I shall first report to the House on the economic forecasts of the independent Office for Budget Responsibility. This is the bit with the “long, economicky words”. Once again, I thank Robert Chote and his team for their hard work over the last few weeks. I believe passionately that the best way to improve the lives of people across the length and breadth of this country is to help them get into work. I am acutely aware that 1.4 million people out of work is 1.4 million too many, so today I welcome the OBR forecast that there will be another 600,000 people in work by 2022. I am immensely proud of this Government’s record in having created over 3 million new jobs since 2010—incidentally, a rather far cry from the 1.2 million job losses that the right hon. Member for Hayes and Harlington (John McDonnell) predicted in 2011—but let nobody be in any doubt that this Government will continue their relentless focus on getting more people into work, giving them the security and peace of mind of a regular wage.
I also want work to be good quality and well paid, and regrettably our productivity performance continues to disappoint. The OBR has assumed at each of the last 16 fiscal events that productivity growth would return to its pre-crisis trend of about 2% a year, but it has remained stubbornly flat. So today it revises down the outlook for productivity growth, business investment and GDP growth across the forecast period. The OBR now expects to see GDP grow 1.5% in 2017, 1.4% in 2018, 1.3% in 2019 and 2020, before picking back up to 1.5% and finally 1.6% in 2022, with inflation peaking at 3% in this quarter before falling back towards target over the next year. I reaffirm the remit for the independent Monetary Policy Committee and its 2% CPI inflation target.
We took over an economy with the highest budget deficit in our peacetime history. Since then, thanks to the hard work of the British people, that deficit has been shrinking and next year will be below 2%. However, our debt is still too high and we need to get it down, not for some ideological reason but because excessive debt undermines our economic security, leaving us vulnerable to shocks; because it passes the burden unfairly to the next generation; and because it cannot be right to spend more on our debt interest than we do on our police and our armed forces combined. So I am pleased to tell the House that the OBR expects debt to peak this year and then gradually fall as a share of GDP—a turning point in our recovery from Labour’s crisis. Apparently not everyone shares the view that falling debt is good news. I have heard representations from Labour Members suggesting increasing the debt by £500 billion, taking us back to square one and wasting an extra £7 billion a year on debt interest. If they carry on like that, there will be plenty of others joining Kezia Dugdale in saying, “I’m Labour, get me out of here.”
I have rejected these representations, and instead I reaffirm our pledge of fiscal responsibility and our commitment to the fiscal rules I set out last autumn, but now I choose to use some of the headroom I established then, so that as well as reducing debt, we can also invest in Britain’s future, support our key public services, keep taxes low and provide a little help to families and businesses under pressure: a balanced approach that will prepare Britain for the future, not seek to hide from it.
Today, the OBR confirms that we are on track to meet our fiscal rules. Borrowing is forecast to be £49.9 billion this year. That is £8.4 billion lower than forecast at the spring Budget. After taking account of all decisions since the spring Budget, the OBR’s GDP revision and the measures I will announce today, borrowing will fall in every year of the forecast, from £39.5 billion next year to £25.6 billion in 2022-23, to reach its lowest level in 20 years. As a percentage of our GDP, it falls from 2.4% this year to 1.9% next year, then 1.6%, 1.5%, 1.3% and, finally, 1.1% in 2022-23. The OBR forecasts the structural deficit to be 1.3% of GDP in 2020-21, giving £14.8 billion of headroom against our 2% target. Debt will peak at 86.5% of GDP this year and then fall to 86.4% next year, then 86.1%, 83.1%, 79.3% and, finally, 79.1% in 2022-23—the first sustained decline in debt in 17 years. Under Conservative-led Governments, the hard work of the British people is steadily clearing up the mess left behind by Labour.
At the heart of a global Britain must be a dynamic and innovative economy. On Monday, the Prime Minister set out the key elements of our modern industrial strategy—a strategy to raise productivity and wages in all parts of our country and to guarantee the brighter future we have promised to the next generation. My right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy will present a White Paper to the House in the next few days. This is not just an economic plan; it is a key part of our vision for a fairer Britain—a Britain where every one of our citizens can contribute to, and share in, the benefits of prosperity. The key to raising the wages of British workers is raising investment, both public and private, and we are investing in Britain’s future: half a trillion pounds since 2010; the biggest rail programme since Victorian times; the largest road building programme since the 1970s; the biggest increase in science and innovation funding in four decades; and the two largest infrastructure projects in Europe—Crossrail and HS2.
When I took this job, I committed to making the battle to raise Britain’s productivity, and thus the nation’s pay, the central mission of the Treasury. Last autumn, I launched the national productivity investment fund to provide an additional £23 billion of investment over five years to upgrade Britain’s economic infrastructure for the 21st century. Today, I can announce that I will extend the fund for a further year and expand it to over £31 billion, meaning that public investment under this Government will, on average, be £25 billion higher per year in real terms than under the last Labour Government. We are allocating a further £2.3 billion for investment in R and D, and we will increase the main R and D tax credit to 12%, taking the first strides towards the ambition of the industrial strategy to drive up R and D investment across the economy to 2.4% of GDP.
Britain is the world’s sixth largest economy. London is the No. 1 international financial services centre. We have some of the world’s best companies, and a commanding position in a raft of tech and digital industries that will form the backbone of the global economy of the future. Those who underestimate Britain do so at their peril, because we will harness that potential and turn it into the high-paid, high-productivity jobs of tomorrow. Others may choose to reject the future; we choose to embrace it. A new tech business is founded in Britain every hour, and I want that to be every half hour, so today we invest over £500 million in a range of initiatives from artificial intelligence to 5G and full-fibre broadband. We support regulatory innovation with a new regulators’ pioneer fund and a new geospatial data commission—[Interruption.] Opposition Members should listen. The new commission will develop a strategy for using the Government’s location data to support economic growth.
To help our tech start-ups reach scale, we asked Sir Damon Buffini to review the availability of patient capital, and I am grateful to him. Today, we are publishing an action plan to unlock over £20 billion of new investment in UK knowledge-intensive, scale-up businesses, including through a new fund in the British Business Bank seeded with £2.5 billion of public money, by facilitating pension fund access to long-term investments, and by doubling enterprise investment scheme limits for knowledge-intensive companies while ensuring that EIS is not used as a shelter for low-risk capital preservation schemes. We stand ready to step in to replace European Investment Fund lending if necessary.
There is perhaps no technology as symbolic of the revolution gathering pace around us as driverless vehicles—[Interruption.] Opposition Members surely do not want me to make that joke about the Labour party again. I know that Jeremy Clarkson does not like driverless vehicles, but there are many other good reasons to pursue the technology, so today we step up our support for it—sorry Jeremy, but this is definitely not the first time that you have been snubbed by Hammond and May. Our future vehicles will be driverless, but they will be electric first, and that is a change that needs to come as soon as possible for our planet. So we will establish a new £400 million charging infrastructure fund and invest an extra £100 million in plug-in car grants and £40 million in charging R and D. I can confirm today that we will clarify the law so that people who charge their electric vehicles at work will not face a benefit-in-kind charge from next year. The tax system can play an important role in protecting our environment.
We owe it to our children that the air they breathe is clean. We published our air quality plan earlier this year, and we said then that we would fund it through taxes on new diesel cars. From April 2018, the first-year vehicle excise duty rate for diesel cars that do not meet the latest standards will go up by one band, and the existing diesel supplement in company car tax will increase by one percentage point. Drivers buying a new car will be able to avoid the charge as soon as manufacturers bring forward the next-generation cleaner diesels that we all want to see, and we will only apply the measures to cars. Before the headline writers start limbering up, let me be quite clear: no white van man or white van woman will be hit by these measures. The levy will fund a new £220 million clean air fund to provide support for the implementation of local air quality plans, improving the quality of the air in cities and towns up and down the UK.
However, air quality is, sadly, not our only environmental challenge. Audiences across the country who have been glued to “Blue Planet II” have been starkly reminded of the problems of plastics pollution. The UK led the world on climate change agreements and is a pioneer in protecting marine environments. I want us now to become a world leader in tackling the scourge of the plastic that is littering our planet and our oceans. With my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs, I will investigate how the tax system and charges on single-use plastic items can reduce waste, because we cannot keep our promise to the next generation to build an economy fit for the future unless we ensure our planet has a future.
Meeting the challenge of change head-on means giving our people the confidence to embrace it and the skills to reap the rewards from it, and we have a plan to do so. We are delivering 3 million apprenticeship starts by 2020 thanks to our apprenticeship levy, and I will keep under review the flexibility that levy payers have to spend that money. We are introducing T-levels, and today I provide a further £20 million to support further education colleges to prepare for them. Knowledge of maths is key to the high-tech, cutting-edge jobs in our digital economy, but it is also useful in less glamorous roles such as frontline politics.
So we will expand the Teaching for Mastery of Maths programme to a further 3,000 schools; we will provide £40 million to train maths teachers across the country; we will introduce a £600 maths premium for schools, for every additional pupil who takes A-level or core maths; and we will invite proposals for new maths schools across England, so that highly talented young mathematicians can release their potential, wherever they live and whatever their background. More maths for everyone—Mr Deputy Speaker, don’t let anyone say I don’t know how to show the nation a good time.
Computer science is also at the heart of this revolution, so we will ensure that every secondary school pupil can study computing by tripling the number of trained computer science teachers to 12,000, and we will work with industry to create a new national centre for computing. But rapid technological change means that we also need to help people retrain during their working lives, ensuring that our workforce are equipped with the skills they will need for the workplace of the future. Today, my right hon. Friend the Education Secretary and I are launching an historic partnership, between the Government, the CBI and the TUC, to set the strategic direction for a national retraining scheme. Its first priority will be to boost digital skills and support expansion of the construction sector. To make a start immediately, we will invest £30 million in the development of digital skills distance learning courses, so that people can learn wherever they are and whenever they want.
I am pleased to be able to accept the representation I have received from the TUC to continue to fund Unionlearn, which I recognise is a valuable part of our support for workplace learning. [Interruption.] Apparently the Opposition do not know what that is, Mr Deputy Speaker. I got an email from Len asking me especially, so I couldn’t say no, could I?
Backing skills is key to unlocking growth nationally, but far too much of our economic strength is concentrated in our capital city. If we are truly to build an economy that is fit for the future, we have to get all parts of the UK firing on all cylinders. That is what our modern industrial strategy is all about. Today we back the northern powerhouse, the midlands engine and elected Mayors across the UK, with a new £1.7 billion Transforming Cities fund: half to be shared by the six areas with elected metro Mayors, to give them the firepower to deliver on local transport priorities, and the remainder to be open to competition by other cities in England.
We are investing £300 million to ensure that HS2 infrastructure can accommodate future northern powerhouse and midlands engine rail improvements. I am also providing £30 million today to trial new solutions to improve mobile and digital connectivity on trains on the TransPennine route. We are developing a local industrial strategy with Manchester, and I am pleased to announce a second devolution deal with Andy Street in the west midlands. We have agreed a new devolution deal with North of the Tyne, and we will fund the replacement of the 40-year-old rolling stock on the Tyne and Wear metro, at a total investment of £337 million.
We will invest £123 million in the Redcar steelworks site to support the ambitious plans of our new Tees Valley Mayor, Ben Houchen, and my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke), who are leading the fight for prosperity in their area. We are piloting 100% business rates retention in London next year and continuing to work with Transport for London on the funding and financing of Crossrail 2. We will also make over £1 billion of discounted lending available to local authorities across the country to support high-value infrastructure projects—a Conservative Government giving power back to the people of Britain, and driving prosperity and greater fairness across our United Kingdom.
The decisions taken in this Budget also mean £2 billion more for the Scottish Government, £1.2 billion more for the Welsh Government and over £650 million more for a Northern Ireland Executive. I can confirm today that progress is being made on city deals for Tay Cities and Stirling, and on a growth deal for Borderlands. I am getting used to the experience of having my ear bent by 13 Scottish Conservative colleagues, most recently on the issue of Scottish police and fire VAT. The Scottish National party knew the rules and knew the consequences of introducing these bodies, and ploughed ahead anyway. My Scottish Conservative colleagues have persuaded me that the Scottish people should not lose out just because of the obstinacy of the SNP Government, so we will legislate to allow VAT refunds from April 2018.
In response to yet more representations from my hon. Friends from Scotland, aided and abetted by my hon. Friend the Member for Waveney (Peter Aldous), from November 2018 we will introduce transferable tax history for transfers of oil and gas fields in the North sea, an innovative tax policy that will encourage new entrants to bring fresh investment to a basin that still holds up to 20 billion barrels of oil.
We will begin negotiations towards growth deals for north Wales and mid-Wales, and we will abolish tolls on the Severn bridge, as promised, by the end of next year. We will deliver on our commitment to review the effect of VAT and air passenger duty on tourism in Northern Ireland, reporting at next year’s Budget, and we will open negotiations for a Belfast city deal as part of our commitment to a comprehensive and ambitious set of city deals across Northern Ireland—a Conservative Government delivering for all parts of our United Kingdom.
It is only by supporting our regions and nations, dealing with our debts and investing in skills and infrastructure for the long term that we can we build an economy fit for the future. But I recognise that many people are feeling pressure on their budgets now, and because we are all in politics to make people’s lives better, in the short term as well as the long term, we will take further measures in this Budget to help families and businesses where we can.
The switch to universal credit is a long-overdue and necessary reform, replacing Labour’s broken system that discouraged people from working more than 16 hours a week and trapped 1.4 million on out-of-work benefits for nearly a decade. Universal credit delivers a modern welfare system where work always pays and people are supported to earn, but I recognise the genuine concerns on both sides of the House about the operational delivery of this benefit, and today we will act on those concerns.
First, we will remove the seven-day waiting period applied at the beginning of a benefit claim so that entitlement to universal credit will start on the day of the claim. To provide greater support during the waiting period, we will change the advances system to ensure that any household that needs it can access a full month’s payment within five days of applying; we will make it possible to apply for an advance online, and we will extend the repayment period for advances from six months to 12 months; and any new universal credit claimant in receipt of housing benefit at the time of the claim will continue to receive that housing benefit for a further two weeks, making it easier for them to pay their rent. This is a £1½ billion package to address concerns about the delivery of the benefit. My right hon. Friend the Secretary of State for Work and Pensions will give further details in a statement to the House tomorrow.
We also want to help low-income households in areas where rents have been rising fastest. In the long run, of course, the answer lies in increasing the amount of housing available, a theme I shall return to. In the meantime, the best way to help them is by increasing the rate of support in those areas where rents are least affordable. So we will increase targeted affordability funding by £125 million over the next two years, benefiting 140,000 people. We will always listen to genuine concerns and act where we can to help.
Making work pay is core to the philosophy of this Government. That is why we introduced the national living wage in 2016. From April, it will rise by 4.4%, from £7.50 an hour to £7.83, handing full-time workers a further £600 pay increase and taking their total pay rise since its introduction to over £2,000 a year. We also accept the Low Pay Commission’s recommendations on national minimum wage rates, supporting our young people with the largest increase in youth rates in 10 years and delivering a pay rise for over 2 million minimum wage workers of all ages across the country.
The facts are these: income inequality today is at its lowest level in 30 years; the top 1% are paying a larger share of income tax than at any time under the last Labour Government; the poorest 10% in Britain have seen their real incomes grow faster since 2010 than the richest 10%; and the proportion of full-time jobs that are low paid is at its lowest level for 20 years—a Conservative Government delivering a fairer Britain.
As well as making work pay, we want families to keep more of the money they earn. When we came into office, the personal allowance stood at £6,475 a year. From April, I will increase the personal allowance to £11,850 and the higher rate threshold to £46,350, making progress towards our manifesto commitments, which I reiterate today. The typical basic-rate taxpayer will be £1,075 a year better off compared with 2010, and a full-time worker on the national living wage will take home more than £3,800 extra—this Conservative Government, delivering for Britain’s workers.
I turn now to duties. The tobacco duty escalator will continue at inflation plus 2%, with an additional 1% duty on hand-rolling tobacco this year, and minimum excise duty on cigarettes will also rise. Excessive alcohol consumption by the most vulnerable people is all too often done through cheap, high-strength, low-quality products, especially so-called white ciders. I pay tribute to the campaign led by my hon. Friend the Member for Congleton (Fiona Bruce) on this issue. Following our recent consultation, we will legislate to increase duty on these products from 2019. But, recognising the pressure on household budgets, and backing our great British pubs, duties on other ciders, wines, spirits and beer will be frozen. This will mean that a bottle of whisky will be £1.15 less in 2018 than if we had continued with Labour’s plans, and a pint of beer 12p less. So, merry Christmas, Mr Deputy Speaker.
The cost of travel is an important factor for families and businesses. From April 2019, I will again freeze short-haul air passenger duty rates, and I will also freeze long-haul economy rates, paid for by an increase on premium-class tickets and on private jets—sorry, Lewis. For those who do not stretch to a private jet, I can announce a new railcard for those aged 26 to 30, giving 4.5 million more young people a third off their rail fares. I will, once again, cancel the fuel duty rise for both petrol and diesel that is scheduled for April. Since 2010, we will have saved the average car driver £850 and the average van driver over £2,100, compared with Labour’s escalator plans. Fuel duty has now been frozen for the longest period in 40 years, at a total cost to the Exchequer of £46 billion since 2010.
Our NHS is one of our great institutions: an essential part of what we are as a nation and a source of pride the length and breadth of the country. Its values are the values of the British people, and we will always back it. Dedicated NHS staff are handling the challenges of an ageing population and rapidly advancing technology with skill and commitment, and we salute them. Mr Deputy Speaker, although you would not think so to listen to the Leader of the Opposition as he regularly talks down the achievements of the NHS, the number of patients being treated is at record levels, cancer survival rates are at their highest ever level, 17 million people are now able to access GP appointments in the evenings and at weekends, and public satisfaction among hospital in-patients is at its highest level in more than 20 years.
It is central to this Government’s vision that everyone has access to the NHS, free at the point of need. That is why we endorsed and funded the NHS’s five-year forward view in 2014. But even with this additional funding, we acknowledge that the service remains under pressure, and today we respond. First, we will deliver an additional £10 billion package of capital investment in frontline services over the course of this Parliament to support the sustainability and transformation plans that will make our NHS more resilient—investing for an NHS fit for the future. But we also recognise that the NHS is under pressure right now. I am therefore exceptionally, and outside the spending review process, making an additional commitment of resource funding of £2.8 billion to the NHS in England: £350 million immediately, to allow trusts to plan for this winter, and £1.6 billion in 2018-19, with the balance in 2019-20, taking the extra resource into the NHS next year to £3.75 billion in total, meaning that our NHS will receive a £7.5 billion increase to its resource budget over this year and next.
Our nation’s nurses provide invaluable support to us all in our time of greatest need and deserve our deepest gratitude for their tireless efforts. My right hon. Friend the Health Secretary has already begun discussions with health unions on pay structure modernisation for “Agenda for Change” staff, to improve recruitment and retention. He will submit evidence to the independent pay review body in due course, but I want to assure NHS staff and patients, and Members of this House, that if the Health Secretary’s talks bear fruit, I will protect patient services by providing additional funding for such a settlement.
Just as our public services must be fit for the future, so too must our tax system. It must remain competitive to attract the brightest and the best to establish and grow the businesses of the future. It must raise the revenue we need to fund our public services and it must be robust against abuse so that it is fair to all. We have heard a lot of talk recently from the Opposition about what they would do to crack down on tax avoidance and evasion, but the truth is that they did not. It is this Government who have clamped down on avoidance and evasion; this Government who have seen the tax gap cut by a quarter since 2010, to a record low; and this Government who have raked in an extra £160 billion over seven years for our public services by collecting the taxes that are due. So I am going to take no lectures, but I will take action. This Budget continues the work of the last seven years, with a package of measures that is forecast to raise £4.8 billion by 2022-23—doing the job that Labour failed to do for 13 years in office.
Our long-term phased reduction of corporation tax has generated investment and jobs and raised £20 billion extra for our public services. We are committed to maintaining Britain’s competitive corporation tax rates, but there is a case now for removing the anomaly of the indexation allowance for capital gains, bringing the corporate tax system into line with the personal capital gains tax system.
I will therefore freeze this allowance so that companies receive relief for inflation up to January 2018, but not thereafter.
I am grateful to the Office of Tax Simplification for its recent report on the VAT registration threshold. At £85,000, the UK’s VAT threshold is by far the highest in the OECD. By contrast, in Germany it is just £15,600. I note the OTS conclusion that it distorts competition and disincentivises business growth. I also note the concerns of the Federation of Small Businesses about the cliff edge of the threshold. But such a high threshold also has the benefit of keeping the majority of small businesses out of VAT altogether, so I am not minded to reduce the threshold, but I will consult on whether its design could better incentivise growth, and in the meantime we will maintain it at its current level of £85,000 for the next two years.
We cannot build an economy fit for the future without supporting its backbone: our 5.5 million small businesses, which are responsible between them for nearly half of our private sector jobs. They give our economy its extraordinary vibrancy and resilience, but I recognise that many are feeling under pressure right now. I know what hard work it is to get a business off the ground, to get it to grow, so today I want to do what we can to ease that pressure.
Business rates represent a high fixed cost for small businesses. At Budget 2016 we introduced a package of business rate relief worth almost £9 billion, with a further £435 million in the spring Budget. Today I go further. We have listened to concerns about the potential costs of the annual uprating of business rates in April next year, and today I will accept the representation of the British Chambers of Commerce, CBI and other business organisations and bring forward the planned switch from RPI to CPI by two years, to April 2018—a move worth £2.3 billion to businesses over the next five years.
I have also listened to businesses affected by the so-called staircase tax. We will change the law to ensure that where a business has been impacted by the Supreme Court ruling, it can have its original bill reinstated, if it chooses, and backdated. I hope that I can expect cross-party backing to speed that measure through Parliament.
There are three simple steps to solve the staircase tax—[Interruption.] What do they expect? It’s the tax section. To support the thousands of small pubs that are at the heart of so many of our communities, we will extend the £1,000 discount for pubs with a rateable value of less than £100,000 for one more year, to March 2019.
And I have heard the concerns about the five-yearly revaluation system. Shorter revaluation periods will reduce the size of changes in valuations, so I can announce today that after the next revaluation, future revaluations will take place every three years—this Conservative Government listening to small business.
There is a wider concern across this House and in the business community about the tax system in the digital age. Along with the innovation and growth that it brings, digitalisation poses challenges for the sustainability and fairness of our tax system. But this challenge can only be properly solved on an international basis, and the UK is leading the charge in the OECD and the G20 to find solutions.
Today we publish a position paper on the tax challenge posed by the digital economy, setting out our emerging thinking about potential solutions. But in the meantime, we will take what action we can. Multinational digital businesses pay billions of pounds in royalties to jurisdictions where they are not taxed, and some of these royalties relate to UK sales. So from April 2019, and in accordance with our international obligations, we will apply income tax to royalties relating to UK sales when those royalties are paid to a low-tax jurisdiction, even if they do not fall to be taxed in the UK under our current rules. That will raise about £200 million a year. It does not solve the problem, but it does send a signal of our determination and we will continue work in the international arena to find a sustainable and fair long-term solution that properly taxes the digital businesses that operate in our cyber-space.
Following representations from a number of my hon. Friends, we are also taking further action to address online VAT fraud, which costs the taxpayer £1.2 billion per year, by making all online marketplaces jointly liable with their sellers for VAT, ensuring that sellers operating through them pay the right amount of VAT, just as we would expect traditional retailers to do.
I want to turn to the challenge of the housing market, but before I do so I want to touch on the aftermath of the appalling events at Grenfell Tower. We have provided financial support for the victims of this terrible tragedy, and today I can announce we will provide Kensington and Chelsea Council with a further £28 million for mental health and counselling services, regeneration support for the surrounding areas and to provide a new community space for local residents.
This tragedy should never have happened, and we must ensure that nothing like it ever happens again. All local authorities and housing associations must carry out any identified necessary safety works as soon as possible. If any local authority cannot access funding to pay for essential fire safety work, they should contact us immediately. I have said before, and I will say it again today: we will not allow financial constraints to get in the way of any essential fire safety work.
I want to address the issue of empty properties. It cannot be right to leave property empty when so many are desperate for a place to live, so we will legislate to give local authorities the power to charge a 100% council tax premium on empty properties. We will also launch a consultation on barriers to longer tenancies in the private rented sector and how we might encourage landlords to offer them to those tenants who want the extra security.
I also want to say something about rough sleeping. It is unacceptable that in 21st-century Britain there are people sleeping on the streets, so we will invest today £28 million in three new Housing First pilots in the west midlands, Manchester and Liverpool, and we will establish a homelessness taskforce as part of our commitment to halving rough sleeping by 2022 and eliminating it by 2027.
I thank the many colleagues who submitted ideas on how to tackle the challenge of the housing market, including my hon. Friends the Members for North East Hampshire (Mr Jayawardena), for Eastleigh (Mims Davies) and for Weston-super-Mare (John Penrose) in particular. By continuing to invest in Britain’s infrastructure, skills and research and development, we will ensure the recovery in productivity growth that is the key to delivering our vision of a stronger, fairer, more balanced economy, and the assurance to the next generation of their economic security.
But however successful we are in that endeavour, there is one area where young people today will, rightly, feel concern about their future prospects, and that is in the housing market. House prices are increasingly out of reach for many. It takes too long to save for a deposit, and rents absorb too high a portion of monthly income, so the number of 25 to 34-year-olds owning their own home has dropped from 59% to just 38% over the last 13 years. Put simply, successive Governments, over decades, have failed to build enough homes to deliver the home-owning dream that this country has always been proud of, or indeed to meet the needs of those who rent.
In Manchester a few weeks ago, my right hon. Friend the Prime Minister made a pledge to Britain’s younger generation that she would dedicate her premiership to fixing this problem, and today we take the next steps to delivering on that pledge. By choosing to build we send a message to the next generation that getting on the housing ladder is not just a dream of your parents’ past, but a reality for your future.
We have made a start with schemes such as Help to Buy, which has helped over 320,000 people buy a home. We have increased the supply of homes by more than 1.1 million since 2010, including nearly 350,000 affordable homes. House building stands at its highest level since the crash, with the latest figures showing that over 217,000 net additional homes were added to the stock last year. That is a remarkable achievement, but we need to do better still if we are to see affordability improve.
This is a complex challenge, and there is no single magic bullet. If we do not increase the supply of land for new homes, more money will simply inflate prices and make matters worse. If we do not do more to support the growth of the SME house building sector that was all but wiped out by Labour’s great recession, we will remain dependent on the major national house builders that dominate the industry. If we do not train the construction workers of tomorrow, we may generate planning permissions but we will not turn them into homes. Solving this challenge will require money, it will require planning reform and it will require intervention. So today we set out an ambitious plan to tackle the housing challenge.
Over the next five years, we will commit a total of at least £44 billion of capital funding, loans and guarantees to support our housing market, to boost the supply of skills, resources and building land, and to create the financial incentives necessary to deliver 300,000 net additional homes a year on average by the mid-2020s—the biggest annual increase in housing supply since 1970; new money for the home builders fund to get SME housebuilders building again; a £630 million small sites fund to unstick the delivery of 40,000 homes; a further £2.7 billion to more than double the housing infrastructure fund; £400 million more for estate regeneration; a £1.1 billion fund to unlock strategic sites, including new settlements and urban regeneration schemes; a lifting of HRA caps for councils in high demand areas, to get them building again; and £8 billion of new financial guarantees to support private house building and the purpose-built private rented sector. And because we need a workforce to build these new homes, we are providing an additional £34 million to develop construction skills across the country.
Solving the housing challenge takes more than money—it takes planning reform. We will focus on the urban areas where people want to live and where most jobs are created, making best use of our urban land and continuing the strong protection of our green belt, in particular building high quality, high density homes in city centres and around major transport hubs. And to put the needs of our young people first, we will ensure that councils in high demand areas permit more homes for local first-time buyers and affordable renters.
My right hon. Friend the Communities Secretary will set out more detail in a statement to the House in due course. However, one thing is very clear: there is a significant gap between the number of planning permissions granted and the number of homes built. In London alone, there are 270,000 residential planning permissions unbuilt. We need to understand why. So I am establishing an urgent review to look at the gap between planning permissions and housing starts. It will be chaired by my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) and will deliver an interim report in time for the spring statement next year. And if that report finds that vitally needed land is being withheld from the market for commercial, rather than technical, reasons, we will intervene to change the incentives to ensure that such land is brought forward for development, using direct intervention compulsory purchase powers as necessary.
Mr Deputy Speaker, my right hon. Friend the Prime Minister has said that we will fix this problem, and no one should doubt the Government’s determination to do so. But the solution will not deliver itself. Local authorities will need help and support. Developers will need encouragement and persuasion. Infrastructure to facilitate higher-density development must be funded and delivered. So the Homes and Communities Agency will expand to become Homes England, bringing together money, expertise and planning and compulsory purchase powers, with a clear remit to facilitate delivery of sufficient new homes, where they are most needed, to deliver a sustained improvement in housing affordability.
But Mr Deputy Speaker, the battle to achieve and sustain affordability will be a long-term one, so we also need to look beyond this Parliament, to long-term measures. We will use new town development corporations to kick-start five new locally agreed garden towns in areas of demand pressure, delivered through public-private partnerships and designed to attract long-term capital investment from around the world.
Last week, the National Infrastructure Commission published their report on the Cambridge-Milton Keynes-Oxford corridor. Today we back their vision and commit to building up to 1 million homes by 2050, completing the road and rail infrastructure to support them. And as a down-payment on this plan, we have agreed an ambitious housing deal with Oxfordshire to deliver 100,000 homes by 2031. We are capitalising on the global reputations of our two most famous universities and Britain’s biggest new town to create a dynamic new growth corridor for the 21st century.
Mr Deputy Speaker, this is our plan to deliver on the pledge we have made to the next generation: that the dream of home ownership will become a reality in this country once again. But I also want to take action today to help young people who are saving to own a home. One of the biggest challenges facing young first-time buyers is the cash required up front. We have put £10 billion more money into Help to Buy: Equity Loan to help those saving for a deposit, but I want to do more still. I have received representations for a temporary stamp duty holiday for first-time buyers, but this would only help those who are ready to purchase now and would offer nothing for the many who will need to save for years. So with effect from today, for all first-time-buyer purchases up to £300,000, I am abolishing stamp duty altogether.