with mortgage approvals on the increase, albeit at a much lower level than before the crisis struck.

For both home-buyers and the Scottish Government, there is another powerful plus to a home building programme. New homes in Scotland are built to some of the highest technical standards in Europe and already emit 70 per cent less carbon compared with 1990 levels.

They are now remarkably energy efficient. Research has found that living in new energy efficient homes could create annual savings of around 55 per cent on gas and electricity spending – significant potential savings when you consider the average bill has rocketed by 91 per cent since 2006 and now stands at around £1,300.

The attractions are even more compelling when considering that in the housing market there is no price premium that attaches to an energy efficient new home when compared with its draughty Victorian counterpart. The price of a house is largely determined by the number of rooms and overall square footage, by the area it is in and its general state of repair. For heat- and energy-guzzling homes, there is no equivalent to the car buyer’s question: “How many miles does it do the gallon?”

This seems a lost marketing opportunity – for the buyer, for the housebuilding industry and for the Scottish Government. Raising the profile of the benefits of energy efficient homes would seem a must.

However, the outlay needed to fund improvements that would make a significant difference in an older property loses out to the more immediate visual attractions of a new kitchen or conservatory.

The Scottish Government and local authorities could do some fiscal “nudging” – using tax powers to encourage households to buy an energy efficient home through schemes such as lower stamp duty. Households who live in efficient homes (either through choice at purchase or by retrofitting) could benefit from reduced council tax to help reduce the payback time on their capital investment.

With greater recognition of the benefits, the energy efficiency of a home would really climb up the checklist of purchase points.

What are the obstacles to a big push on housebuilding? One is the backlog of major housing developments in the planning system. Figures released last month showed that decisions on major housing applications are taking an average of nearly 77 weeks – over a year longer than the 16-week statutory time scale. Even allowing for local consultations it should not take 18 months.

Homes for Scotland director of planning Allan Lundmark has described this as “an outrage” considering that only 15,000 new homes were built in 2011 despite 160,000 people being on waiting lists, households growing at a rate of more than 21,000 a year and the population at its highest ever level.

And, says Philip Hogg, chief executive of Homes for Scotland: “Whether helping to meet housing need, maximising economic return, creating vital jobs, maintaining skills, meeting climate change targets or tackling fuel poverty, no other industry has the potential to impact so many policy areas so positively and effectively as home building… It makes sense to maximise investment in housing.”

Amid all the bleak economic prognostications, here is one area where bold and decisive intervention in Scotland could make a real difference.

Twitter: @Bill_Jamieson