Meeting of the Parliament 25 January 2023
It is a basic human right to have a place to call home. It provides shelter, comfort, a sanctuary and identity. You have your own address: “This is where I live.” Now, however, there are increased pressures on people keeping what home they have by meeting the mortgage payment when interest rates, along with energy and food bills, are soaring.
It is true that we need more social affordable homes, but a number of factors are impacting on the cost of constructing houses, one of which is inflation. The level of inflation—10 per cent—stems directly from the economic failures of the UK Government. That has reduced the actual value of the Scottish Government’s budget, which was set when inflation was at 3 per cent, by some £1.4 billion. That means that, as the cabinet secretary said, the housing budget buys even less in the market.
Another factor is Brexit. After the nigh stagnation of construction in the two years of Covid, demand for construction materials is extremely high, but there is a supply chain issue. One reason for the shortage of construction materials is the fact that lorry drivers are in short supply, which means that it has become more expensive to deliver construction materials to different parts of the UK, and it is therefore more expensive to build. A large number of lorry drivers in the UK were from other EU countries, and many of them cannot come back here.
According to the Construction Leadership Council, 60 per cent of imported materials used in construction are from the European Union. The supply of timber has been particularly affected by Brexit, as 80 to 90 per cent of softwood is imported from European countries. Scarcity adds to construction costs.
Another factor is the skills shortage. It is estimated that close to a million construction workers are set to retire in the next 10 years, which will also significantly impact the industry. Before Brexit, about 40 per cent of all construction workers in the UK came from other EU countries. Now, such workers are unlikely to get visas to work here, as the UK has introduced a points-based immigration system. The impact of the skills shortage in the UK is that employers will have to increase wages, as competition will be stiff among construction companies, and that will put up construction costs.
Then there is VAT. I quote Rishi Sunak, for the first and possibly last time:
“Green belt land is extremely precious in the UK. We’ve seen too many examples of local councils circumventing the views of residents by taking land out of the green belt for development, but I will put a stop to it.”
Yet VAT for construction on brownfield sites remains at 17.5 or 20 per cent, depending on the circumstances, whereas it is zero per cent on greenfield sites. Perhaps Mr Sunak’s attention is occupied on other taxing matters because nothing has happened on VAT equity to date.
All of those—inflation, Brexit and VAT—add to the costs of construction of homes, especially in the social rented sector, where councils are already under pressure because inflation is attacking their budgets on all fronts. None of that is in the control of the Scottish Government. It is all reserved, so let us have some refreshing honesty from the Tory benches, starting perhaps with agreeing that VAT for construction on brownfield sites should be levied at zero per cent.
16:57