In another reset, PM Johnson pitches plan for UK economy, housing

FILE PHOTO: British Prime Minister Boris Johnson gives a speech
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By Andy Bruce and William James

LONDON (Reuters) -Prime Minister Boris Johnson told Britons on Thursday he was "on your side", vowing to build a high-growth, low-tax economy where everyone could buy their own home, in his latest attempt at a reset after surviving a major revolt against his leadership.

In a wide-ranging speech, the Conservative leader vowed to tackle the soaring cost of living and address long-standing problems such as unaffordable childcare.

But many economists were doubtful about Johnson's promises, with official forecasters saying tax revenue is on course to rise to the highest level since the 1940s and growth set to disappear.

Johnson warned the British public there was no quick fix to the economic instability stoked by Russia's invasion of Ukraine, but that his government would use "fiscal firepower" to help ease the cost-of-living crisis.

He argued that growth and a high-wage economy would alleviate the pain of inflation in Britain, which, according to the British Chambers of Commerce and the Organisation for Economic Co-operation and Development, is heading for stagnation.

In a speech to an audience in the northwestern town of Blackpool, Johnson said the economic consequences of the war in Ukraine would abate over time, but in the meantime his government would act to try to ease the cost-of-living crunch.

However, simply increasing spending or wages is no panacea as this might fuel further price rises, he said, a change of tack for a prime minister who has often thrown money at challenges such as the COVID-19 pandemic.

"We must deal with the here and now, we’ve got to recognise that there are pressures on household budgets that for some will prove simply unaffordable," he said. "So this government is on the side of the British public in coping with those pressures."

His main new policy announcement was to address declining rates of home ownership, especially among young people given the rocketing cost of housing relative to income.

He said he would extend what was once called the "right-to-buy", the ability for more people living in social housing to buy their homes, and that he would launch a review of the mortgage market to increase access to low deposit mortgages.

Lindsay Judge at the Resolution Foundation think tank said a plan to assist people on welfare benefits in buying homes would only help a small number of people.

OLD POLICY?

Earlier, the minister for removing regional inequalities, Michael Gove, was questioned about whether the government was guilty of simply recycling old policies that had failed to work.

Gove said: "On right to buy, you are absolutely correct to say this is an extension of policy that we already have." This time, he said, the government would replace sold social housing with new homes, without giving details.

Britain's main opposition Labour Party said Johnson was ignoring the increasingly poor economic outlook.

"No wonder he is unwilling to face the reality that economic growth in the UK will grind to a halt next year," Labour lawmaker Tulip Siddiq said of Johnson's planned speech.

Johnson has for months been under increasing pressure over "partygate" - lurid details of alcohol-fuelled parties at his Downing Street office and residence during COVID-19 lockdowns.

The growing anger culminated in an ultimately unsuccessful bid to oust him by a no-confidence vote on Monday, which wounded Johnson's authority as he managed only a slender victory over rebels in his Conservative Party.

The cost-of-living crisis now looms large.

The OECD sees zero UK growth next year - the weakest of any G20 economy apart from Russia - while the BCC expects Britain's economy to shrink 0.2% in the final quarter of this year before growing just 0.6% in 2023 and 1.2% in 2024.

"The downgrade reflects heightened political and economic uncertainty, and rising cost pressures which are limiting smaller firms' abilities to invest," the BCC said.

But Johnson wants to prove those assessments wrong and said his government would cut taxes - a demand of many in his unhappy Conservative Party - as soon as it could.

"The overall burden of taxation is now very high. And sooner or later - and I would much rather it was sooner than later - that burden must come down," Johnson said.

"Over the next few weeks, this government will be setting out reforms to help people cut costs in every area of household expenditure, from food, to energy, to childcare, to transport and housing."

(Reporting by Andy Bruce and William James; additional reporting by Kate Holton; writing by Elizabeth Piper; editing by Mark Heinrich)