By Ben Walters
On Tuesday, Philip Hammond delivered his first Autumn Statement as Chancellor, and gave the Treasury a chance to react to both Brexit and new fiscal forecasts. Below, we have discussed some of the changes which may impact on cities.
‘showing the Treasury’s reaction to both Brexit …’
Local Growth & Devolution
The Autumn Statement announced the allocation of round 3 of the Local Growth Fund to Local Enterprise Partnerships (LEPs) across England. This was previously announced in the 2016 Budget, and totals £1.8 billion: £556 million will go to the North of England, £543 million to the Midlands and East and £683 million to London, the South East and the South West (specific LEP allocations will be announced in the coming months). Alongside this, Government will consult on lending up to £1 billion to local authorities at a new ‘local infrastructure rate’ (of gilts + 60 basis points – which would currently total approximately 1%) for three years, to support high value for money infrastructure projects.
Whilst not as detailed or expansive as in previous years, Government has reaffirmed its commitment to devolution: working towards a second devolution deal with the West Midlands Combined Authority, and beginning talks on future transport funding with Greater Manchester. Government will devolve the budget of the Work and Health Programme to both London and Greater Manchester, and it has reannounced the devolution of the adult education budget to London from 2019-20. Additionally, Government has confirmed the Greater London Authority’s (GLA) affordable housing settlement (£3.15 billion to deliver over 90,000 housing starts by 2020-21). The publication of the Northern Powerhouse strategy by Government, and the upcoming Midlands Engine strategy, demonstrates the continued focus on raising productivity.
Finally, there were further signals of increased government support for local investment, as Government will allow mayoral Combined Authorities to borrow money, with a borrowing cap. It also confirmed arrangements for the Northern Powerhouse and Midlands Engine Investment Funds, which will start supporting SMEs in early 2017.
In Scotland, there was continued support for city deals. The Government confirmed city deal funding in Aberdeen and Inverness, as well as indicating progress towards a deal with Edinburgh. It will also work towards a city deal for Stirling and will consider deal proposals with the Tay cities; this means that all Scottish cities have the opportunity to agree a city deal. In Wales, there has been good progress towards a city deal for the Swansea Bay City Region, and the indications of shaping a deal in north Wales. It’s also continuing to support the implementation of the £1.2 billion city deal for the Cardiff Capital Region.
Infrastructure & Investment
Infrastructure investment features strongly in the Chancellor’s speech. First, Government has made significant changes to its ongoing infrastructure policy. The National Productivity Investment Fund will spend £23 billion over 5 years, including £1.3 billion into road transport networks, £1 billion into Digital infrastructure investments, £2 billion into R&D spending, £1.4 billion into affordable housing and £2.3 billion going towards the Housing Infrastructure Fund. It has highlighted the central role it would like the independent NIC to play in policy advice, inviting it to set out recommendations each year, on the country’s strategic infrastructure needs and how to meet them. It’s set out a fiscal remit for these recommendations, increasing infrastructure spending (from 0.8% currently) to 1% of GDP by 2020-21, and between 1 and 1.2% of GDP between 2020 and 2050. And, it aims to increase transport spending by 50% to invest £61 billion this parliament, and increase economic infrastructure investment by almost 60%, from £14 billion in 2016-17 to £22 billion in 2020-21.
Secondly, the government has endorsed the NIC study on the Cambridge-Milton Keynes-Oxford corridor, welcoming the interim report and its recommendation for an Oxford-Cambridge expressway, providing £27 million in development funding, and it will bring forward £100 million to accelerate construction of the East-West Rail line. It is also considering the NIC’s work on delivery models for housing and transport in the corridor, and asking for a new study on how emerging technologies can improve infrastructure productivity.
Other Key Points
As on devolution, while the policies of the Autumn Statement have generally been accepted positively, there were some notable policy areas which have been generally left out. This could arguably be due to the Chancellor wanting to limit the Autumn Statement and not cover all policy areas. Whilst there has been a renewed Government focus on justice and inequality, there was only a small mention of inclusive growth measures – external analysis suggests only a limited impact on lower income deciles. And there was little talk of any investment into the skills budget, whether through education or other investment. As skills have a major part to play in productivity, this may come under focus at a later date.
There have also been a series of announcements which allude to the significance of an upcoming Industrial Strategy. While many of the policies which were announced did have relevance to an Industrial Strategy, there is no official word on when we will have hard information on it (although unofficial rumours speculate there could be an announcement soon).
Finally, in terms of process, there are changes to the future of fiscal events in the UK. Namely, while there will remain two forecasting events, the primary event (the Budget) involving significant fiscal changes will be moved to the autumn, while the secondary event (the Statement) will be moved to the spring. The Statement will also be reduced to minor responses to the forecasting in hand, only making significant fiscal changes when necessary. This was a stated aim of Philip Hammond when he became Chancellor, and means that there will be both a spring and autumn budget in 2017 (and no spring or autumn statement).