To Deliver On It

Angela Rayner writes:

At cabinet last Tuesday the prime minister reportedly made a powerful case for a government that serves the interests of those struggling to get by. He is right. The cost of living emergency is the issue of our time.

It is a crisis not months, but years in the making. For more than two decades, living standards have been crushed and there is an increasing sense of a country where people cannot get on, of a system stacked against them.

In the face of this deep-set disillusionment, Labour in government has been at its best when challenging the status quo. By standing firm in the face of established interests who have had it their own way for decades – that’s exactly what the landmark Employment Rights Act and Renters’ Rights Act have done, delivering new protections for millions.

And now, this government has a fresh opportunity to show whose side it is on – by ending the scandal of unregulated and unaffordable ground rents faced by leaseholders, as we pledged in our manifesto. 

Millions of people suffering from this scandal expect action in the imminent draft leasehold and commonhold reform bill. Many of them are young families who have tried to do everything right. They entered the jobs market in the teeth of a great recession; they endured the worst collapse in living standards in generations; and they scrimped and saved and managed to get their foot on the housing ladder.

Yet despite owning their home, they hand out hundreds, and in some cases thousands of pounds a year in ground rents to unaccountable investors, often from overseas, for the right to occupy the land on which the home they live in was built. Unlike service charges, leaseholders get nothing in return for these payments. And for many this is made worse because the rates at which they pay can escalate with total impunity, in some cases doubling every five to 10 years.

In the past, ground rents were of a low or a symbolic peppercorn value. Over recent decades, though, ordinary homeowners have been charged high and escalating amounts of ground rent, leaving them in financial distress and often unable to sell or remortgage their homes.

The Competition and Markets Authority has found that nearly 1m leases have one of these escalating or onerous ground-rent clauses. Where they are replaced, it’s often made even worse, with a formula pegged to inflation, leading to huge and unpredictable increases for hard-pressed homeowners.

All this misery for ordinary homeowners to do nothing more than sustain the unearned income stream of unaccountable investors – it’s not right.

Labour made a promise to leaseholders that we would fix this injustice, but ministers are currently subjected to furious lobbying from wealthy investors trying to water down this manifesto commitment.

There are those who argue we cannot act on our promise as it could risk a backlash from investors, including pension funds. It’s hardly surprising – the system works just fine for them. They get an annual return for doing absolutely nothing, they can raise ground rents and pile up service charges without transparency, with total impunity, regardless of the devastation it causes to families.

But only a very small amount of UK pension fund assets are actually dependent on ground rents. The government’s own figures suggest this could even be below 1% and easily absorbable. They are also niche investments with little risk to wider investor confidence. In any case, this unproductive investment does nothing to grow our economy. Incentivising investors to move towards productive investments – such as infrastructure, technology and capital to help businesses scale up – is exactly what we should be doing to promote growth.

As things stand, this Labour government has a record on leasehold reform we can be proud of. We have already switched on a range of new protections and rights for leaseholders. Our draft leasehold and commonhold reform bill can move us on from the feudal leasehold system – but not without meaningful action to tackle ground rents; at the very least, an annual cash cap.

If Labour cannot fix such an obvious injustice and show families whose living standards have been crushed that we will fight for them, then we shouldn’t be surprised if they lose faith that anything can change.

This battle is a symbol of so much more. It is about whose side we are on, and who we are in government to fight for. Last week the prime minister powerfully made that case at cabinet. Now it is on all of us in government and parliament to deliver on it – so let’s get the job done.