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This year’s ‘resilient economy’ Budget was all about the ‘makers, doers and savers’, with big themes and some radical announcements around tax, childcare, pensions, savings and housing. The eye-catching smaller announcements ranged from halving tax on bingo halls and a 1p cut in beer duty to closing stamp duty loopholes and cutting the fuel duty rise: you can read some great summaries of the key announcements here and here.
So what was in this Budget for cities? A mix of fairly specific policies and more general high-level policies that will have an effect on different cities in different ways is the answer.
On specific policies, it was good to see that the Government Property Unit will work with local areas to make better use of assets, which we called for in our pre-Budget letter, as well as to see the continued focus on housing. Help to Buy equity loans (helping people with a 5 per cent deposit buy a new-build property) will now run until the end of the decade, and take-up has been largely outside the London market. The Government has also promised support for building more than 200,000 new homes, support for the development of Brent Cross and Barking Riverside, and a new Garden City in Ebbsfleet with 15,000 new homes. But I’d have liked to see measures that would help cities like Milton Keynes and Cambridge, who want to build new homes but struggle to fund the associated costs (schools, roads etc) of doing so because their funding for infrastructure does not rise with their population.
On infrastructure, beyond announcements about money for potholes (£200m) and floods (£140m), there were also various city-focused policies, including a £270m guarantee for the Mersey Gateway Bridge, an extension for the Regional Air Connectivity Fund to include start-up aid for new routes from regional airports and the Cambridge City Deal, where the Government is committing £100m to Greater Cambridge until 2019-20 to support their housing, transport and infrastructure proposals through a Gain Share mechanism. This is potentially worth up to £500 million over 15 to 20 years and helping to deliver an additional £1 billion of infrastructure investment (depending on how well the investments perform), and is a very welcome and innovative measure (although unlikely to be rolled out around the UK in the current climate of austerity).
The announcement of a three year extension of business rate discounts and extended capital allowances for Enterprise Zones will also have a direct impact on many cities, although it seems unlikely it will have an enormous impact on city economies. The small print in the OBR suggests take-up to date has been about 20 per cent of what was expected (£6m of an expected £30m spent), suggesting there’s a question about whether there is high demand for this support.
So what impact will some of the broader announcements have on cities? The five year cap on structural welfare spending, starting at £119bn and only rising in line with inflation, is likely to affect cities in quite different ways. Some critics argue that this is a ‘smoke and mirrors‘ announcement because of the lack of specific policies, while others are concerned about the effect on working families because of the inclusion of housing benefit and various tax credits in the cap. All agree that tough choices will need to be made, and the impact of many of these will fall on cities given that 84 per cent of the most deprived neighbourhoods are in English cities. This is particularly true for those cities where welfare spending makes up a large proportion of local economic spend (see the Centre’s analysis from 2011 on this).
Manufacturing was a theme woven all the way through the speech, with measures to support exports identified as helping to support northern and Scottish economies in particular. The Chancellor argued that doubters about manufacturing’s ability to create jobs should look to the States, where 5 million manufacturing jobs have been created. Manufacturing clearly matters to the UK economy, and Northern cities have a much higher proportion of jobs in manufacturing. But our research suggests it’s a mistake to focus too much on one sector: particularly one where net jobs are falling even in countries such as China and Germany.
Ultimately, however, it may be the announcement that the Welsh government will be given tax and borrowing powers to fund infrastructure needs (such as improvements to the M4) that is most interesting for cities, particularly those in England; it’s the kind of power that we have been calling for cities to have for years. That’s because if the Government wants to create more jobs, support building more houses, improve public services and improve wages and skills, then, as we argue in our campaign, it has to ‘Think Cities’ as part of its overall strategy. That means not only measures to help individuals across the country – which this Budget focused on a great deal, from children to pensioners – but also enabling cities to invest in the infrastructure, housing and skills that their local economies, and the individuals working and living there, could really benefit from.
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