Spending Review Summary
Four and a half years away from the next general election the new Conservative Government can afford to be a little tight on the purse strings. Even more so when the main opposition party seems somewhat ambivalent about getting themselves into power.
Four and a half years away from the next general election the new Conservative Government can afford to be a little tight on the purse strings. Even more so when the main opposition party seems somewhat ambivalent about getting themselves into power. So we might have expected this Spending Review to be a rather painful affair and it certainly is a determined march toward a budget surplus in 2019/20.
However, there was a spoonful or two of sugar in there to help the austerity medicine go down. The big u-turns on tax credits and police budgets were well-judged given the general public reaction to both issues and the same is true of the raft of measures announced to promote house-building and home ownership. But bitter doses were prescribed to Whitehall and local councils and the message here was clear, the Government is re-shaping the state and committed to reducing overall levels of public spending.
Housing and Planning
The house building programme positioned as the centre piece of today’s speech has already been making its way through Parliament in the guise of the Housing and Planning Bill over the last few months but there were a few new announcements to add to the mix.
From 1 April 2016 stamp duty on buy-to-let and second homes will increase by 3%. This is a measure aimed squarely at London where concern about homes left empty by overseas investors has emerged as an issue in the Mayoral election race. The money raised will go towards doubling the affordable housing budget from 2018/19 and creating a £60m communities fund.
In the next five years, the Chancellor wants to build 400,000 new affordable homes. As detailed in the Bill, half of these are to be ‘Starter Homes’ sold at 20% discount to young, first time buyers (capped at £450,000 in London). A new Help to Buy scheme will be launched in London and the Government will provide a 40% equity loan (interest free for five years) against a 5% deposit. Overall, the target is to build 135,000 Shared Ownership Homes nationally.
A pilot of the controversial extension of Right to Buy will start at midnight tonight for tenants of five Housing Associations. The five are L&Q (who have estates across the capital), Sovereign, Riverside, Saffron Housing and Thames Valley.
The Government has also identified £2.3bn worth of loans for estate regeneration and infrastructure for new housing developments. Estate regeneration has been one of Zac Goldsmith’s talking points in his Mayoral campaign and so again this is good news for his team.
Housing benefit will be capped for social renters to bring it in line with private renters.
Capital gains tax on property sales must be paid within 30 days.
The Department for Communities and Local Government will have its budget cut by 29% by 2019/20.
There is not a great deal of new money here for major London regeneration schemes but there are a couple of significant points to note for both East and West London.
In the East, the Government has restated its support for Olympicopolis, a new cultural and university quarter in the Queen Elizabeth Olympic Park that will be home to a new UCL campus, a new University of the Arts London campus and new spaces for the Victoria and Albert Museum and Sadler’s Wells.
Over in the West, the aspiration to bring the land around the HS2 interchange at Old Oak Common under single control is made firm, though there is no detail here on how this might happen and the role that the Old Oak and Park Royal Development Corporation would play.
The Government is to provide £310m to deliver the first new garden city in a century in Ebbsfleet. This allocation falls within a wider £700m package for regeneration at Barking Riverside, Brent Cross, Northstowe and Bicester Garden Town.
The Chancellor has reiterated his intention to sell off old Victorian prisons and announced that HMP Holloway in North London will be sold.
There is also £150m to support the replacement of the British Museum, Science Museum and Victoria and Albert’s Blythe House storage facility in West Kensington where over 2m fragile and sensitive objects are held.
With transport leading the way in government departmental cuts we may well ask who is going to oversee Osborne's ‘biggest investment in transport infrastructure in generations.’ There was money announced for HS2 and Crossrail but little detail on funding specifics for London and disappointingly there was only a passing mention of Crossrail 2 rather than a firm commitment.
Roads are the big winner with £13.4bn confirmed for the Roads Investment Strategy and £5bn for roads maintenance.
The Government also confirmed funding for the Network Rail investment programme as well as £46.7bn of capital expenditure over the next five years including starting construction on HS2.
Meanwhile Transport for London will receive £11bn for transport investment to power Crossrail, cycle superhighways and new tubes and buses. However, the Government is also phasing out its resource grant to TfL, effectively cutting its budget by 6% or £700m by 2019/20. The Government suggests that TfL counter this shortfall by selling their surplus land (which they are in process of doing) and being more efficient. Labour’s Mayoral candidate, Sadiq Khan, has already pledged to freeze fares for four years, even with this cut.
The DCLG consultation into the Local Government Settlement will also consider transferring the funding the TfL Capital Grant to local authorities.
As previously announced, £87m has been allocated to develop a new Thameslink Station at Brent Cross as well as a further £55m to extend the London Overground from Barking to Barking Riverside.
On the advice of the new National Infrastructure Commission, a £300m fund has been created to support ‘the next generation of transport infrastructure projects’ like, for example, Crossrail 2.
There is also a commitment to invest £300m nationally in cycling over the next six years.
Local authorities have had a rough few years, they’ve had to make swingeing cuts while managing an ever increasing list of responsibilities including the public health and social care of a growing and ageing population. Much of the detail is still to come but it is obvious that it’s not going to get any easier for them. On the surface there is some good news here but this is a highly complicated area both in terms of policy and politics and it will take time for the full impact of these changes to be understood.
As announced earlier this year, town halls will keep 100% of their business rate revenue by the end of this Parliament. However, we learnt today that in response, the Local Government Settlement will be phased out. More detail on this is expected with next month’s Settlement announcement.
Councils will be able to spend all receipts from asset sales (excluding those generated by Right to Buy) for ‘reform projects’, defined as initiatives that will enable them to deliver ‘more for less’. Again, the detail on this will be set out alongside the Local Government Settlement in December.
A 2% increase in council tax will be permitted but the money raised will be ring-fenced for care services.
DCLG will begin a major consultation next year on transferring funding responsibility for housing benefit administration, Transport for London capital projects and public health to local authorities. The consultation will also look at reforms to the New Homes Bonus.
Culture and Sport
Despite a 20% cut to the Department for Culture, Media and Sport’s budget, there was some good news here for the cultural and creative industries from a Party that hasn’t always been so kind to them.
The Arts Council’s budget has been protected to the end of the Parliament, meaning that museums and galleries will remain free to access.
There is also a promise to explore tax relief for museums and galleries and an extension of the operational and financial freedoms for national museums announced at the 2013 Spending Review to the British Film Institute, the National Army Museum and Historic England among others.
In anticipation of the excitement over Rio 2016 and Tokyo 2020, UK Sport’s budget has been increased by 29% in order to create a new generation of Team GB legends.
£1.6 billion of capital investment in culture over the next 5 years, mostly in Manchester and Birmingham but with the £150m for the Blythe House replacement in London coming under this umbrella.
The Metropolitan Police will benefit from the Government’s commitment to protect overall police spending, and additional investment in police counter-terrorism capability.
The NHS will receive a £10bn increase in funding over the next five years of which £6bn will be delivered by the end of 2016/17. Mental Health services will receive £600m.
26 new local enterprise zones will be created, however, none of these will be in London.
There is a lot of information here and LCA will be considering the detail and impact of today’s announcements more fully over the next few days as well as tracking the response from the media, politicians and industry bodies. If you have any questions or comments for us please contact Jenna Goldberg on 020 7612 8480 or firstname.lastname@example.org.