Autumn Statement: Levelling up commitment cautiously welcomed by industry

The industry has been reassured by the chancellor’s promises to not strip away levelling up and infrastructure funding. In his Autumn Statement yesterday, Jeremy Hunt said: “Our national mission is to level up economic opportunity across the country. And that, too, needs investment in infrastructure. So I will proceed with round two of the Levelling Up Fund, at least matching the £1.7bn value of round one.” This came alongside a commitment to capital spending on vital infrastructure, as well as more money to make buildings more energy efficient. Patricia Moore, managing director at Turner & Townsend, said: “There will be a sense of relief today from those who feared cuts to capital spending. The chancellor’s commitment to a pipeline of much-needed rail and nuclear investment in particular brings certainty that can allow these schemes to continue in earnest. But the reality of inflation means that government departments will need to do more with less.” Infrastructure promises Jessica Bowles, director of strategy at Bruntwood, added: “It is good to see the commitment to continue to deliver on infrastructure promises including both Northern Powerhouse Rail and HS2 to Manchester. We have long made the argument that we need both.” Landsec CEO Mark Allan highlighted the fundamental issue. “We didn’t see sufficient commitment to provide fair funding to our partners in local government. I wrote to the chancellor and the levelling up secretary earlier this month highlighting how failure to act on these areas would limit both growth and the levelling up agenda.” He added: “The implication of the Office for Budget Responsibility report is that local government funding will be further squeezed. We hope that this is not the case and both local government funding and fundamental business rates reform are addressed in future updates to support the UK’s ambitions to increase growth across the whole country.” The spending cuts, though they have been largely postponed until after the general election, will be severe. In two years’ time, according to Hunt’s plan, capital spending by departments will have shrunk by £15bn a year, while day-to-day spending will be down by £20bn. Moore added: “Growth doesn’t need to be expensive, but it will fall to our industry to ensure that we are efficient and targeted despite the pressure on resources.” Simon Peacock, head of regions at JLL, was less optimistic. “With few initiatives to boost growth and a slower rise in capital spending, the public sector is going to find it much harder to play an active role in local regeneration projects. Cuts to budgets force government departments and local authorities to make really hard decisions that ultimately reduce the people and capacity available to deliver on growth and renewal in our regions.” And despite the promise to retain the level of funding for levelling-up projects, many may fall by the wayside anyway. As Tim Heatley, co-founder of Capital&Centric, said: “A major issue facing property and its role in the levelling-up agenda is viability and trying to keep inflation under control. We have seen examples in the last week of rocketing costs – and in particular fears of burdensome long-term running costs – killing off some levelling up projects.” He added: “That is a particular perfect storm that is going to affect communities beyond the South, where land values are already lower, viability is a challenge and every cost is rising month-on-month. It is down to local authorities to strike up partnerships with the development community and, together, revisit levelling-up aspirations to make sure that they still work against the vastly different economic climate and, secondly, are commercially viable in the long-term.” Planning under-resourced Victoria Du Croz, head of planning at law firm Forsters, said that while the commitment to levelling up was welcome, the underfunding of local authorities meant that this would inevitably be held back. Councils are set to receive below inflationary increases over the next two years, before falling further to just 1% real-terms increases from 2025. “Local authority planning teams are severely under-resourced, lacking both sufficient staff and budget to streamline processes,” she said. “Added to this, the planning system is long and protracted, making it difficult for developers to bring forward proposals with time and cost-certainty.” Melanie Leech, chief executive at the British Property Federation, added: “The lack of necessary investment in local authorities and continued uncertainty about planning reform are a fundamental risk for the government’s ambitions for levelling up and we hope Michael Gove will address this.” There was also a boon in the commitment to the Solvency II reforms, which will allow investors to put funds into a wider range of projects. Leech said: “The reforms of Solvency II have the potential to unlock further institutional investment, but we need to be bolder in creating new models for public-private partnership and investment if we are to deliver local infrastructure and transform town centres whilst tackling climate change. Devolution A commitment to further devolution was also seen as a positive move. “Over half of England will soon be covered by devolution deals with local mayors,” said Peter Hardy, partner and head of the living sector at Addleshaw Goddard. But again the detail of what is actually being offered is key. “Will they be given full planning powers and the cash to enable locally-led regeneration projects, or will these still come from central government? I am not sure the government understands the nuances between different local authorities. The mayors are tuned into local strategic needs and cultural points in a way that no central government minister can be,” he said. Alistair Watson, head of real estate at Taylor Wessing, agreed: “To get development done, ministers should focus less on ideology and look at funding and processes. We have digitalisation to embrace and to provide efficiencies and transparency, there are skills gaps that need to be filled. Whether government provides local authorities with more funding or allows the local authority to say ‘the planning performance agreement is there, sign it, front of the queue’ gets consistency of delivery. Changes to the way processes are regulated would make a huge different to the rate at which we can get development done.” To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews Photo by James Veysey/Shutterstock