05 Mar 2020
See Lichfields' "Budget 2020 - getting it done" Economic outlook for reactions and analysis of Rishi Sunak's first Budget speech.
Rishi Sunak’s ministerial red box was already overflowing when he took office last month – handed the keys to Number 11 at short notice following the resignation of Sajid Javid – and it has been a tumultuous three weeks since. With coronavirus now weighing down heavily on the global economic outlook, the early tetchy stages of the UK’s negotiations with the European Union on future trade underway, and speculation of interest rate cuts later this year, the Chancellor may well be turning to his preferred brand of Yorkshire tea leaves for guidance.
Given the macroeconomic uncertainties, HM Treasury officials are reported as saying that next week’s Budget will be the first installment in a “trilogy” of statements this year – something for the aficionados to relish. Some decisions on tax, spending and borrowing are likely to be pushed back to the autumn, a year after last November’s Budget was itself postponed due to the general election.
However, the Budget is one of the key set pieces of the parliamentary calendar, and is particularly important in the context of a new government keen to deliver quickly on its manifesto promises. So what might the Chancellor’s red box hold in terms decisions on planning, infrastructure and regional economic policy? Here’s a round-up of 10 key points to look out for next Wednesday:
Economic growth – tea leaves aside, the Office for Budget Responsibility (OBR) – the independent fiscal watchdog – will publish its latest UK economic forecasts alongside the Budget. It is widely expected that the OBR will downgrade their forecasts from those published in March 2019. This matters because it would result in higher forecasts for government borrowing and, in theory, give less bandwidth to increase public spending if the Chancellor also wants to limit tax increases in line with manifesto commitments.
‘Levelling up’ – the phrase that featured prominently in the Conservative election campaign, and is already permeating into the policy sphere (seemingly replacing the ‘rebalancing’ lexicon which became popular in the Osborne and Hammond eras). The Queen’s Speech in December referred to making investments, “in order to unleash productivity and improve daily life for communities across the country.” Following success in breaking the so-called ‘Red Wall’ in the North and Midlands, the government have been clear that levelling up will be a key factor in all future policy and decision-making, so we can expect this theme to be writ large. Practically, this could extend to creating a new hub for HM Treasury officials on Teesside.
Revisions to the Green Book – the ‘Green Book’ (HMT’s guidance for appraising public spending decisions) was an unlikely media star over the quiet Christmas news cycle when it was reported that significant revisions are in the works aimed at boosting investment in the North and Midlands. We considered the implications in an earlier blog. The Budget will provide an opportunity for the Chancellor to set out the details on how this will work in practice, but clarity about how decisions on local infrastructure spending will be decided will be keenly sought from both north and south.
Devolution White Paper – government has committed to publishing a Devolution White paper, promising a review of more directly elected mayors in the mould of the Metro Mayor, and the possibility of more combined authorities and unitary authorities. These policies reflect wider effort to devolve decision-making to the local level. The future of sub-national partnerships such as the Northern Powerhouse, Midlands Engine and Oxford-Cambridge corridor will also depend on any funding and powers devolved to them over the next few years.
Planning White Paper – in the works since being first announced by Theresa May in March 2019, and now anticipated around the time of the Budget or shortly thereafter. A recent Ministerial Written Answer confirmed, “the purpose of the White Paper will be to make the planning process clearer, more accessible and more certain for all users, including homeowners and small businesses. It will also address resourcing and performance in Planning Departments.” It remains to be seen what influence Jack Airey’s (co-author of Policy Exchange’s report in January on ‘Rethinking the Planning System’ for the 21st Century’) recent appointment as No. 10 housing and planning adviser will have on policy proposals.
Local Industrial Strategies – Mayoral Combined Authorities and Local Enterprise Partnerships (LEPs) across the country have been busy preparing their local response to the national Industrial Strategy since 2018 through the form of Local Industrial Strategies (LIS). So far, seven LIS have been agreed and published but some thirty remain in the pipeline still to be agreed with central government. At the very least, an extension to the deadline for nationwide coverage by March 2020 seems inevitable – or potentially a shift to something different as has been rumoured. The Budget could usefully provide some clarity.
Big infrastructure – the recent confirmation of HS2 might signal that the government is moving towards funding big ticket infrastructure investment, relaxing its fiscal rules. Eyes will be on the Budget to see whether this is backed with investment for Northern Powerhouse Rail and an indication on the future of the Oxford-Cambridge growth corridor. A further indication of the priorities of this government might be its omission of major road investment announcements (so far transport infrastructure spending announced has been for trains, busses and cycling), but this will need squaring with the legally-binding target of net zero greenhouse gas emissions by 2050.
Research and development – in the spirit of levelling up, the Prime Minister and his Special Adviser Dominic Cummings are looking closely at R&D funding nationally, pointing out that more than half of the national gross domestic expenditure on R&D is spent in London, the South East, and East of England. This might be through investing into nationally-significant hubs like the “MIT for the North” and the Midlands “Gigafactory”. Options include strengthening the existing Catapult Centres, National Productivity Investment Fund and Strength In Places funds, or through new initiatives.
UK Shared Prosperity Fund – further detail on the plans to replace the £2.1billion EU structural and investment funding, the proposed UK Shared Prosperity Fund, is long awaited. A consultation period is expected before the fund kicks in. While the fund is committed to tackling inequalities between communities by raising productivity in areas of the country that are ‘furthest behind’, clarity is needed to ensure local authorities have certainty over long term funding arrangements in order to effectively plan for future interventions.
Freeports – a key policy for government, given the aspirations for global trade following Brexit. They will operate similarly to enterprise zones but specifically for port areas, in which goods are only charged tariffs when they leave the freeport area. With a 10-week consultation recently launched by the Government aims to announce up to 10 new freeports across the UK at the end of this year to be operating in 2021. The Budget provides the Chancellor with the opportunity to say more about the potential funding and regulatory framework for this initiative.
With a promised dose of new public spending, a significant parliamentary majority and a new phase of Brexit and global macroeconomic developments, next week’s Budget will be significant not just for the decisions made but how this sets the tone for policy and funding for the years ahead.
Lichfields will be providing further comment on the Budget in due course.
Click here to subscribe for updates (opens in email)
Image credit: Rishi Sunak (@RishiSunak)
24 Feb 2020
Moving into a new decade with a new Government and Brexit a firm reality, will no doubt bring changes but some of the challenges which have influenced the last decade will continue, not least the need to create long term sustainable communities with the opportunity for people to access the housing market.
Local Plan progress continues, albeit at varying pace, and is needed to support the delivery of new homes. The Government in their manifesto continued to give their support to delivering more than 300,000 homes by the mid-2020’s. This is despite the introduction of the standard method, introduced to drive national housing delivery, which has in some areas had the opposite affect and resulted in some local authorities reducing housing requirements despite retaining ambitious economic strategies.
In 2019 across the North East, three Local Plans went through their Examinations; Sunderland, Northumberland and County Durham. All of these emerging Plans identified a requirement above the standard method, albeit by a very nominal amount and lower than previous iterations of Local Plans (See Hannah Bickerdike's blog). The outcomes of two Examinations are not yet known but having attended both, it’s perhaps the spatial strategy which will come under greater scrutiny from the Inspectors through their reports, rather than the total amount of housing being brought forward given the introduction of the standard method. The amount and type of housing brought forward to support future housing delivery is also critical.
In the North East there remains significant variation in the strength and success of local housing markets with hotspots where demand is impacting upon local prices. Contrasted with other parts which continue to deal with low demand and the wider social issues which this brings.
The North East Strategic Economic Plan (SEP) (2018) recognises the need to address the under-provision of housing stock to meet demand and respond to demographic change. What is apparent is that it remains critical that the right homes are brought forward in the right places whether these are:
Executive homes to support the economic aspirations of knowledge-based businesses which have been identified as lacking within a particular local economy;
Affordable homes to meet the needs of lower income households;
New models of housing which meet the needs of new graduates keen to move on from student accommodation but aspire to the facilities that new Purpose-Built Student Accommodation has provided whilst they were studying; or
Identifying particular gaps in the market.
To do this effectively, there is a need for evidence – evidence which understands the dynamics and characteristics of the local housing market alongside future demographic change which will impact upon future demand. This evidence helps to shape future proposals which are well considered and can be robustly justified whether these are in alignment with local policy or enable an alternative to local policy to be considered. Understanding what type and mix of housing is required to meet future need is critical to delivering long term sustainable communities. This sits alongside areas where there is an over-supply of a particular housing type which is having a negative impact on the vibrancy and success of these communities.
Lichfields recently worked alongside one local authority in the North East to assess the future potential for the growth in an urban-living housing product to help diversify the existing housing market. Lichfields helped to assess the existing housing stock in terms of type and tenure within an identified boundary and worked with stakeholders to understand existing demand for this type of housing. Lichfields through analysis of future demographic projections, alongside analysis of the market sought to identify the extent of the potential future market.
The approach developed set out the future potential of this market and highlighted the wider socio-economic issues which would need to be tackled, alongside the housing issues to support the growth in this particular housing product.
The project utilised Lichfields skills in understanding housing market dynamics and the principles which underpin Lichfields' Sizemix product.
As Local Plans in the North East are adopted, the need for evidence continues, particularly where it involves justifying proposals which underpin the planning case for future housing development. Evidence is powerful and persuasive.
We are happy to discuss existing and future developments and your requirements.