Philip Hammond will also announce £1.4bn investment in affordable housing in bid to help ‘just about managing’ families

This article is more than 3 years old

This article is more than 3 years old

Millions of families who are being charged hundreds of pounds by agencies to cover the supposed administrative costs of renting will be offered relief when Philip Hammond promises to ban letting fees.

The chancellor will unveil the measure in the autumn statement on Wednesday alongside a £1.4bn investment in affordable housing as he tries to deliver on Theresa May’s promise to help families who are “just about managing” – or “Jams”.

Will rents go up if unfair letting fees are banned? Read more

The boost for housing, in addition to a fund that is already worth £4.7bn, is expected to help build 40,000 new homes and would allow providers more flexibility to offer people lower rents.

The eye-catching ban on letting fees, which would come into place after a consultation, follows campaigns by both the Labour party and a Lib Dem peer, Olly Grender.

They claimed that renters were being asked to pay hundreds of pounds for questionable reasons such as inventory checks.

However, just two months ago the housing minister, Gavin Barwell, tweeted that such a move would be a “bad idea – landlords would pass cost to tenants via rent”.

Gavin Barwell MP (@GavinBarwellMP) @insidehousing Bad idea - landlords would pass cost to tenants via rent. We're looking at other ways to cut upfront costs & raise standards

Other measures designed to target the so-called Jams include:

Ploughing over £1bn into universal credit over five years by reducing the rate at which benefits are taken off people as they progress through work, following demands for action by Conservative backbenchers.



Increasing the national living wage from £7.20 to £7.50 an hour from April 2017, slightly below the £7.60 estimate by the independent Office for Budget Responsibility (OBR).



Allocating £4.3m a year towards strengthening minimum wage enforcement.



Hammond is also expected to use the first major financial statement of a chancellorship likely to be dominated by Brexit to announce sharply weaker forecasts for GDP growth and the public finances.



The figures from the OBR follow predictions from City forecasters that economic growth will slide from around 2% this year to little more than 1% in 2017.

Meanwhile, the city credit ratings agency Moody’s warned that just managing families may find themselves unable to service their car loans and mortgages as a result of by rising inflation caused by Brexit.

The ban on letting fees comes despite Barwell’s comments and the fact that the Conservative government led by David Cameron fiercely resisted calls by the Labour party for the change just six months ago.

The Conservative party press office put out a statement saying that Ed Miliband’s policy would “lead to higher rents” while the same message was delivered by the local government minister, Marcus Jones, who is still in position.

He told MPs in the House of Commons: “Banning or capping letting agent fees would not make renting any cheaper for tenants – tenants would still end up paying but through higher rents.”

The issue is disputed with National Landlords Association chief executive, Richard Lambert, agreeing that the cost would “boomerang” back on to private tenants.

While he admitted that some unscrupulous agents have got away with excessive fees, Lambert said: “Agents will have no other option than to shift the fees on to landlords, which many will argue is more appropriate, since the landlord employs the agent. But adding to landlords’ costs, on top of restricting their ability to deduct their business costs from their taxable income, will only push more towards increasing rents.”

He said Hammond “lacks an understanding of how the whole sector works”.

However, Shelter – which found letting fees are on average £300 but can reach more than £500 – insisted that the evidence from Scotland, where a ban is already in place, is that rents did not rise.

The charity welcomed the moves on housing in the autumn statement but said the “devil will be in the detail”.

“At Shelter we see the impact of our chronic shortage of affordable homes every day, with increasing numbers of people left with no choice but to fork out most of their hard-earned wages on expensive private rents, and wave goodbye to the chance of a stable home,” said the charity’s chief executive, Campbell Robb.

The shadow housing secretary, John Healey, added that his party had long backed “ending sky-high letting fees for renters” and pointed out that Conservative MPs, including May and Hammond, had voted against the move.

Lady Grender, who is the author of a private members bill on renters’ rights that proposed the change and was being discussed in parliament as recently as Friday, said: “Our relentless campaigning to get tenants’ letting fees banned has finally paid off and the government has recognised this is the right thing to do. The upfront costs of renting are far too high, pushing many people into debt just to pay the fees, and stopping others from being able to move into a rented home.”



Facebook Twitter Pinterest Philip Hammond’s speech is expected to be significantly shorter than those of his predecessor, George Osborne. Photograph: Stefan Rousseau/PA

She wrote to the prime minister to highlight the issue when she first came into office, and received a response in which May said: “I appreciate your comments regarding the private rented sector and I agree that tackling concerns about housing will be an important part of building a country that works for everyone.”

Sources said the chancellor was expected to spend Tuesday evening putting the finishing touches on his speech at No 11, having moved into the Downing Street flat less than a fortnight ago.



'Just about managing' families to be £2,500 a year worse off by 2020 – study Read more

Hammond’s speech will start at 12.30pm after prime minister’s questions and is likely to be significantly shorter than those of his predecessor, George Osborne. The so-called red book of fiscal measures will also be slimmer, reflecting a desire to focus on broad-brush headline measures rather than micromanaging the spending of departments.

Ahead of the event, Hammond has spoken to more than 100 businesses and organisations to get a sense of their perspective on the post-referendum economy. His big theme on the day will be boosting spending on infrastructure and productivity, as well as the string of small measures to help families that are just managing.



After the speech, David Gauke, the chief secretary to the Treasury, will be sent out on to the airwaves to explain the overarching points of the statement. He is a veteran of the Treasury and was often used in a similar way by Osborne after big announcements.

