The hurt is hidden
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After months of pessimistic rhetoric and stark warnings of 40% cuts the Comprehensive Spending Review didn’t actually seem that bad.
This is testament to the coalition government’s skill of managing expectations and carefully leaking stories to certain newspapers and websites.
At the start of the CSR George Osborne gleefully brandished potential departmental cuts of between 25% and 40%.
He knew very well that the 40% figure would stick in people’s minds and also that there was no chance he was ever going to go that far.
He played up to this so much that he announced with a certain pride that he had managed to cut departments by “only” 19%.
Another example was the day before the CSR when the BBC had a full report of the social housing cuts and decent homes programme.
After a call to the Department of Communities and Local Government press office I was told this was merely speculation. But considering that the report was absolutely bang on, I have rather large doubts about that.
The same was true of the Capital Gains Tax introduction when the Treasury hinted at an increase of up to 50% to howls of derision from the Conservative backbenchers.
He then posed as the reasonable negotiator and pleased his opponents with a 28% rate despite the fact he had no intention of ever going further.
By drip feeding the bad news over five months the government was allowed to announce a few pieces of good news in the CSR including the extension of the Income Support for Mortgage Interest until 2012.
But actually when you look beneath the spin and bluster methods that would have made the former-Prime Minister Gordon Brown blush then there are some harsh truths.
There is a housing crisis in the UK and the CSR has only increased the problems.
The government clearly wants to turn to the private rented sector rather than social housing but buy-to-let lenders Precise Mortgages and Paragon have criticised the changes for straining the sector even further.
Private renting is expected to pick up the slack for tougher mortgage criteria and a cutback on social housing. It is being squeezed from both sides.
There is a market here for big institutional investor and we may see more deals in specialist markets such as the Carlyle Group buying student accommodation last month.
But there has to be flexible lenders to fund professional landlords if the private rented sector is going to grow at the speed the government wants.
And without more buy-to-let funding how is this going to happen?
With 80% of the market value of rent demanded from social housing tenants, where are those who can’t afford it going to live? Housing benefit is being cut so will they be homeless?
The CSR was a monumental change to the British state and despite it being well-managed it still poses some serious questions, particularly for the housing market.
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