It was far from clear that today’s Budget would have much to offer to UK cities, with the Government having allowed urban issues to slip down the political agenda over the past 15 months. However, the Chancellor Phillip Hammond confounded those low expectations by placing cities at the heart of some of the Budget’s key announcements, and by putting an important focus on England’s metro mayors in a number of policy decisions.
Over the coming days we will be analysing the full Budget statement in greater detail, but here are five immediate reflections on the big issues for UK cities:
1. Metro mayors are the big winners in this budget
In recent months I’ve criticised the Government for downgrading its commitment to the devolution and mayoral agendas. With that in mind, the Budget’s focus on the metro mayors was very welcome. Hammond confirmed that the mayoral city regions will receive half of the new £1.7 billion ‘Transforming Cities’ fund, aimed at improving transport and infrastructure in order to drive economic growth and productivity in cities.
He also announced £12 million of additional funding to boost the mayors’ capacity and resources, and confirmed that three of the mayoral city regions would be the location for new pilots to tackle homelessness. Finally, the Chancellor revealed that the Government is working with Greater Manchester to develop a local industrial strategy for the city region, suggesting that the mayoral areas will be a focus in the full industrial strategy (due to be launched on Monday 27th November).
If there was doubt about the merits of having a mayor, this Budget put those misgivings to bed. In particular, it showed that the mayoral city regions – due to their clear and accountable leadership – will be given priority ahead of other places when it comes to Government decisions on investment and policy-making. The onus is therefore on major cities such as Leeds which are yet to introduce a mayor to step up efforts to agree a devolution deal with Government, or risk falling further behind.
It was also positive to see the Chancellor announce a second devolution deal for the West Midlands, and a new deal for the North of Tyne. Unfortunately the latter does not include places like Gateshead, which make up an integral part of the local economy, but which chose to pull out of the previous North East devolution deal. Hopefully the North of Tyne deal will be a stepping stone towards a city region deal encompassing the wider Newcastle economy. This will be crucial in ensuring that local leaders can make the most of the benefits devolution could bring.
2. The Government has recognised the geography of the housing crisis – but must do more to tackle it
The stand-out announcement of the day was the Chancellor’s decision to scrap Stamp Duty for first-time buyers on properties worth up to £300,000, and to reduce this tax for other first-time buyers. As my colleague Anthony has already pointed out, it’s not clear that this measure will do much to increase house-building, and the Office for Budget Responsibility has suggested that it would actually drive up housing prices.
However, what was more welcome was the Chancellor’s emphasis on building homes where they are most needed – the UK’s high-demand urban areas, particularly in the London and the Greater South East. This demonstrates a much-needed recognition of the geography of the UK’s housing crisis, which is not a national problem, but primarily affects cities in the South East.
Other measures, such as new investment to increase the role of small builders and to improve skills in the construction industry will make some difference to increasing housing supply and in driving up productivity. But it was disappointing that the Government yet again ruled out sensible development on small parts of the green belt around high-demand cities – the option which would have the biggest impact in addressing shortages quickly.
3. The focus on improving digital and maths skills is welcome
One of the biggest factors holding back cities outside the Greater South East is low skills levels. Birmingham, for example, has the highest share of residents with no formal qualifications of any UK city (17 per cent), and Liverpool and Manchester fare little better (14 per cent and 13 per cent respectively). This is a significant barrier for these places to attracting the kinds of knowledge-intensive firms and jobs which drive productivity and prosperity in cities.
Tackling this issue was another major priority for the Chancellor today, who focused in particular on the need to boost mathematical skills – offering a £600 Maths Premium to schools for additional pupil who takes A-level or Core maths, and £40 million to train maths teachers across the country.
He also announced £20m additional funding for the Further Education sector to help with introducing the new ‘T-levels’, and a new National Retraining Scheme which will initially focus on digital and construction.
Broadly, these measures are all welcome. However, the Government will need to ensure that this investment is directed to cities where the biggest skills challenges exist. It’s unclear as yet how the investment for the National Retraining Scheme will be allocated, and how much influence places will have on how it is implemented. And while the new investment for mathematical and digital skills – and the FE sector – is welcome, it is not nearly enough to deliver the resources and reforms that are urgently needed.
4. More regular business rates revaluation
Earlier this year we highlighted that the infrequent revaluation of business rates (with this year’s revaluation the first since 2010), was creating great volatility in the system and adversely affecting cities and businesses.
The Chancellor’s decision to introduce revaluations every three years is therefore a welcome move that will help prevent the major hikes to rates which some businesses faced this year. Ideally, these revaluations would take place annually to offer businesses and cities greater certainty and stability, alongside other reforms of the system – but today’s announcement is nonetheless a step in the right direction.
5. Greater tools for cities to make more of their assets and to leverage investment
As well as announcements on investment, the Chancellor also set out a number of significant new measures to help cities make the most of their assets, and to help them secure more investment for high value infrastructure projects.
For example, he revealed that the Government is working with Greater Manchester to explore funding transport improvements through mechanisms such as land value capture, and that Department for Communities and Local Government is launching a consultation on this issue, but once concluded its recommendations must become real tools for cities to use.
The Chancellor also announced that the Government will lend local authorities in England up to £1 billion at a new discounted interest rate to support major infrastructure projects. A bidding process for these loans will begin next month.
Both these measures are welcome in giving places more of the tools and opportunities they need to maximise their assets, and to get big infrastructure projects off the ground.
Watch this space for further analysis on the Budget in the coming days