the times | Thursday November 26 2020 2GM 7News
Homeowners are facing a double hit of
falling house prices and rising council
tax bills as the long-term effect of the
pandemic hits family finances.
The Office for Budget Responsibility
(OBR) warned that the temporary
boost from Rishi Sunak’s stamp duty
holiday would be reversed next year
with house prices dropping by more
than 8 per cent and not recovering until
2022.
As a result, by 2025 the cost of an av-
erage home will be 17 per cent lower
than they predicted at the time of the
budget in March and before the impact
of Covid-19 was known.
In July, the chancellor raised the
threshold for paying stamp duty from
£125,000 to £500,000 until March 31House prices to fall as council tax jumps
Oliver Wright Policy Editor next year. Buyers pay no tax on
purchases below £500,000 and get a
15 per cent discount on their payment
on purchases above that level.
The OBR warned of a significant
slowing in the housing market midway
through next year after the stamp duty
holiday comes to an end. Sales would
then rise “gradually” to a more consist-
ent level.
The chancellor gave local authorities
the go-ahead yesterday to raise council
tax bills by up to 5 per cent next year to
help them to fund social care and
address the pressures of dealing with
Covid-19.
Councils providing adult social care
can add 3 per cent to bills, with a further
2 per cent rise to pay for general
services.
This could lead to bills for an averageBand D property rising from £1,818 to
£1,908, an increase of £90.
Mr Sunak said that the settlement
would allow councils to increase their
“core spending power”, which includes
government grants, by 4.5 per cent.
“Local authorities will have extra
flexibility for council tax and the adult
social care precept, which together with
£300 million of new grant funding gives
them access to an extra £1 billion to
fund social care,” he said.
He added that this was on top of the
extra £1 billion social care grant already
announced and which will be extended.
The Local Government Association
said that while the increase was neces-
sary to support important local services
it would place a “significant burden on
households”.
“It is good that the chancellor hasprovided further funding for councils to
manage the cost pressures they face as
a result of the pandemic,” said James
Jamieson, who is chairman of the
association.
“However, this assumes council tax
bills will rise by 5 per cent next year
which will place a significant burden on
households. Council tax rises — partic-
ularly the adult social care precept —
have never been the answer to the long-
term pressures faced by councils, par-
ticularly in social care, raising different
amounts of money in different areas,
unrelated to need. It is not the long-
term solution which is desperately
needed.”
Others questioned whether the
additional funding would be enough to
support the already stretched social
care sector.Caroline Abrahams, charity director
at Age UK and co-chairwoman of the
Care and Support Alliance, said that
the funding was “insufficient”.
She added: “Against the context of
the pandemic, which is both driving up
the level of need, and weakening the fi-
nances of providers, this is a decidedly
reckless approach.
“Local authorities are once again
being asked to square an impossible
circle and this ungenerous settlement
does very little to help the NHS either.
“However, it’s older and disabled
people, and their families and carers,
who will as ever pay the biggest price,
with more likely to have to manage
without the support they need.
“This is a bitter pill to swallow, espe-
cially after everything social care has
been through this year.”the economy, warns watchdog
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tNNN bbb2019 Q4 = 100News
Analysis
F
ree money exists. It is
hard to conclude
otherwise after the most
free-spending year in
peacetime (Philip
Aldrick writes). Over this
parliament the chancellor will
borrow £863 billion, the Office
for Budget Responsibility said,
lifting the debt to £2.7 trillion,
three times more than in 2008.
Rishi Sunak will borrow
£562 billion more over these five
years than was planned in March,
yet the debt interest bill will be
£69 billion lower. He has the
Bank of England to thank, for
cutting interest rates to 0.1 per
cent and buying every penny of
sovereign debt issued this year.
Cheap borrowing makes the
debt manageable, but only while
rates stay low. At some point
taxes will have to rise, the OBR
said. “Even on the loosest
definition of balancing the books,
a fiscal adjustment of £27 billion
would be required.” That’s 4p on
the basic rate of income tax.
Mr Sunak did not mention
taxes or austerity in his speech.
Spending reviews are often about
restraint but he kept playing
Father Christmas. What began in
the summer as a £181 billion fund
to protect households and
businesses from the virus became
£218 billion and now £280 billion.
The debt has served its
purpose. In July the OBR
expected unemployment to peak
at 12 per cent. It now expects the
peak to be 7.5 per cent, a million
more out of work than now. Less
encouraging was the forecast for
a shallow V-shaped recovery. Not
until the end of 2022 will the
economy return to its pre-crisis
level, after shrinking 11.3 per cent
this year, and £65 billion of
national income will be lost for
good relative to pre-crisis trends
— 3 per cent of GDP gone.
Leaving the EU without a deal
will add £12 billion to borrowing
next year and 2 more percentage
points of permanent damage. On
the other hand, vaccines could
open the economy more quickly.
Either way the picture is of a
nation still borrowing £100 billion
in 2025, and with dangerous debt.
Next year, Mr Sunak will have to
start talking about taxes.TOLGA AKMEN/AFP VIA GETTY IMAGES