GMAC-RFC has called for a more robust trial of Home Information Packs, after economic research it commissioned revealed the detrimental impact any drop in housing transactions could have on the wider UK economy.
The findings were presented this morning to all three political parties, other public policymakers and interested observers on both sides of the HIPs debate.
The independent study by Oxford Economic Forecasting looks at the economic impact of a 10% and 25% fall in housing transactions arising from the imposition of a compulsory HIP charge on a largely discretionary housing market.
In the 25% scenario, it found that unemployment would rise by 93,000, gross domestic product falls by 0.5% or 5,700m, consumer spending falls by 0.7% or 5,800m, and net revenue to the government falls by 0.9% or 5,600m.
In the 10% scenario, unemployment rises by 42,000, GDP falls by 0.2% or 2,600m, consumer spending falls by 0.3% or 2,500m, and net revenue to the government falls by 0.4% or 3,200m.
The independent economic modelling work was undertaken by Oxford Economic Forecasting who has also undertaken work for HM Treasury, the Department of Trade and Industry, the International Monetary Fund and the World Bank.
An independent academic overlay analysing the OEF output was additionally commissioned by GMAC-RFC from Mark Stephens, professor of european housing and assistant director of the Centre for Housing Policy at the University of York.
Jeff Knight, director of marketing at GMAC-RFC says: “We commissioned this work because, although there has been a lot of debate about HIPs, no modelling has been undertaken in the public domain to test the economic impact of HIPs if there were to be a fall in housing transactions. This work fills that gap and frames the economic risks.”
“The reports by OEF and Professor Stephens speak for themselves but the results do reinforce our belief, and oft-repeated request, that a paid-for HIPs dry run should be conducted so that the issue of consumer reaction to this new cost can be tested and taken into account prior to implementation.”
Ray Boulger senior technical manager at john Charcol says: “Today’s GMAC-RFC sponsored report produced by Oxford Economic Forecasting raises very serious concerns over the government’s controversial plans to introduce HIPs on June 1 2007.
“Concerns over the introduction of HIPs have increased significantly over the last few months and the government will be embarrassed by these new findings which demonstrate the potentially damaging economic impact of HIPs on unemployment, consumer spending, the gross domestic product and the government’s tax take.
“A competent government would have carried out similar research a long time ago. If such research was commissioned, choosing not to publish the results speaks volumes. If the research wasn’t commissioned it is a damming indictment of their disregard for a proper in depth study prior to introducing a major new policy.
“The report shows that the introduction of HIPs will produce a substantial rise in unemployment, a significant fall in consumer spending and a sharp fall in Government revenues, all of which will result in a significant short term reduction of GDP, and possibly even a long term negative impact.
“With the continued confusion and uncertainty over HIPs in the marketplace there is now only one way for the government to save face. Make HIPs voluntary.
“By doing so, not only will the Government avoid the problems highlighted by the report, but they will side-step the potential embarrassment of not having enough Home Inspectors trained and certified in time for the proposed start date in less than a year’s time.”
Professor Stephens says: “It is telling that at this stage we cannot be more certain about the impact of HIPs on transactions. One of the key conclusions of the government-sponsored evaluation of English Housing Policy 1975-2000 was that while policy instruments are often successful when assessed within their own terms, they frequently have unintended consequences that are sometimes unfavourable.”