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Autumn Statement 2016

Autumn Statement 2016

The Chancellor’s first Autumn Statement saw significant investment and economic reform. Here, our policy experts react with what the announcements really mean across our key areas.

Phillip Blond, Director of ResPublica, said “Today’s Autumn Statement was an attempt to marry Reaganomics to Rooseveltian intervention. Continuity was the message of the day when it came to tax cuts for corporations, low-paid individuals and motorists – with the strategic reductions promised by Osborne confirmed and continued by his replacement. As America looks set to slash corporation tax – and as inflation begins to bite – this ‘steady as she goes’ approach is sensible. Meanwhile, on infrastructure, the country will finally benefit from some of the large-scale investment that ResPublica – amongst others – has been calling for. The £23 billion fund for innovation and infrastructure is a much-needed step in the right direction.

Throughout the Autumn Statement, Hammond returned again and again to the dilemmas and the difficulties posed by productivity. This is an issue of long-standing interest to the new Chancellor and he rightly grasps the urgency of closing both the productivity gap between North and South and that between the wider UK and our peer economies. As Hammond observed, this is not an abstract issue – it is the reason that people in this country work longer and harder, for less money, than they should. Reviving the fortunes of post-industrial Britain – and safeguarding our economy against the dangers of Brexit – demands radical and transformative answers to our productivity crises. It is exciting and encouraging that this Government appears to grasp the centrality of this issue to the UK’s social and economic flourishing and ResPublica will be feeding in new ideas in the coming weeks and months to support this welcome focus.

Brexit, Trump and the rising cost of fuel are all storms that buffet the British economy. Our Chancellor has little control over any of them directly. But today – in his first major ‘fiscal event’ – Philip Hammond showed that he grasps the factors that are making the weather and is determined to hold the economic ship together”

Housing & Planning

The Chancellor’s announcement to build 40, 000 affordable homes is welcome.

ResPublica has long called for an increased in housing, and in recent report Going to Scale gained cross-party support in setting out proposals for a National Housing Fund that could deliver up to 75,000 rented homes a year over the long-term. Earlier this month, in Great Estates, ResPublica found that new approaches are needed to fund regeneration schemes around the country to support life chances and deliver new homes.

The Government’s ambition to introduce flexibility on grant rules; deliver a Housing Infrastructure Fund of £2.3 billion to unlock sites for development; and provide £1.4 billion for affordable housing are all welcome measures to increase the scale of housing delivery, and will ensure that housebuilding meets different housing needs. Efforts to improve private renting through the abolition of letting agent fees is also important, not least because it will support young people looking to save up to eventually own their own home.

Edward Douglas, Housing Lead at ResPublica, said “The Government, in announcing £1.4 billion for affordable housing, has today clearly recognised the need we set out in Going to Scale last week to invest in housing to deliver at least 40,000 homes across tenure types.

“The major investment to unlock large sites for development through a new Housing Infrastructure Fund is welcome, but the forthcoming White Paper on housing should seek to address other problems to ensure we deliver the homes we need on the sites this unlocks. Our proposals for a National Housing Fund would maximise the potential of the Government’s plans because it would fuel efforts of developers and housing associations to build.

“Finally, the Government’s commitment to introduce flexibility in the rules on grants to deliver a wider range of homes is less likely to make the headlines. But it will allow providers and developers to make best use of existing government funding and, crucially, better meet the needs of all people in all parts of the country – and ultimately help to bridge the home ownership divide.”

Further to the success of Going to Scale and Great Estates, we are taking forward a full programme of work on housing.

Our Backing Beauty campaign calls for community involvement in planning, as well as the restoration of beauty to the heart of planning policy

Duncan Sim, who heads our campaign said, “The acknowledgement that concerns about local infrastructure capacity represent a major source of objections to the delivery of new housing is welcome. Yet it is vital that this infrastructure is understood not only in terms of new roads, schools, and other physical amenities, but also in terms of the broader public realm, such as local parks and green space; the future of such spaces has been the subject of considerable public concern, demonstrated over the past months through outlets such as the Communities and Local Government Committee’s recent inquiry. 

The Government’s decision to grant £7.6 million to the restoration of Wentworth House shows that it recognises the importance of heritage and beauty, yet it is neither possible nor appropriate to have Government intervene from the top down in this way across the country. That is why we have, through our Backing Beauty Commission, called for additional powers to be devolved to local authorities and communities to discern, protect and create beauty in their areas. We would have liked to have seen the Government act to encourage neighbourhood planning in deprived areas, where ResPublica’s research suggests communities are currently three times less likely to be forming such plans relative to more affluent areas.”

The Just About Managing

Measures to help ‘Just About Managing’ families were heavily trailed in advance of the Chancellor’s statement, including the rise in the National Minimum Wage, the reduction in the taper rate applied to benefits received under Universal Credit, and a £1.4 billion fund to build 40,000 affordable homes. Yet these are fundamentally short-term actions; meanwhile the effectiveness of another pre-announced measure – the abolition of letting agency fees – is already being questioned amid concerns tenants will see compensatory rent increases.

More positive is the introduction of a new savings product to increase returns for those families who can afford to put some income aside, and the devolution of the adult education budget to London, providing an opportunity for many to gain the skills and confidence needed for new employment opportunities as well as enabling them to play a more engaged role in their own children’s schooling, providing intergenerational benefits. Measures to reduce the cost of childcare to parents and expand entitlements were again trumpeted, yet no additional investment in recruiting and training high quality nursery staff was announced; this is a missed opportunity to build a platform for children’s later attainment, in particular for those from disadvantaged backgrounds.

Duncan Sim, Policy and Projects Manager, said: “Tweaks like the minimum wage rise and reduction in taper rate on Universal Credit, while small steps in the right direction, cannot address the underlying factors which lead to the inequality and lack of social mobility which this Government has pledged to tackle. A broader vision is needed for that goal, one which prioritises closing disparities in savings rates and asset ownership alongside measures to simply raise incomes for struggling households. More focus must be given to a regionally-led skills policy with the involvement of HEIs and businesses to help people into secure, well-paid employment, rather than allowing people in work to remain dependent on state support. And civil society must play a greater role in local economies through the development of community business and civic finance institutions, to enable prosperity to take root in those areas where neither globalised markets or central government intervention have yet achieved this.”

ResPublica is tackling these issues and more with our work on social reform

Regional Growth and Infrastructure

Mark Morrin, Principal Research Consultant, said: “The announcement of further city deals in Scotland, where all cities will now have a city deal; and in Wales, where the Swansea Bay City Region now joins Cardiff Capital Region in achieving its city deal, leaves Northern Ireland as the only region in the UK yet to arrive at such a settlement. Belfast, where ResPublica has been calling for a devolution deal, is a conspicuous absence. Additional borrowing powers for Metro-mayors is welcome given their new responsibilities, but where similar devolved functions are performed by shire counties they should also receive the same borrowing powers.

In terms of local productivity, broadband is vital for the extended hinterlands of city-regions so additional money and the focus on Fibre to the Premises is welcome, but the Government should consider whether BDUK is really up to the task of delivering, and allow combined authorities a delivery role where they have greater ambition. The Government’s proposal for ‘Urban Transformation Centres’ for universities to market tech transfer is interesting but it is clear little work has been done on fleshing them out. It should also place the expanded regional Science and Innovation Audits on an organised footing by increasing the capacity of the LEPs, whose relationship with the Metro-mayors has also not been clarified by the Chancellor.”

In England the Government has restated its commitment to devolving powers to support local areas to address productivity barriers, including discussions about a second stage devolution deal with the West Midlands Combined Authority, the transfer of the budget for the Work and Health Programme to London and Greater Manchester, and the adult education budget to London.

However, the Autumn Statement has provided little indication of the Government’s future intentions for devolution in cities or counties or other places, whether this is next stage devolution deals for those that already have them or a new offer for those that don’t. There is still little movement on many of the 30+ propositions which since September 2015 have been immovably log jammed in Treasury.

The allocation of £1.8 billion through the Local Growth Fund, the additional investment in infrastructure and R&D and new borrowing powers for combined authorities will be welcomed in the regions. But there is little clarity about the future role of LEPs and how they will operate under the new governance structures of the metro mayors, or how these new funds will be allocated and invested in a place-base setting or alongside the Government’s Industrial Strategy.

The publication of the Northern Powerhouse strategy signals continued commitment to such a project and making the vision a reality. But if such a rebalancing of the UK economy is to be realised the allocation of investment in the North will need to commensurate with the scale of the challenge.

We welcome indications that BEIS will support a place-based Industrial Strategy. We believe this approach will be crucial to supporting local growth, addressing productivity and rebalancing the UK economy – as we argue in our Industrial Strategy programme.

Business and Productivity

This year’s Autumn Statement, set against the backdrop of the Brexit vote, was sold as a difficult one for the new Chancellor. Yet, there is much in the budget that chimes with the work of ResPublica.

Adam Wildman, Principal Research Consultant, said, “The Chancellor quite rightly highlighted the issue of low productivity in the UK. Productivity has indeed increased over the last year from a low base and and the Chancellor rightly outlined plans to help Britain catch-up with France, Germany and other advanced economies on productivity measures.

This and some of his measures are to be welcomed. We believe it is right to increase funding to the British Business Bank and incentivise more investment in R&D, but the Statement lacks any real plan to boost productivity through investments in human capital, particular to amongst SMEs. Smaller businesses need a coherent plan to deliver additional skills funding and training schemes. SMEs comprise approximately 60 per cent of the work force, yet most of the schemes aimed at promoting skills are directed towards larger firms. Any Chancellor who fails to supply a plan for upskilling SMEs cannot truly be said to be serious about tackling the productivity puzzle.

ResPublica believes that true prosperity can only be achieved if significant investments are made in human capital, with the benefits this bestows on productivity. On this measure, the Chancellor is currently under-performing. ResPublica would strongly recommend that he shift his focus at the earliest possible opportunity.”

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