Tiffany Cloynes 27 November 2015

Driving the devolution revolution

George Osborne has announced that the Government would deliver a 'devolution revolution by returning power to the UK’s nations, cities and councils'.

This would be achieved through 'rebalancing our economy, giving people greater control' by:

• Enabling local government to be 'self-sufficient' by the end of the Parliament by paving the way for 100% business rates retention by 2020
• Giving councils the power to cut business rates to boost growth
• Further empowering elected city wide mayors – ability to impose an infrastructure levy of 2p on business rates if companies agree
• Enabling councils to retain 100% of receipts (excluding right to buy receipts) from the sale of assets subject to conditions to be announced in December
• Allowing councils to increase taxes by 2% to pay for rising social care costs
• Significant transport powers devolving to Greater Manchester and the City Regions
• Publishing new guidance for best practice on property disposals by Budget 2016
• 18 new Enterprise Zones and extending three others
£12bn Local Grant Funding to replace the regional growth fund

However this is to be balanced against the loss of £18bn grant across councils in England.

The shift from grant support to the generation of revenue from rates from the private sector and the sale of assets is a fundamental shift predicated on the willingness of the private sector to invest which, particularly in the poorest areas, presents an even greater challenge.

Notwithstanding this, Mr Osborne claimed to be making the biggest effort in 50 years to close the North-South divide including £150m for oyster style ticketing, £15m to support trade missions and £5m for the Midlands.

Osborne positions Government as builders

The shrinking of the state and a greater role of the private sector is seen very clearly in the government’s announcements on housing.

Linking home ownership with the aspirations of working people, the chancellor made a number of key announcements regarding housing, some new, some not so new.

Attempting to address problems in supply, a new target of 400,000 new homes by 2020 has been set, backed-up by a doubling of the housing budget available to private developers to over £2bn a year. Osborne hailed this as part of the biggest government house-building programme since the 1970s, with half ear-marked for young first time buyers who will enjoy 20% off market value. Increased building activity might have positive impacts on levels of employment and numbers of apprenticeships within the construction sector and more widely.

Any Government target for new homes is susceptible to change and it remains to be seen how the blockages which have proved so resilient for many years will be removed in this Parliament.

A few pointers were given by the chancellor but will further reforms to the planning system, the re-designation of unused commercial land and the release of more former public sector land be enough to boost supply?

Existing initiatives/programmes involving the sale of publicly-owned land – such as One Public Estate – are supplemented by further announcements regarding the sale of former prisons to create more space for new housing and releasing enough public land for 160,000 homes. Good progress has been made since 2010 in identifying surplus land and selling it off for housing or to boost economic growth. Now is the time to build on this and quicken the pace.

Buy-to-letters and second home owners were singled out for Government attention. Stamp Duty Land Tax changes to take effect from April next year, will mean new higher rates of tax will be levied – a hike of 3% on normal rates. This is a very significant announcement and implementation will require careful consultation with the sector. Critics are already suggesting that this might have a chilling effect on the market, as it might reduce the supply of much needed housing for rent and might adversely impact on tenants as landlords seek to offset these costs.

A pilot will allow tenants of five housing associations to begin the process of acquiring their own property. This builds on the extension of the Right to Buy for social tenants announced in the Conservative manifesto earlier this year. Further announcements will be made but we know that the five housing associations are L&Q, Riverside, Saffron, Sovereign and Thames Valley.

Tiffany Cloynes is head of public services (England) at Geldards LLP

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