Today saw Philip Hammond give his inaugural and much anticipated Autumn Statement. It was his first opportunity to officially outline the priorities and future vision for the country and the economy since his appointment and in the wake of the unexpected Brexit vote. It was expected that Hammond would initiate a change of direction to his predecessor, George Osborne, although how much of a change was unclear as it was also widely recognised that the economic backdrop did not leave much room for manoeuvre.
In the end, we did see some changes: in a major departure from the Osborne era, Hammond revised the target of a budget surplus in 2020, to a deficit of £21.9bn by the end of Parliament. Despite this, the Chancellor set out to try and provide some relief to the so-called ‘just about managing’ families around the UK, who have inevitably been dubbed ‘JAMs’ by an acronym-loving civil service and media. We saw a number of measures aimed at appealing to this group, from a fuel duty freeze to tinkering with tax and benefit rates.
In this blog, however, we want to focus on three key aspects of the Autumn Statement that arise out of one change in direction – Hammond’s willingness to borrow more than his predecessor, at least for the purposes of expanding infrastructure – and one area of continuity, a commitment to devolution.
We have published a number of blogs over the past few months about the Government’s focus on housing. The Autumn Statement has confirmed, yet again, the cross-Governmental effort to try and kick-start a step change in housebuilding in the UK. In an attempt to increase both supply and stem affordability, a new Housing Infrastructure Fund of £2.3bn was announced with the aim of providing necessary infrastructure to support growth in areas where demand for housing is highest, and which the Government believes will help deliver up to 100,000 new homes. An additional £1.4bn – provided by the National Productivity Investment Fund – was earmarked to deliver an extra 40,000 affordable housing starts by 2020/2021. During the same time period £1.7bn will be invested to accelerate construction on public land in England.
A Right to Buy regional pilot was also announced, meaning an additional 3,000 people will have the opportunity buy their Housing Association homes under the policy. Perhaps controversially, there was also an announcement that the DCLG will consult on banning letting agents’ fees, following changes already made in Scotland. All of this is ahead of the upcoming White Paper on Housing – now expected at the end of the year – and we can expect more measures and greater steps to tackle the issues in the market when that is published.
A new National Productivity Investment Fund was announced, with £23bn allocated over the next five years to ‘ensure the economy is prepared for the future,’ providing additional funding in key areas essential to productivity such as transport, digital communications, research & development, and housing. Funds from this will be used to ease congestion and improve local roads and highways. A £390m in future transport technology, including testing of driverless cars, electric and hydrogen busses, and installation of charging points for low emission vehicles.
A clear direction of travel was set for future continued infrastructure growth, with the Chancellor telling Parliament that he had written to the National Infrastructure Commission to tell them to expect between 1% and 1.2% of GDP to be spent on infrastructure from 2020. Putting that into context, this year’s announcements total just 0.8%. There was also confirmation of a much-trailed commitment of £1 billion for upgrading digital infrastructure so the UK can be a world leader in 5G. (We recently blogged about how this type of digital upgrade was an integral part of the 4th Industrial Revolution).
Devolution and Northern Powerhouse
The Northern Powerhouse was George Osborne’s particular creation and much had been made of Theresa May changing her language and not repeating that well-known slogan. However, Hammond confirmed that devolution is at ‘the heart’ of the Governments approach to local growth and he did talk specifically about the Northern Powerhouse, so the concept lives on and the Chancellor committed more funding for road and transport projects across the North.
The Northern Powerhouse now has competition, though, as the Government is also keen to develop a ‘Midlands Engine’ which was singled out for rail hub upgrades to increase capacity. More funding was announced for Local Enterprise Partnerships around the country, and new City Deals, or upgraded devolution packages, or discussions about upgrading devolution packages, in other cities and metropolitan regions across the UK were also discussed.
London was not forgotten, though, and Sadiq Khan will be pleased to receive further devolved responsibilities and, more importantly, a bigger budget: £3.15 billion over the next five years to build 90,000 affordable homes in the capital and future control over the capital’s adult education budget.
Clearly there is a big gap between an announcement and policies being delivered, and any downturn in the economy might yet see some or all of Hammond’s ambitions jettisoned. Moreover, there is considerable scope in the way that many of these schemes could be delivered, and how they will be prioritised.
We at Nudge Factory will be scrutinising closely how these Autumn Statements are developed over the coming months. We will want to see how the Government’s Housing White Paper and Industrial Strategy contribute to these goals. However, increased devolution in recent years also puts an onus on regional and local leaders to play their part. So we will also be looking in detail at the new Mayor of London’s Housing and Planning strategies are developed, as well as how the new Metro Mayor’s, due to be elected for the first time next year, can influence housebuilding and regeneration of local economies across the ‘Northern Powerhouse’, ‘Midlands Engine’ and beyond.