At a meeting in the House of Commons. GMAC-RFC presented the research it has commissioned to all three political parties, various other public policymakers and interested observers on both sides of the HIPs debate.
The independent economic modelling work was undertaken by Oxford Economic Forecasting (OEF) who has also undertaken work for HM Treasury, the Department for Trade and Industry (DTI), the International Monetary Fund (IMF) 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.
The OEF study considered the economic impact of a fall in housing transactions arising from the imposition of a compulsory HIP charge on a largely discretionary market. The report shows that in both scenarios unemployment rises, but GDP and net revenue to the Government falls, even taking into account that new VAT will be generated on HIPs.
Two scenarios were assessed, representing small and medium percentage falls: firstly a 10 per cent reduction in housing transactions in the first year following the introduction of HIPs, gradually rising by 1per cent per annum over the next four years and, secondly, a 25 per cent reduction in year one, rising at 2 per cent per annum over the next four years.
Jeff Knight, director of marketing at GMAC-RFC, said: "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."
Professor Stephens commented in his independent academic overlay to the OEF report: "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."
Mr Knight concluded: “The research has been carried out independently to inform the market. We commissioned it for the same reason that we support over 140 charities in the UK, and fund specialist debt counsellors for the Citizens Advice Bureau, namely because it’s the right thing to do."
