Home information packs (Hip) could potentially wipe up to £5.7bn in gross domestic product from the UK economy and make almost 100,000 people jobless in the first year of their introduction, an independent report has said today.
The report commissioned by mortgage lender GMAC-RFC, reveals a nightmare scenario in which Hips lead to a downturn of 25% in housing transactions after their introduction to the housing market next June.
Oxford Economic Forecasting, which also carries out studies for the Treasury, the Department for Trade and Industry, the International Monetary Fund and the World Bank, states consumer spending would also fall by 0.7% or £5.8bn.
And net government revenue would fall by 0.9% or £5.6bn.
GMAC-RFC, presented the research to all three political parties this morning as well as various other public policymakers and industry figures on both sides of the Hip debate.
The report also contained details of a scenario in which Hips had a lesser impact on the housing market.
In that scenario there was only a 10% downturn in housing transactions, unemployment would rise by 42,000, while GDP would fall by 0.2% or £2.6bn.
Consumer spending would fall by 0.3% or £2.5bn and net revenue lost by the government would amount to 0.4% or £3.2bn.
Both models take into account the government would be able to levy VAT on Hips and yet still forecast that it would be out of pocket.
In both models the number of housing transations make a gradual recovery with the proportion of transactions rising by 1% per year in the 10% scenario and by 2% per year in the 25% scenario. As a result housing transaction levels would not return their current level for 10 years after the introduction of Hips.
Jeff Knight, director of marketing at GMAC-RFC says the lender 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 the packs if there were to be a fall in housing transactions.
"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 Hip[s 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," adds Knight.
Ray Boulger, senior technical manager at John Charcol, says: "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."
Boulger says the only option for the government is now is to make Hips voluntary. He claims by doing so, the government will avoid the problems highlighted by the report and will side-step the potential embarrassment of not having enough Home Inspectors trained and certified in time for the proposed start date.
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