Budget 2016

Budget 2016

This year’s Budget Statement, set against the backdrop of the EU Referendum, was sold as a difficult one for the Chancellor to deliver. Yet, there is much in the budget that chimes with the work of ResPublica.


The Chancellor announced that the National Infrastructure Commission will prioritise transport projects in the North, including an HS3 link between Manchester and Leeds, and improvements to the M62. The budget also paid adequate attention to promoting the Northern Powerhouse. As a leading proponent of cities devolution, ResPublica is clearly supportive of this.

However, this budget did not provide an adequate answer to the UK’s productivity puzzle. It rightly points out that productivity has increased over the last year from a low base, but it lacks a long-term plan on exactly how Britain can catch-up with France, Germany and other advanced economies on productivity measures.

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, the Chancellor said this was the “budget for the next generation” that would invest in Britain’s young people. This is partly true, with the Chancellor affirming his target for 3 million apprenticeship starts by 2020.

But what is missing form the budget is a coherent plan to deliver skills funding and training schemes to smaller businesses, particularly the young workers in these firms. 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 budget that fails to supply a plan for upskilling SMEs cannot truly be said to be for the next generation.


Tom Follett, ResPublica Policy & Projects Officer for devolution, said: “The devolution revolution showed no signs of slowing down in Budget 2016, with new Metro-Mayors announced, groundbreaking devolution of criminal justice and deprivation funds, and single city-regional investment funds for infrastructure and adult skills. However, new reliefs on business rates have the potential to hit councils hard once business rates are devolved and the specifics of this need to be urgently clarified”.

Business rates reliefs increased

Small business rates relief will see 50% of business rates fall. For councils with large, high-value employers, the effect will be probably be marginal. However, the concern will be in areas with many small businesses occupying premises with low rateable value. In this case, the reliefs applied could remove a significant amount of councils’ tax bases. The Budget suggests councils ‘will be compensated’ for loss of income, but without specific proposals the potential remains for a significant drop in the income of areas that are supposed to become self-reliant following the end of central government funding in 2020. Such uncertainty is inevitable if taxes such as Business rates are to be retained locally but set nationally.

Devolved Life chances interventions fund & Criminal Justice

This combines into a single pot for Greater Manchester funds from the Troubled Families Programme, the Working Well pilot; and Cabinet Office Life Chances Fund. One of the major promises of place-based public services has been the potential to offer a single point of intervention in order to turn around the lives of a few families who create very large costs for public services. A well-funded pilot is therefore welcome and should also be trialled in areas less dynamic than Greater Manchester. Likewise, criminal justice devolution offers the opportunity of providing pathways into work for offenders and joining up crime, skills and work at the local level in a way that is currently impossible.

Mayoral powers

Devolved adult skills funding is to become non-ringfenced for areas with devo deals and combined with infrastructure funding in a single local growth pot. This presents an opportunity for local areas to target spending where it is most needed. However, the appropriate division of funding between skills and infrastructure may prove a difficult political issue for devolved areas to agree on.

Infrastructure finance & land value

Agreement of a city deal and funding for a metro system in Cardiff demonstrates that local transport funding remains high on the agenda, where the Government can secure political accountability.

The government “invites TfL to bring forward proposals for financing infrastructure projects from land value increases”. Funding infrastructure from land value increases has been discussed as a key mechanism for funding large projects in the future without Treasury grants, and if TfL secure appropriate powers, devolved transport bodies in other parts of England will not be far behind.

Housing & Planning

ResPublica has been vocal in calling for an increase in housing, and has called for devolution to local authorities to support acceleration of house-building, place-making and empowerment of communities. Devo Home recommended a devolution of housing powers to catalyse development, and was lauded as “an excellent report” by Shadow Housing Minister Roberta Blackman-Woods MP. A Community Right to Beauty, featured on BBC Radio 4’s Today Programme, argued for beautiful localities to be made available to all communities via the planning process.

The Government’s ambition to support young people to save more through a Lifetime ISA is welcome, as is the continued drive to unlock public sector land and remediate brownfield land for housing. The move to a more zonal approach to planning will give local authorities more power to speed up development, but as we argued in our Devo Home paper, streamlining of the planning system needs to involve local communities.

Edward Douglas, Senior Policy & Projects Officer, said “Support for savers is welcome, but will of course serve to further fuel demand in the housing market. The Budget will disappoint some hoping for more to be done to address supply-side issues, but there are important announcements on bringing more brownfield sites and public sector land into residential development. This is an excellent opportunity for more practical support to be offered to small developers to accelerate development. The Government should work with local authorities to earmark smaller public sector sites to SME builders.

“The move to a more zonal planning approach is also very welcome and is something we called for in our Devo Home report last year. But if this approach is to deliver the housing we need and build the places we want, it is crucial that local communities are more directly involved in the planning process.”


Somewhat unexpectedly , the Chancellor announced a sugar levy targeted at producers and importers of soft drinks that contain added sugar. The levy is designed to incentivise  companies to reformulate their mixtures by adding less sugar to the drinks they sell, and ultimately move consumers towards lower sugar alternatives and reduce portion sizes. Osborne expects the levy will raise £520 million in the first year, and the money raised will be spent on increasing PE in primary schools and in allowing secondary schools to set up a wide range of extracurricular activities.

William Griffiths, Policy & Projects Officer, said: “ We believe there is an urgent need to take action on the high levels of childhood obesity in the UK, and the announcement today indicates that the Chancellor is taking the issue seriously. While taxing a single commodity is a blunt instrument, a sugar levy sends out a strong message of intent from the Government. The sugar levy will be no silver bullet to the problem, however, and we hope that the Childhood Obesity Strategy later this year will set out a raft of ambitious and far-reaching measures.”



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