On the Day Briefing: Budget 2017

Make or Break or Fit for the Future?

Today’s budget was trailed as the “make or break” budget for the Chancellor’s political reputation and one that focused on housing –  following the pre-election publication of the Housing White Paper and the announcement of a forthcoming Social Housing Green Paper and a personal commitment from the Prime Minister to resolve the housing crisis.

But some commentators questioned the government’s ability to deliver on their announcements citing a failure on seven housing pledges.

Others fundamentally questioned the ability of the government to reach the 300,000 new homes per year target without significant capacity boosts – particularly to the LA sector and doubt that capacity would be forthcoming.

The morning of the Budget saw perhaps confirmation that these concerns were well founded with moves afoot to dampen expectations of big spending and interventions.

There were already pre-Budget whispers that the Chancellor’s own Whips were trying to stimulate opposition to planning reforms.

In a slight change in terminology we learnt that there was not only no silver bullet for housing but now no big bazooka either.  But somehow the Chancellor needed to grapple with the seemingly intractable problem of how to boost house building and meet a range of housing needs.

Would the Chancellor be able to overcome the concerns expressed about his ability to deliver? Is he the “boxed-in Chancellor” or would the Budget include a housing shaped rabbit?

Economic Overview

The Chancellor was keen to stress that the economy is growing; the UK will have a new relationship with Europe, will see new opportunities and will be meeting the challenges head on. Negotiations with the EU are at a critical phase and the government is prepared for every Brexit outcome.  A further £3billion is set aside for this and the government is willing to explore further funding if required.

Britain is in the midst of a technological revolution and the government claimed it will grasp the opportunities and will be “running towards change”.  The “prize is enormous” and Britain is at the forefront through work at its universities, factories, and science businesses.

The Chancellor was keen to stress that there must be a balanced approach – ensuring fiscal stability — investing in growth whilst taking opportunities to assist families and businesses to cope with a challenging financial environment. This will hopefully lead to a prosperous and inclusive economy.  He said that the Budget lays the foundations to create this environment.

The Chancellor set out the key economic stories and the disappointing news on productivity was at the centre with the OBR downgrading productivity assessments over the forecast period. Whilst productivity has slowed across all advanced economies this is more pronounced in the UK.  To tackle the “productivity challenge” the budget advises that the UK should prioritise investments in infrastructure, improve skills, help businesses to invest and reform housing & planning systems – these formed the centrepiece of the Autumn Budget 2017.

Wider economic analysis included a projected increase in people in employment to 32.7million in 2022 but GDP growth has been revised downwards to 1.5% in 2017 and the OBR forecasts slower growth during 2018 and 2019 (1.4% and 1.3% respectively).

The OBR projections regarding CPI and cost of living suggests CPI inflation to peak at the end of this year averaging 3.0% in quarter 4 and then easing over 2018 to 2.0%.

The budget heralded that the country is now at peak debt (86.5% of GDP in 2017/18) and the OBR forecasts the government will meet fiscal targets as debt as proportion of GDP is forecast to fall.

The welfare cap (not benefit cap) is assessed as being met with £2.5bn of headroom and will be re-set for the new Parliament with performance being assessed by OBR in 2022 -2023.

The Chancellor set out the vision for the country underpinned by a modern Industrial Strategy. An Industrial Strategy White Paper will be published shortly and the NHC will be looking to respond to this and will work with our members in developing this response.  To support the Industrial Strategy the National Productivity Investment Fund will be extended for a further year with over £31 billion including £2-3bn for R&D – details of which are highlighted below.

The Chancellor highlighted the need for the UK to be at the forefront of technology advances – including tech start-ups, AI and investing in electric and driverless vehicles.  Tech hubs will be located in Manchester Newcastle, Leeds and Sheffield.

Skills

The Chancellor recognised that moving to a modern Industrial Strategy with a bold vision for a technology based future will require new skills and therefore made announcements for further skills investment; including support for FE colleges, increases in support for IT and digital skills and the launch of a partnership with TUC and CBI to boost digital skills and expand construction skills to unlock growth nationally.

The government will continue to work with employers on how the Apprenticeship Levy will be spent so it works for industry and supports productivity.

Northern Investment

The Chancellor confirmed his support for the Northern Powerhouse, and the Midlands Engine with £1.7b Transforming Cities Fund (from NPIF) to be shared by the metro mayors:

  • £243million for Greater Manchester
  • £134million for Liverpool City Region
  • £59million for Tees Valley – (and support for the South Tees Development Corporation to take over SSI Redcar Steelworks)

The remainder of the fund will be available to other localities on a competitive basis.

Further northern transport investment will include ongoing support for HS2, investment in rolling stock in Tyne and Wear Metro and improvements to technology infrastructure/rail passenger communications including Trans Pennine.

In developments on devolution the Chancellor announced

  • a “minded to” devolution deal with the North of Tyne which will see £600million investment over 30 years and an elected Mayor in 2019
  • discussions ongoing with Liverpool City Region and Tees Valley for further devolution deals
  • the development of a local industrial strategy for Greater Manchester including land value capture
  • additional resource support to Mayoral Combined Authorities
  • ability for Combined Authorities to levy a Strategic Infrastructure Tariff in addition to CIL (consultation forthcoming as to whether this will include both strategic and local infrastructure).

Welfare Reform: Universal Credit

The Chancellor described UC as a necessary reform but recognised concerns about its operational delivery.  He announced a £1.5bn package of adjustments including:

  • From February 2018 the seven day waiting period will be abolished and entitlement will start on the day of a claim.
  • From January 2018 those who need it will be able to access up to a month’s worth of UC within five days and recovery period is extended from six months to twelve.
  • From April 2018 claimants who are in receipt of Housing Benefit will continue to receive this benefit for two weeks to reduce build-up of rent arrears and government will make it easier for claimants to have the housing element of awards paid directly to landlords.

He offered help for low income households with an increase in targeted affordable funding in the next 2 years including a National Living Wage increase to £7.83.

The personal allowance will increase on the basic rate to £11,850 and the higher rate to £46,350.

National Health Service

Additional investment was promised to the NHS including £10bn in capital investment and a further £2.8bn support for front line services including £350million available this winter.

The Chancellor announced extra funding  would be made available if a new pay deal is struck with for NHS staff.

No additional support was provided in the Budget on social care but we are due a social care green paper shortly.

Housing

Housing was trailed as the centrepiece of the Budget and indeed it took the prized ‘last slot” building up for a proverbial Budget Rabbit.

The Chancellor began announcements on housing by re-stating that the Grenfell Tower tragedy should never have happened and urged local authorities not able to meet financial commitments regarding safety upgrades to speak to central government. A further £28million of additional community support was awarded to victims.

New Supply

The Chancellor announced an increase in net additions to hit 300,000 per annum by the end of this parliament. To achieve this the government will make available an additional £15.3bn of new financial support for housing supply – bringing the total support to at least £44bn during this parliament. The government will also introduce planning reforms to release more land, and support for construction skills.

Funding

The new package of funding includes:

  • £1.1bn for Land Assembly Fund for Homes England
  • Five new garden towns in high demand areas
  • Increasing the Housing Infrastructure Fund (high demand areas) by £2.7bn
  • Housing deal negotiations with Greater Manchester and Leeds
  • £630million for small sites – infrastructure and remediation
  • £1.5bn support for SME builders (Home Building Fund)
  • £8bn funding (guarantees) to support private sector house building
  • £400million of loan funding for estate regeneration
  • Confirmation of £2bn affordable housing announced in October
  • Lifting of HRA caps for LA in high demand areas (but not clearly expressed how these will be identified)

Planning Reform

Oliver Letwin will head up a review to explore the gap between planning permissions granted and homes built out. The review will provide an interim report for the Spring Statement and a full report by Autumn Budget 2018. The report is expected to include planning teeth including CPO powers.

Additional planning announcements include:

  • Consultation on CIL to include – removal of S106 pooling which should assist LA with low viability
  • Speeding up of revisions to CIL processes – making it more responsive to market changes
  • Different CIL rates to be set reflecting uplift in land values when different change of use applied
  • Indexation of CIL to house price inflation rather than build costs.
  • Combined Authorities to have ability to levy the SIT.
  • Consultation on expectation for LA’s to provide permission for land outside their plan on condition that high proportion of homes are discounted for sale for FTB or affordable rent
  • Consultation on minimum densities in city centres and transport hubs
  • Easing of conversion of empty space above shops (and retail/employment land conversions)

Empty Homes

To tackle the problem of empty properties, local authorities will be given the power to charge 100% premium on the council tax. Furthermore, the Chancellor will address the barriers to longer term tenancies, thereby securing homes for people renting.

Homelessness

The Chancellor announced an additional £28m will be available for Housing First programmes in the West Midlands, Liverpool, and Manchester and the creation of a new homelessness reduction taskforce with the aim of aiming of halving the number of rough sleepers by 2022 and reduce it to zero by 2027. A fund of £20m will be made available to support people at risk of homelessness to access and sustain tenancies in the private rented sector.

First Time Buyers – the Budget Rabbit

The Chancellor acknowledged support is needed for young people with house prices increasingly out of reach and rents taking up such a proportion of their income that saving for a deposit is not possible.

Fin tech companies have been charged with finding innovative ways to ensure rental payments count towards a positive credit score in mortgage applications for FTB’s.

It was widely expected that the government would announce a FTB stamp duty holiday but the Chancellor went further.

Stamp Duty will be abolished on purchases by first time buyers up to £300,000 and for the first £300,000 on properties valued at up to £500,000.

NHC Viewpoint

Today’s budget included several welcome announcements for housing and the North of England – although as ever with Budgets we do await more detail in forthcoming Green Papers, White Papers, Consultation documents and the like!

Additional support for devolution with the North of the Tyne deal looking to progress, alongside work on housing specific deals and further iterations of devolution in Greater Manchester, Liverpool City Region and Tees Valley are all welcome.

In terms of housing we welcome the recognition that housing can support increased productivity – a point made in the Commission for Housing in the North and whilst many of the housing specific announcements focused on high demand areas (which will include some Northern localities) – there was also recognition of the need for urban regeneration, land remediation and unlocking small sites – all of which will hopefully be of value to NHC members and are a key focus for the ongoing work of the Commission for Housing in the North.

We await details of the Social Housing Green Paper and the Letwin Review and will seek opportunities to engage with NHC members to shape a strong Northern response to these discussion papers.

The need for changes to Universal Credit were widely discussed both in the housing sector, parliament and the wider press. Some of the changes that the Chancellor announced however were not trailed – including the (as yet) undefined easing of ability for housing element of UC to be paid direct to landlords.

The NHC will provide regular updates as more detail emerges from today’s budget  – for more information please contact Karen.brown@northern-consortium.org.uk.