Budget 2020 – What does it mean for planning and local government?

Rishi Sunak’s first Budget as Chancellor has turned out to be one of the most anticipated spending statements for years. In the statement, Sunak well and truly sent the message that the era of reigned-in public spending is over.

Along with more than £600 billion planned for investment in capital projects over the next five years, the Treasury is promoting the claim that the Government’s spending plans will bring real-terms public investment not seen since the days of ‘Rab’ Butler, Anthony Eden’s Chancellor in 1955

This is a clear area of concern for some on the Conservative backbenches, with former Prime Minister Theresa May warning against abandoning restraint in public spending. However, it is noticeable that a number of the Government’s policy decisions listed in the Budget have already been previously announced, including further Business Rates Retention Pilots, and it is worth being sceptical as to how much of the £600 billion capital investment is money that has already been committed in previous announcements.

Responding to Coronavirus

It was hard to ignore, too, the impact of the ongoing Coronavirus emergency, which the Chancellor opened his speech on. We were presented with a series of measures designed to help the economy, including a £500 million ‘Hardship Fund’ for local authorities to support the worst off during the crisis. There was a sense of just how seriously the Government is taking the situation, and how determined it is to head off any chances that the virus will stall the country’s economic growth.
The Budget acted as positive indicator of how the Government continues to respond well to the evolving emergency. It was also reassuring for the Chancellor to be working in lock-step with the Governor of the Bank of England, who this morning announced his own measures including a cut in interest rates to 0.25% and a £100 billion cheap funding scheme for banks to support small businesses. The mixed response of the markets can be seen in the pound strengthening against the euro and the dollar, praise and criticism from sovereign ratings agency Moody’s, and the stock market rallying slightly in response to the Budget before declining as the afternoon has worn on.

Planning and development

In the local government and planning sectors, the other highlights from the Budget included a significant package to help meet the Government’s targets around housebuilding. There was an announcement of an additional £12 billion for the Affordable Homes Programme, an allocation of £1.1 billion from the Housing Infrastructure Fund to pay for nearly 70,000 new homes, and a cut in interest rates on lending to local authorities to build social housing. However, if the economy sinks as a result of the Coronavirus outbreak, the development sector may be unable to deliver the new housing the Government desperately wants, and all the Chancellor’s promises may come to nothing.

OxCam Arc

The Budget also set out that the land connecting Oxford, Milton Keynes, Bedford and Cambridge – the OxCam Arc – is a key economic priority. In order to deliver new housing and infrastructure, the Budget will see the development of a long-term Spatial Framework, examination of the case for four new Development Corporations and exploration of a New Town at Cambridge. The road element of the Arc, however, was notable by its absence from the Budget, and it has been suggested Transport Secretary Grant Shapps that there will be an announcement around this shortly.

The planning system

Crucially, the Chancellor announced that the Housing Secretary, Robert Jenrick, will present details of proposals to reform the planning system in the Commons tomorrow (12th March). These changes could potentially have a far-reaching impact on the planning sector and councils. Looking ahead to tomorrow, Cratus will be analysing the Secretary of State’s much-awaited announcement on Planning policy, and will provide a further update on the back of this.

Local government

Local government will also benefit from a £2.5 billion fund for roads resurfacing and pothole repair and money to research the integration of family services. There was an announcement of new City and Growth Deals, an increase in the finance settlements for metro mayors, and a Transforming Cities fund will invest more than £1 billion in local transport across 12 cities.

The temporary changes to business rates, however, will be less welcome for councils, since without mitigation measures there is a strong chance that it will reduce the slice of the income that local authorities receive from the rates. Similarly, the Government is proposing to limit councils to only borrowing once a year from the Public Works Loan Board to invest in commercial property. With a significant number of councils increasingly turning to rental income from such property as a way to meet their funding shortfall, there are question marks over what MHCLG is proposing to offer as an alternative source of revenue for councils that are already feeling the financial squeeze.

Announcements with an effect on development and local government inevitably made up a small proportion of the Chancellor’s spending plans. Nonetheless, the Budget contained proposals that have an impact for the next five years.