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Spring Budget 2024 – a policy ‘spring clean’?
The Spring Budget this year felt curiously low key given the continuing speculation (including by some Labour frontbenchers) that an election could be called as early as May. In reality, much of the coverage focused on the absence of any pre-election ‘big bang’ announcement or ‘giveaways’ as had been called for by many Conservative MPs, notwithstanding the second successive cut to National Insurance and further support for families – this time child benefit.
 
The backdrop provided by the Office for Budget Responsibility (OBR) showed that the overall economic and fiscal outlook is similar to the position at the time of the Autumn Statement in November. While growth has disappointed since then – the so-called ‘technical’ recession – a steeper fall in inflation and interest rates should support a stronger recovery and enable a faster recovery in living standards. Even so, the OBR sees the medium-term economic outlook as remaining challenging.
Despite the Chancellor Jeremy Hunt framing it as a budget for long term growth, this was not a ‘fiscal event’ that centred around planning reform, or signature investments in housing, transport or the built environment to any great extent. Alongside a pitch to the electorate for economic credibility, much of the Chancellor’s speech was given over to celebrating the allocation of funds to projects and places, perhaps somewhat inevitably in an election year. In this context, it seems that the Government’s focus was on something of a policy ‘spring clean’ – such as allocating funds to projects, publishing new devolution framework agreements, as well as launching and concluding consultations that provide details for ongoing reforms – rather than any bold new policy announcements. Over 40 documents were published alongside the main Budget report.
There were elements that were specifically focussed on development, for example the abolition of multiple dwellings stamp duty relief, and a reduction in the rate of capital gains paid by landlords and second-home owners on home sales, which the BPF has already warned could hit the build to rent sector. The Budget set out more on the specific ambitions for regeneration and growth across Leeds, Cambridge and certain sites in London. Also, a consultation was launched on the proposed design of a new accelerated planning service for commercial projects in England and a review led by Charles Banner KC in to speeding up the delivery of Nationally Significant Infrastructure Projects (NSIPS).
In place of big investments, the Chancellor focused on the reform of public spending, namely improving efficiencies and productivity in the public sector. The Institute for Fiscal Studies noted that public services were again facing significant funding cuts in all but health and education sectors, but there is room in the Budget for support to industry investment in skills for local planners. Additionally, digitisation in planning – a key long term goal of this Government – is further fleshed out with a commitment to ‘Piloting the use of AI solutions’ in local plan making a move that is cautiously welcomed by the RTPI. These are part of a range of reforms aimed at reducing the amount of time public sector workers spend on ‘unnecessary administrative tasks’.
Investment Zones, introduced by former Chancellor Kwasi Kwarteng, as part of his ill-fated September 2022 Growth Plan survive albeit now ‘refocussed’ as had been previously announced. The Chancellor used the Budget to highlight the Zones and 12 Freeports already created and setting out the several tax reliefs and business rate retentions that will be offered to the eight IZs across England and four in Wales and Scotland. The Government has announced details on how funding for the English Investment Zones (originally announced in 2023) is to be spent in combined authority’s which have Mayors. There is notably no ‘new money’ attached to this, and the OBR identify it as a policy risk to their forecasts due to it being ‘not yet firm policy’. It therefore remains to be seen what impact the creation of IZs will actually have.

The Government also announced “trailblazer” devolution deals for the North East, as well as deeper deals for the Greater Manchester and West Midlands Combined Authorities, including a commitment to implement a single funding settlement at the next Spending Review. These single settlements will include central funding falling under five thematic policy areas (‘themes’): local growth and place; local transport; housing and regeneration; adult skills; and buildings’ retrofit.
This is undoubtedly a significant devolutionary move with long term ramifications for these areas. However, with these powers, difficult decisions will also be devolved. The focus on public sector productivity, a looming reduction in public spending, and an ever-increasing demand for public services, all puts significant long term pressure on any discretionary and non-statutory expenditure by local or combined authorities.
In many ways, this Budget continued the Government’s messaging that local areas are being handed the responsibilities to resolve their own financial circumstances. Whilst this is not ‘news’ to those in local planning authorities, the Budget is another reminder that the challenge to local authority financing is a significant threat. A week ago, a survey of senior council figures found 51% warn their councils are likely to ‘go bust’ in the next parliament unless local government funding is reformed[1]. It is in this context that the current shift towards devolving powers, without the ability to raise local funds or the prospect of more central government funding support, will leave many local and combined authorities facing tough choices.
Perhaps one of the most encouraging elements of yesterday’s Budget were improved housebuilding forecasts provided by the Office for Budget Responsibility (OBR). In their latest forecasts for housebuilding, the OBR still expect a major drop in housebuilding activity in the period to 2025/26 to just 213,000 homes per annum, almost a third below what is needed. However, this is a sizeable improvement from November’s projections, with housebuilding forecast to reach 250,000 by 2028/29 (Figure 1).

Fig 1 OBR forecasts of Housebuilding over the last three fiscal events (Net Additional Dwellings)

While it has only been four months since the Autumn Statement, these forecasts reflect greater optimism that inflation and interest rate rises might have peaked. But they also serve as a reminder of the non-policy affects on the housing market that will likely continue to have a large effect on housebuilding rates. The CMA’s Housebuilding market study final report published last week found:
The number of houses being built and their affordability are propelled by two key drivers: the nature and operation of the planning system and the limited amount of housing being built outside the speculative approach (such as affordable housing, self-build, and build-to-rent)."
With this in mind, housebuilding rates are likely to be affected by planning reform and policy for the foreseeable future. It remains to be seen whether the OBR forecasts might have to be revisited in light of the negative impacts of the December 2023 NPPF reforms, as indicated by previous Lichfields analysis.
Taken overall, there were few surprises from the Spring Budget and certainly no ‘rabbits out of the hat’ moments. That was to be expected given it follows an Autumn Statement that was only four months ago, and while the OBR had confirmed a slight improvement in the near term outlook there was really no major change. Added to that was the fact that the Chancellor had limited room for manoeuvre given borrowing is still projected to fall over next five years – with tax as a share of GDP rising to near to a post-war high, debt interest costs falling, and per person spending on public services effectively being held constant in real terms (based on current government plans at least). Yet this low key Budget still contained plenty of signposting on future policy, funding and devolution, and Lichfields will be appraising the implications of these in more detail.

[1] 51% of senior council figures warn their councils are likely to go bust in the next parliament unless local government funding is reformed.

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Party Politics (Labour) – How aligned are Labour either side of the Severn Bridge?
The UK’s political landscape faces changes in 2024. The Prime Minister has indicated a general election will be held in the ‘second half’ of the year[1] and Wales’s First Minister has already confirmed his resignation, sparking a leadership race within Welsh Labour.
First up is the Labour (and Senedd) leadership race in Wales, between Vaughan Gething MS and Jeremy Miles MS. The result will be announced on 16 March. We do not yet know what either candidate will say about the development industry through their campaigning, but manifestos and promises will in due course be the subject of rigorous analysis. For now, perhaps, it is more fruitful to consider the broader (and possibly emerging) political picture within which this contest is to be run and its implications for the development sector.
Later this year the UK will see a general election. By-election results and polling indicate it is more likely than not to lead to a Labour Government for the first time in 14 years. In Wales, Labour has had control of the Senedd (formally Welsh Assembly), since devolution in 1998. With the next Welsh election not due until 2026 (accepting this might change under the new leadership), it seems increasingly likely that the Senedd and UK Parliament will be on the same political page for the first time since 2010.
But are they on the same page when it comes to development?

For the UK, the headlines are already out there. Labour’s ‘How not If’ statement of October 2023[2] lays the foundations for a way forward that captures a desire to promote growth, through:
 
  • Strengthening powers to approve homes in areas with out-of-date local plans;
     
  • Enforcing local housing targets;
     
  • Improving the speed of local plan making (including recruiting planners!);
     
  • Adding flexibility to the affordable housing program – acknowledging soaring interest rates and increasing uncertainty that harms delivery;
     
  • Increasing delegated approval powers to speed up decision making;
     
  • Introduce ‘off the shelf’ environmental mitigations – to cut down on surveys and costs;
     
  • Promote a raft of New Towns; and,
     
  • In urban centres, accelerate sustainable brownfield development.
Alongside this has been talk about opening up a discussion about Green Belt, with a view to releasing poorer quality land – so-called ‘grey belt’ – for development[3].
This direction of travel has sought to create a dividing line with the Conservative Government, solidified by the recent changes to the NPPF which – despite the Secretary of State’s long term plan for housing initiatives, and interventions on various local plans and in London and Cambridge and Leeds[4] – has been seen as a concession to backbench MPs that will lead to less development overall[5].
But what of Wales? Of course, the Welsh and English contexts are very different, hence why planning is a devolved matter, to allow, in theory, for a more nuanced approach to local issues. But if Labour does win the General Election and both UK and Wales are led by the same party, with shared political identities, then it is worth considering to what extent Welsh Labour’s current approach aligns with the Labour’s UK call to action, and perhaps offering food for thought for the Welsh leadership candidates on how they might shape their approaches to the housing and development sector:
 
  1. UK Labour has placed housebuilding at the heart of its mission to grow the economy, with a promise for “shovels in the ground and cranes in the sky” to deliver “more beautiful cities [and] more prosperous towns”. Labour has recognised that housebuilding can be a key economic driver and one where value capture can achieve investment in infrastructure with less calls on the public finances[6]. There has been no equivalent expression of support for boosting housebuilding as a vehicle for economic growth and home ownership from Welsh Labour so far
     
  2. As has been well documented, the Senedd abolished the requirement for a five-year land supply in 2020. As a result, LPAs in Wales set and monitor targets locally, with very limited enforcement for under delivery. The recent amendments to the NPPF have seen some softening in the five-year land supply requirement in England[7] - although still far from disapplied. However, Labour (UK) has pledged to reverse these NPPF changes and seeking to reinforce housing targets and strengthen the enforcement of delivery, – noticeably at odds with Welsh Labour’s approach.
     
  3. Setting housing targets in Wales remains to be determined through each individual LDP with household projections as the starting point. Household projections are essentially trend based so reflect past levels of housing delivery rather than provide an assessment of future needs. Whilst Welsh Government assessments of housing need include a policy uplift for affordable housing delivery no such adjustment is expected for market housing delivery. There is no indication that UK Labour would seek to fundamentally change the current approach in England, which sets central estimates of housing need targets to boost housing delivery (both market and affordable) in areas where houses are least affordable to account for past undersupply.
     
  4. UK Labour will focus on the delivery of all types and tenures of housing, including market housing with an explicit effort to “save the dream of home ownership”. By contrast, Welsh Labour’s focus, monitoring and targeting is based largely on the delivery of affordable housing and more narrowly defined, focused largely on social rent which is seen as a core tenure.
     
  5. UK Labour is proposing to invest in New Towns, whereas Future Wales (Wales’s National Development Plan) explicitly rules them out.
     
  6. Whilst UK Labour is suggesting it will support and enable development to proceed in areas with out-of-date local plans, Welsh Government has continued to prioritise the plan led system irrespective of whether an LDP is time expired. There is no effective sanction to secure continued housing delivery where an LDP is not being reviewed in a timely manner.
     
When it comes to determining how to deliver new homes and economic growth through development, Labour UK and Labour Wales appears to be promoting very different approaches. Indeed, right now the Labour-led Welsh Government appears almost to have a stronger policy alignment with the current UK Government, as crystallised by the Secretary of State’s recent NPPF changes. Accepting the principle of devolved powers, and a different economic, social and environmental context – can this political difference within one political party be sustained?  
This is perhaps something both Vaughan Gething MS and Jeremy Miles MS should be pondering, before considering how their Manifestos might address planning and development…  
 

[1]https://www.bbc.co.uk/news/uk-politics-67883242
[2]https://labour.org.uk/updates/press-releases/how-not-if-labour-will-jump-start-planning-to-build-1-5-million-homes-and-save-the-dream-of-homeownership/

[3] In his October Conference speech, Sir Keir Starmer MP said: ““And no, this doesn’t mean we’re tearing up the green-belt. Labour is the party that protects our green spaces. No party fights harder for our environment. We created the national parks. Created the green-belt in the first place. I grew up in Surrey.  But where there are clearly ridiculous uses of it, disused car parks, dreary wasteland. Not a green belt. A grey belt. Sometimes within a city’s boundary. Then this cannot be justified as a reason to hold our future back. We will take this fight on. That’s a Britain built to last.”

[4] See the SoS WMS here: https://questions-statements.parliament.uk/written-statements/detail/2023-12-19/hcws161

[5] See this commentary here: https://www.ft.com/content/1f0adb36-612d-4a34-bb0f-1643a841c417

[6] A link made in this Times article: https://www.thetimes.co.uk/article/starmer-knows-houses-can-rebuild-economy-9ntkwmfwl

[7]https://lichfields.uk/blog/2023/december/20/changes-to-5yhls-under-the-revised-nppf-not-great-not-terrible

 

 

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