£3.5bn worth of extra efficiencies to be found in unprotected departments by 2019
£2.86 billion single pot, un-ringfenced funding to be made available to areas with mayoral devolution deals
The 2016 Budget was trailed as the Budget for the “next generation” a phrase that was referenced almost 20 times in the Chancellors speech. Compared to recent fiscal policy set pieces it was relatively light on new housing announcements but where there were housing plans they continued along the well established themes of unlocking delivery and supporting home ownership. One of the new measures proposed by the Chancellor was the creation of a Lifetime ISA which under 40s can use to purchase their first home. However it should be noted that the Office of Budgetary Responsibility have marked the impact of this proposal as highly uncertain.
Whilst devolution continued to be a central theme for the Chancellor, for this Budget, devolution announcements included areas outside the Northern Powerhouse (although a push for greater connectivity between North Wales and the Northern Powerhouse was made).
As ever with Budget announcements we will see more detail emerge over coming weeks as supplementary policy papers are released – though CLG were quick off the mark with the Starter Home Land Fund and Garden Villages prospectuses. However, the detail of the £3.5bn savings to be found across government departments (unprotected) in 2019/2020 will become clearer as the efficiency review led by HM Treasury gets underway.
Home Ownership, Brownfield Land Remediation and Public Sector Land Disposals
After the Autumn Statement 2015, the Chancellor devoted little time in his speech to housing given the commitments made then on shared ownership, starter homes and other measures. However, in the Budget document itself, there was an announcement of the launch of the Starter Homes Land Fund prospectus (which is available here) which will invite Local Authorities to access £1.2 billion of funding to remediate brownfield land to be used for housing, to deliver at least 30,000 Starter Homes. This fund is specifically for areas outside of London. Additionally, the Budget document also announced the delivery of 13,000 affordable homes two years early by bringing forward £250 million of capital spending to 2017-18 and 2018-19. The Budget document also outlined an intention to explore ways to extend home ownership to social tenants who cannot afford to take advantage of existing schemes.
Home ownership was further supported by the introduction of the Lifetime ISA which can be used by under 40s to purchase their first home (up to a maximum value of £450,000)
The government will explore options for encouraging private investment in low cost home ownership including scope to use guarantees.
On public sector land disposals, the Budget said that “the Homes and Communities Agency will work in partnership with Network Rail and local authorities to provide land around stations for housing, commercial development and regeneration” and to work with Local Authorities to unlock land with capacity for 160,000 homes supporting the policy for council housing estate regeneration.
Given the extent of housing measures in the Autumn Statement it is perhaps not surprising that housing has a lower profile in this budget. We welcome the news about the Home Building Fund as part of local growth fund but remain concerned at the possible fragmentation of housing funding streams. Buried in the small print we welcome the government plans to explore ways to attract private sector investment into low cost home ownership and consideration of alternative approaches to home ownership amongst social housing tenants – we know many NHC members are doing innovative work in this arena and we will continue to push the case for investment in housing in the north.
There were some new announcements regarding changes to the planning system including the Government’s intention to move to a “more zonal and ‘red line’ planning approach” where local authorities use their local plans to signal their development strategy from the outset and make maximum use of permission in principle. It is hoped that this will give early certainty to developments and reduce the number of stages developers must go through to get planning permission. Additionally, there was an announcement of measures to speed up the planning system to minimise delays caused by planning conditions and measures to set a 3 month deadline for Secretary of State decisions on called in applications and recovered appeals. The Government also announced a further consultation on Compulsory Purchase Orders.
One interesting facet to the planning reform announcements was the Chancellor’s intent to increase densities on brownfield land, following the consultation on ‘building up’ in London, adding that the Government will consult on providing similar powers through devolution deals
Garden Towns, Cities and Villages
The Budget contained details for new plans for thousands of homes to be built around existing towns in what was seen by some as the Chancellor rolling back bold ideas for a new generation of garden cities. You can read the policy prospectus released by DCLG here.
Under the garden suburbs plans, local authorities will be encouraged to build “locally led” new homes on the outskirts of existing towns. The Government have acknowledged that these new homes could be anything between a few hundred homes to 5,000 new homes.
The Budget document said that “for areas that want to establish smaller settlements, the government will provide technical and financial support to areas that want to establish garden villages and market towns of between 1,500 to 10,000 homes. It noted that the Government will shortly announce what planning and financial flexibilities will be offered to local authorities that submit proposals for settlements that deliver a significant number of additional houses.
The garden suburbs announcement comes amidst criticism over the Government’s plans for new garden cities such as those announced at Ebbsfleet in which there have been less than 100 homes built of the 15,000 projected.
Stamp Duty Land Tax (SDLT)
Building on the announcements made in the Autumn Statement, the Budget stated that the Government will provide £60 million of the additional receipts from higher rates of SDLT on additional residential properties to enable community-led housing developments, including through Community Land Trusts, in rural and coastal communities where the impact of second homes is particularly acute. In his statement, the Chancellor announced that £20m of this will go to the South West so we remain hopeful that there will be funds made available to rural and coastal communities in the North.
Private Rented Sector (PRS) Guarantee
The Government will extend the PRS guarantee scheme until December 2017 to encourage long term institutional investment in the private rented sector.
The Office for Budget Responsibility have made a £0.7 billion downward revision to housing associations’ net borrowing, informed by the £1.0 billion lower-than-expected ONS estimate for their borrowing in 2014-15. We expect that this will impact on development as housing associations borrow less to develop.
It was announced that the Government will make millions of pounds worth of funding available to tackle rough sleeping, including £100m funding to deliver at least 2,000 low-cost ‘second stage’ accommodation places for rough sleepers leaving hostel accommodation and domestic abuse victims and their families moving on from refuges.
It also commits to double funding for the expansion of the rough sleeping social impact bond. These are payment-by-results initiatives where providers and investors are paid only when they have shown they have turned around the lives of specific client groups.
Additionally, it commits to investing £10 million over two years to support and scale up innovative ways to prevent and reduce rough sleeping, particularly in London, building on the success of the No Second Night Out initiative
Official data from the Government has shown that numbers of people rough sleeping in England have doubled since 2010. An October 2015 report compiled by the Northern Housing Consortium on homelessness in the north found that the three most common issues for homelessness presentations in the North were violence; the end of an assured shorthold tenancy and friends or relatives no longer being willing to accommodate. Shelter have also produced a piece for Inside Housing showing that rough sleeping is ‘the tip of the iceberg’ for homelessness.
Welfare, Taxation and Savings
The Government will provide self-employed Working Tax Credit claimants with access to business support and extend the mentoring support offered as part of the New Enterprise Allowance scheme to self-employed Universal Credit claimants. The Government will also trial face to face support from Job Centre Advisors for self employed Working Tax Credit claimants, with a view for national roll out of successful. The NHC would like to see the findings of the trial shared, and guidance for the housing sector around their role in supporting their tenants in partnership with the Job Centres.
As announced by DWP Ministers in Parliament, the Government will fund an additional £15 million in each year from 2017-2018 to help ESA claimants placed in the Work Related Activity Group and UC limited capability for work claimants pay for the additional costs of preparing for work.
The Government will work with the Behavioural Insights Unit team, to explore new ways of supporting parents in choosing when and how to return back to work.
The Government will be accepting the recommendations of an expert led taskforce on how to provide £330 million of additional funding for disabled claimants, which was announced in the summer budget. This will include a new tailored peer to peer support offer, and bespoke employment support directed at key priority groups which will include young people and those suffering from mental illness.
Benefit Cap – from Autumn 2016, government will introduce exemptions for recipients of Guardians Allowance, Carers Allowance and the carers element of universal credit from the household benefit cap.
Following the announcement made by the Secretary of State for Work and Pensions around changes to the calculation formula for Personal Independence Payments (PIP), which is estimated to affect 640,000 by 2020. The aim of the change to the formula is to ensure that PIP is fair and targeted to those who need it. The Government will ensure the support for disabled people will be focussed on those with the greatest need, including:
• Changing the way that entitlement to PIP is determined – a reduction in the number of assessment points awarded for needing to use an aid or appliance to carry out two of the ‘daily living’ activities assessed, which will take effect for new cases and reassessments from January 2017.
• Altering arrangements for terminally ill claimants migrating from DLA to PIP
• Considering the case for long term reform of disability benefits and services that is fair for the taxpayer and for those with disabilities and health conditions.
A third of the new £3.5bn cuts due by 2020 will come from Personal Independence Payments (PIP). The NHC would welcome a dialogue with DWP and members to ensure that any concerns around this formula change are fair to tenants, and any issues ironed out early. Given the significant levels of life-limiting disabilities and health inequalities across the North, it is essential that this is done in a fair and proportional way to ensure that people in Northern communities are not left at a disadvantage.
As expected, the Chancellor announced a rise in the personal threshold to £11,000 in 2016-17 and £11,500 in 2017-18. The Chancellor noted that this continues to ensure that no-one working 30 hours per week on the National Minimum Wage (NMW) will pay income tax in 2017-18, and will bring the total number of taxpayers taken out of income tax since the start of this parliament to 1.3 million.
Higher Rate Threshold
The Government announced that they will increase the higher rate threshold by £2,000 to £45,000 in 2017-18. This will be the biggest above inflation cash increase to this threshold since 1989. The Budget document noted that “this delivers the Government’s ambition to reverse the trend whereby an increasing number of individuals are faced with paying the higher rate.” It also noted that this measure would result, in 2017-18, there will be 585,000 fewer higher rate taxpayers than at the start of the Parliament
The Government have long mulled the idea of introducing a sugar tax and this Chancellor today announced that there would be a sugar tax levied on industries in two years’ time. There will be two rates, both based on grams of sugar per 100ml, with the two rates being 5g per 100ml and a higher rate for those drinks with 8g sugar per 100ml.
There will also be some exemptions: particularly for pure fruit juices and for milk-based drinks. The Chancellor noted that the OBR had forecasted this would raise around £520m which will be used to double the funding spent on sports in primary schools.
There was a series of announcements on business rates by the Chancellor with the biggest being that the Government will permanently double the Small Business Rate Relief (SBRR) from 50% to 100% and increase the thresholds to benefit a greater number of businesses.
In the detail of the policy, it is revealed that businesses with a property with a rateable value of £12,000 and below will receive 100% relief and that businesses with a property with a rateable value between £12,000 and £15,000 will receive tapered relief. The Chancellor noted that 600,000 small businesses, occupiers of a third of all properties, will pay no business rates at all – a saving worth up to £5,900 in 2017-18 and that an additional 50,000 will benefit from tapered relief. While this is good news, the NHC maintains its reservations that northern local authorities’ revenue raising abilities are not cut adrift from the national average.
The Government also pledged to introduce more frequent business rate revaluations (at least every three years) as well as linking local authority business rate systems with HMRC digital tax accounts so that businesses can manage their rates bills in one place alongside other taxes.
Importantly, the Budget document stressed that local government will be compensated for the loss of income as a result of the business rates measures above, and the impact considered as part of the government’s consultation on the implementation of 100% business rate retention in summer 2016.
Capital Gains Tax
The Government announced that they will reduce the higher rate of Capital Gains Tax (CGT) from 28% to 20% and the basic rate from 18% to 10%. The 28% and 18% rates will continue to apply for carried interest and for chargeable gains on residential property. These changes will take effect for disposals made on or after 6 April 2016. There will be an 8% surcharge on these new rates for carried interest and for gains on residential property.
The Budget announced that from 6 April 2017 any adult under 40 will be able to open a new Lifetime ISA. They can save up to £4,000 each year and will receive a 25% bonus from the Government on every pound they put in. Contributions can continue to be made with the bonus paid up to the age of 50 and funds can be used to buy a first home with the government bonus at any time from 12 months after opening the account. Funds can also be withdrawn from the Lifetime ISA with the Government bonus from age 60 for use in retirement.
The Government will set the limit for property purchased using Lifetime ISA funds at £450,000 and this limit will apply nationally. The OBR has categorised this measure as “very high” on its uncertainty of costings framework saying “the main source of uncertainty is the behavioural impact, because the cost of the top-up is extremely sensitive to it. In particular, assumptions are made about: the number of people choosing to use the lifetime ISA; how much they choose to save; and when they choose to withdraw. There is little information that can be used to inform these assumptions and the behaviour is dependent on a variety of other factors, which amplifies the uncertainty”
Education, Employment and Skills
Government action to reward work and reform benefits
Data for 2015 outlines:
• A record employment rate of 74.1% in Q4 2015
• The employment rate of women had risen to 69.1% by the end of 2015 was driven by full time workers
• High and medium skill occupations accounted for 92% of the growth in employment in the year to Q4 2015
• 74% of the increase in employment in 2015 was driven by full time workers
• A strong demand for labour with 767,000 vacancies in Q4 2015, a record high
• The claimant count fell to a 40 year low in 2015
• Working age inactivity fell by over 600,000 from 2010 to 2015.
NHC welcome the fall in unemployment, however concerns still remain around opportunities that are well paid and stable. We would have liked to see more announcements around the employment and skills agenda, and closing the skills gap.
Academisation By 2020
Under the education package of reforms, every state school in England will have to become an academy – meaning they are independent of local authority control – by 2020 or to have a plan in place by that date to do so by 2022. The move would end the century-old role of local authorities as providers of education. Currently, 2,075 out of 3,381 secondary schools are academies, while 2,440 of 16,766 primary schools have academy status. NHC was disappointed to see the lack of announcements around large class sizes, and teacher recruitment. NHC would like to see these announcements backed up by resources that are required by children and young people, to achieve their aspirations and positive outcomes.
School Opening Flexibility
Schools will also be able to bid to be allowed to change their hours to suit their pupils’ needs. The government will provide up to £285 million a year to give 25% of secondary schools to offer extra activities like sport and art.
NHC are pleased to hear the announcement that starting from September 2017, the government will provide £10 million funding to expand the number of healthy breakfast clubs. NHC will continue to work closely with members around their activities to tackle food poverty and wider social isolation and enrichment work.
Fairer Funding Formula
Accelerate the move to fairer funding for schools, the current arbitrary and unfair system for allocating school funding will be replaced by the first National Funding Formula for schools from 2017-2018. Subject to consultation, the aim of the government is for 90% of schools who gain additional funding to receive the full amount they are due by 2020. To enable this the government will provide around £500 million of additional core funding to schools over the Spending Review period, this is in addition to the commitment to maintain per pupil funding in cash terms.
Northern Powerhouse Schools Strategy
NHC welcome the announcement today for a new £20 million yearly investment for the Northern Powerhouse Schools Strategy. This new funding will ensure rapid action to tackle the unacceptable educational attainment gaps, which are prevalent in some parts of the North. Sir Nick Weller will lead a report into transforming education across the Northern Powerhouse. NHC members are doing some great work around supporting local schools and academies, and improving outcomes, NHC are keen to continue our dialogue with members around this agenda and linking it wider employment and skills as part of the devolution deals.
Apprenticeship levy announced at the Autumn Statement 2015, which will be introduced in April 2017, and those employers committed to training will be able to get more out than what they put in.
From April 2017, employers will receive a 10% top up to their monthly levy contributions across England; this will be available to spend on apprenticeship training through their digital account. The Government will set out further details on the operating model in April and draft funding rates to be published in June.
As indicated in the National Infrastructure Commission report a ‘kick start’ for HS3 was required as there was a need for “a higher speed, higher capacity, higher frequency network from Liverpool in the west to Hull and Newcastle in the East, incorporating key northern sections of HS2, upgraded lines, and sections of new track where necessary”.
In his statement, the Chancellor announced plans to implement the recommendations of the National Infrastructure Commission for HS3 between Manchester and Leeds, a long awaited upgrade to the M62 to a 4 lane smart motorway on two stretches between Warrington and Eccles and Rochdale and Brighouse. Further announcements included upgrades to the A66 and A69 in the North East and the north-west quadrant of M60. He also announced that £75m had been allocated to develop the case for an ambitious trans-Pennine tunnel road to run from Manchester to Sheffield.
The announcements are welcome news as improvements to the northern transport infrastructure are long overdue and essential to linking the economies of the northern cities more effectively. Giles Taylor, KPMG’s Head of Property & Construction in the North said that the increased infrastructure spending in the North of England will provide a boost to attracting international property investors for whom ‘connectivity across the region and with the wider UK is a significant tick on their wish list’ as it is likely to increase demand for housing across the north.
The Northern Powerhouse initiative is certainly an grand ambition, but despite Mr Osborne’s claim that his announcements ‘make the Northern Powerhouse a reality’, investment in the northern infrastructure still lags significantly behind that of London. Spending on Crossrail 2 in London will be 5 times that of HS3. It was also noted in the Leader of the Opposition’s response to the Budget that the North East accounts for less than 1% of planned government infrastructure construction projects.
The Government announced new devolution deals with Greater Lincolnshire, East Anglia and the West of England as well as agreeing additional mayoral deals with Greater Manchester and the Liverpool City Region.
Part of the further deals announced was that the Government will work with Greater Manchester on the devolution of powers over criminal justice services, as well as supporting the establishment of a Life Chances Investment Fund. The radical devolution of justice responsibilities will enable Greater Manchester to offer seamless interventions for offenders as they transition between prisons and the community, and to join up public services to tackle the causes of crime and prevent reoffending.
The Government announced that they have agreed another mayoral devolution deal with the Liverpool City Region. This builds upon Liverpool’s previous mayoral deal and gives Liverpool additional new powers over transport, pilots the approach to 100% business rate retention across the city region, and commits the city region and government to work together on children’s services, health, housing and justice.
One very interesting announcement in the Budget was that existing mayoral devolution deals will receive ‘single pot’ funding settlements worth £2.86 billion. This means that those mayors will have flexible, un-ringfenced budgets to spend on local priorities which will allow areas to take more control over strategic investment.
The Budget document states “The single pots will initially include a five-year settlement rolling together existing transport funding, gainshare investment funds and Local Growth Fund allocations. This will be supplemented in the future with further flexibility over central government funding. The Bus Service Operators Grant will also be devolved to areas that adopt bus franchising, and the Adult Education Budget will be included in the single pot from 2018-19 for those areas with devolved adult skills arrangements.”
The Government announced that up to £1.8 billion will be allocated through a further round of Growth Deals with Local Enterprise Partnerships later this year. Detail on the process for the next round of Growth Deals will be announced soon. It was also announced that a further £2 billion of the Local Growth Fund is being allocated through the Home Building Fund. This programme provides finance to developers to unlock large housing sites and bring forward the necessary infrastructure that large house building projects require.
Business Rates Retention Pilots
The Government announced that it will pilot the approach to 100% business rates retention in Greater Manchester and Liverpool City Region. They noted that this will help to develop the mechanisms that will be needed to manage risk and reward under 100% rates retention and will help authorities to build financial capacity to reform core services and invest in long term economic growth from 2017 – three years ahead of schedule. The offer is open to any area that has ratified its devolution deal.
The principal of business rate retention has been welcomed but with the caveat that parts of the North have suffered from loss of businesses which will affect their tax raising ability (without an element of redistribution in advance of move to 100% retention). We are also not clear how the proposals for Greater Manchester and Liverpool City Region to pilot 100 retention will impact on redistribution within wider local authority sector – particularly as this offer is open to other areas with ratified deals.
Devolving Planning Powers
One interesting facet to the planning reform announcements was the Chancellor’s intent to increase densities on brownfield land, following the consultation on ‘building up’ in London, adding that the Government will consult on providing similar powers through devolution deals.
Shale Wealth Fund
The Government will be consulting later this year on the priorities and delivery models for the Shale Wealth Fund, and how it can be deployed in local communities and the North as a whole. The Shale Wealth Fund could be worth up to £1 billion over 25 years and will provide additional funds over and above industry schemes and other sources of Government funding. The NHC hope that the Shale Wealth Fund will be able to play a part in the delivery of locally-led housing delivery in the communities affected by fracking and beyond.
The NHC would welcome feedback from members on the Budget 2016. If you have any comments or queries to make, please contact email@example.com.