Budget 2016: What it means for cities

By Simge Kartav

Yesterday the Chancellor George Osborne delivered his third budget in 12 months.  In his 62-minute speech, changes to tax rates and savings took centre stage. However, his announcements on devolution, transport and business rates are those that will inevitably have a big impact on cities in the UK. 

The Chancellor emphasised that the ‘devolution revolution’ will carry on full speed and announced new deals with the West of England, East Anglia, and Greater Lincolnshire. The Chancellor will be building on existing devolution deals with Greater Manchester, Liverpool City Region, Sheffield City Region, the North East and Tees Valley; soon 57% of the population of the North of England will be represented by elected mayors. Previously agreed mayoral devolution deals will also each receive unringfenced single pots of funding to spend on local priorities, worth £2.86 billion in total.

The Government has also agreed a £1.2 billion city deal for the Cardiff Capital Region with the Welsh Government and local partners. We are delighted that Metro Dynamics client Cardiff Councils were able to get their deal signed off the day before the budget. The combination of the Cardiff Capital Region deal and the West of England deal gives a big boost to the Great Western Powerhouse. Here is a link to the ‘Britain’s Western Powerhouse’ report commissioned by Great Western Cities and authored by Metro Dynamics.

The Chancellors announcement that business rates in England would be cut by £6.7bn over the next 5 years will be significant for local areas and their small businesses.  Six hundred thousand small businesses will pay no business rates and many will benefit from the increase in relief threshold from £6,000 rateable value to £15,000. Local government will be compensated for the loss of business rate income, though at this stage the Chancellor has not outlined how, but will consider ways during the consultation on the implementation of 100% business rate retention, due to kick-off  in summer 2016. The Chancellor also announced pilots in Greater Manchester and Liverpool City Region to test out the dynamics of the 100% business rates retention approach before it is rolled out more widely.

Yesterday’s budget also gave the green light to a wave of new garden towns and villages across the country, with the potential to deliver over 100,000 homes. The Budget announced that the Government will legislate to make it easier for local authorities to work together to create these new garden towns, as well as consult on a second wave of Compulsory Purchase Order (CPO) reforms with the objective of making the CPO  process clearer, fairer and quicker. The Government will provide technical and financial support to areas that want to establish garden villages and market towns of between 1,500 to 10,000 homes.

Some new schemes were announced to address the lack of affordable housing. The Government launched the ‘Starter Homes Land Fund’ prospectus yesterday. This prospectus invites Local Authorities to access a £1.2 billion fund that has been developed to help councils to remediate brownfield land (often a blocking cost) in order to mitigate the cost of delivering Starter Homes on these sites. To deliver 400,000 affordable housing starts by 2020-21, the Government will undertake a series of further reforms to streamline and simplify the planning system. The Chancellor announced that the Government will accelerate its programme to release public sector land for housing; the Homes and Communities Agency will work in partnership with Network Rail and local authorities to identify and release land packages around stations that could be used for housing or commercial developments.

Here’s a quick summary of the major announcements by region:

East of England

  • The Government has agreed a mayoral devolution deal with East Anglia, covering Norfolk, Suffolk, Cambridgeshire and Peterborough; the deal grants new powers over transport, planning, skills and establishes a £900 million investment fund over 30 years to grow the local economy. In addition, £175 million of ringfenced funding has been provided to deliver new homes.
  • The Chancellor contributed £5 million towards the cost of redeveloping St. Albans City rail station and £151 million towards new river crossings at Lowestoft and Ipswich.


  • The Chancellor green lit further development on Crossrail 2, a major new infrastructure project for London. The Government will provide a contribution of £80 million to fund the development of Crossrail 2, and asks Transport for London to match that contribution.
  • The Government will increase the share of business rates the Greater London Authority can retain and will transfer funding responsibility for TfL’s capital projects. This will give the Mayor of London direct control over an additional £1 billion more of locally raised taxes. The Government will also explore the options for moving to 100% business rates retention ahead of the full roll-out of the business rates reforms.
  • The Government also signed-off the business case for a new Thameslink station at Brent Cross Cricklewood, which will in turn unlock 7,500 new homes.


  • The Chancellor announced a new mayoral devolution deal with Greater Lincolnshire. This will give Greater Lincolnshire significant new powers over transport, planning, and skills. Greater Lincolnshire will also be given control of a £450 million investment fund over 30 years to boost economic growth.
  • The Government agreed to create a Midlands Engine Investment Fund of over £250 million to invest in smaller businesses in the Midlands. This will be formed in partnership with the LEPs and the British Business Bank.
  • The Chancellor outlined plans to put Midlands Connect on a statutory footing by the end of 2018 and create a sub-national transport body for the Midlands. This will support Midlands Connect to develop and implement a long-term Midlands Transport Strategy following the £5 million of funding the Government committed at Summer Budget 2015.
  • The Chancellor allocated £14 million for STEAMhouse, a new innovation centre in Birmingham’s Creative Quarter ‘Digbeth’ and £16 million of grants to the aerospace industry including a £7 million grant to Rolls-Royce in Derby.

Northern Ireland

  • The Chancellor announced £4.5 million for an air ambulance service in Northern Ireland and a pilot enterprise zone near Coleraine offering Enhanced Capital Allowance.

Northern Powerhouse

As set out by the Chancellor in 2014, the Northern Powerhouse is the Government’s vision for the North of England. The Government has now agreed a joint statement of intent with the largest cities in the North to make the Northern Powerhouse a reality. To bring the Northern Powerhouse to life, a number of announcements were made:

  • A package of £300 million to fund transport within the Northern Powerhouse, including a High Speed 3 link between Leeds and Manchester, reducing journey times to around 30 minutes.
  • Extra investment of £161 million to accelerate the transformation of the M62; and investment of £75 million to improve other road links across the North including the A66 and A69.
  • Devolved powers over criminal justice services in Greater Manchester, as well as the establishment of a Life Chances Investment Fund. The Chancellor also announced a 100% business rates retention pilot in Greater Manchester.
  • A mayoral devolution deal with Liverpool City Region. This builds upon Liverpool’s mayoral deal on 17 November 2015, and gives Liverpool additional new powers over transport, pilots the approach to 100% business rate retention across the city region, and commits the city region and government to work together on children’s services, health, housing and justice.
  • £20 million a year of new funding to improve schools. This new funding will try to tackle the unacceptable differences in educational attainment and progress between the north and south of the country.


  • Following a £125 million commitment to an Aberdeen City Deal earlier this year the Budget signalled support for a devolution deal for Edinburgh and South East Scotland.

South East

  • The Government tasked the National Infrastructure Commission to develop proposals to help unlock growth, housing and jobs in the Cambridge – Milton Keynes – Oxford corridor. Its report will set out opportunities to maximise the potential for future growth in this corridor.
  • The Budget launched the ‘Local Majors Fund’, a fund that allows local areas in the South East to bid for funds for large local transport schemes including the Chickenhall Link Road.
  • The Government will pilot a £15 million Connected Corridor on the A2-M2 from London to Dover and will allocate £7 million to improve rail stations in the South East.

South West

  • The Chancellor announced a new mayoral devolution deal with the West of England. The West of England will also be given control of a £900 million investment fund over 30 years to boost economic growth. This will give the West of England significant new powers over improved transport, planning, skills and employment.
  • The Chancellor allocated £3 million to improve rail station facilities in the South West and an additional £5 million of funds to improve resilience on the Dawlish rail line.
  • The Government will distribute £14.5 million in grants to extend ultrafast broadband coverage in the South West – £4.5 million more than the £10 million allocated at the Spending Review. As part of its assessment of how the UK can become a world leader in 5G, the National Infrastructure Commission will use the South West as a case study.


  • The Chancellor is allocating a £1.2 billion city deal for the Cardiff Capital Region with the Welsh Government and local partners. The Government’s £500 million contribution to the deal will provide an investment fund for the region and support electrification of the Valley Lines railways, a central part of the Metro project.
  • As announced in January, £50m will also be invested up to 2020-21 to create a new Compound Semiconductor Catapult in Wales. The Government will open negotiations with local partners and the Welsh Government towards a deal for the Swansea Bay City Region, extending from Pembrokeshire to Neath-Port Talbot.