Budget March 2020 Views

Here is our review of the Budget - produced by DTP Director Andy Gladwin:

So money would appear now to be no object. Ten years of austerity has been replaced by a government committed to spend, spend, spend. Whether it’s cash for day to day items or long-term investment, the country’s “new” Conservative government certainly appears to be of a very different hue to those led by David Cameron and George Osborne.  

 While the social housing sector will no doubt welcome much of this week’s budget, the devil still remains in the detail. I suppose all budgets are about promising jam tomorrow. But this one in particular felt as though there was a wide gap between what’s being promised, when it will be delivered and how it will be paid for. Certainly don’t expect to see the benefits of extra infrastructure spending in a hurry. For this reason a full and comprehensive judgement on all the budget’s measures will have to wait.

But what do we know now? What will give the sector grounds for optimism, and what will be cause for concern? And what was missing from Rishi Sunak’s first budget?

 Housebuilding and finance

 How much money the government will make available for affordable homes is always a headline grabber for the sector. And a multi-year settlement of ￡12 billion is certainly significant. It may well be “the largest cash investment in affordable housing in a decade” but it won’t be enough to build the amount of homes needed. Indeed, an amount close to this is probably needed every year rather than over the lifetime of this parliament.

 A couple of decisions around finance are also welcome. The Bank of England’s 0.5% base cut (not a budget measure obviously) and a 1% reduction in the cost of loans to councils via the Public Works Loan Fund may help kick start development. The latter of course will benefit councils rather than Registered Providers.

 Providers have been operating in a low interest environment for over a decade but further temporary reductions in the cost of borrowing will provide welcome assistance for registered providers as they plan how they will manage the impact of the Coronavirus pandemic.

 Conspicuous in its absence however was the subject of home ownership - and right to buy. Again we are seeing a marked shift from the Cameron/Osborne years where the emphasis was mostly on measures to boost private ownership.  

 More detail is needed on much of this from the government in the coming months. So, how will the ￡400m for development on brownfield sites be spent? Where will the ￡1.1 billion for the Housing Infrastructure Fund Go? While this does look like new funding, the original allocation drew criticism as it was skewed towards areas were affordability was an issue. This meant northern local authorities benefited less. Will this geographical basis of allocation be addressed with this next tranche of funding? Will the rhetoric of levelling up be matched by reality?

 Also, how will the planning system be reformed to boost housebuilding? Details on that are expected to come from the Housing Secretary soon.

 Measures to help tenants and employers

 Measures to help the low paid and people on benefits are of course of primary concern to those who provide affordable housing. And the chancellor did give some reasons to be cheerful for social housing tenants, whether they are working or rely wholly on the welfare state.

 For those in employment, rises in the National Living Wage and increases in the NI threshold are significant.

 At the same time, measures to help employers and small businesses in the wake of the Coronavirus are also good news for RPs. The government’s response to this was comprehensive, and although by their nature measures are temporary, they will help many RPs. Help around statutory sick pay should ease the burden, while the targeting of some measures at SMEs which employ less than 250 people will see many smaller RPs benefit.

 We are currently working with a number of RPs to ensure their business continuity plans are as robust as they can be. Coronavirus is a significant part of this and some clarity around the above issues in relation to sick pay will assist them with this process.

 Indeed, stress testing of business plans should now include the impact of a potential pandemic on cash flow and business continuity. RPs must start to think comprehensively about how they will weather the storm. And they will be looking for further assurances and support from the government beyond today’s budget measures.

 Infrastructure and flooding investment

 Increased spending on infrastructure and the government’s so called ‘levelling up’ agenda was a much anticipated element of the budget. ￡600 billion over this parliament is indeed a massive amount. But again, delivery is everything and many big ticket projects, especially around transport, will take years to come to fruition. Similarly, we will have to wait and see what additional funding for metropolitan mayors - including the new West Yorkshire mayoralty - will mean in reality.

 Measures to move 750 staff from the Treasury, business and trade departments to an economic campus in the north of England and long-term more than 22,000 civil service jobs out of London, could also have an impact. Just how significant an impact and over what time period remains to be seen. 

 Of perhaps more immediate concern are measures to prevent flooding and to help communities recently affected by severe winter storms. This is of great interest to many RPs especially those with a significant proportion of their homes in at risk areas who are often faced with exorbitant buildings insurance premiums. Flooding also hits tenants, many of whom cannot afford contents insurance, so investment targeted at flood defences to protect vulnerable communities is welcome. 

 Homelessness

 When it comes to tackling homelessness the government’s focus remains on the more visible rough sleeping element of the problem. The budget had an eye-catching announcement of a new ￡650million fund to pay for 6,000 new places for rough sleepers to live. The big question is whether this will be for short-term accommodation such as hostels or long-term permanent residences for homeless people.

 RPs will undoubtedly be on the frontline when it comes to delivering on this agenda but unless concerted action is taken to address the causes of homelessness (for too long put in a box marked “too difficult”) they will be limited in what they can do. Registered providers are constrained by the amount of housing they have and waiting lists which never seem to budge.

 The sector will be expecting more from the government than the measures announced in the budget, welcome though they are.

Building safety and green measures

 The budget’s new measures to tackle high rise building safety in the wake of the Grenfell tragedy were broadly welcomed by the sector. The government deserves credit for recognising that the problem of cladding goes far beyond Aluminium Composite Material - and for its commitment to provide the resources to deal with the problem (a ￡1 billion fund to remove all unsafe cladding from residential buildings above 18m). For RPs with high rise buildings who have been ineligible for ACM funding this will come as an immense relief.

 When it came to improving housing’s green credentials, the budget was less impressive. In fact, I heard nothing in the Chancellor’s speech which even acknowledged this as an issue.

 Being a government which “gets it done” on the environment didn’t seem to include the built environment at all. So, if RPs are to make their homes net zero carbon in the next few decades they will need resources and a plan from government for how it will improve existing housing stock. In 2050, 80 per cent of the country’s homes will be houses that are already built. A strategy for funding the retrofitting of existing buildings is therefore critical.

 The road ahead

 In the short-term, much will depend on how the Coronavirus develops, and further action may be needed from the Chancellor to stave off the economic impact. The government anticipates its effects will be significant but temporary - and yesterday the chancellor promised to do whatever was necessary to support the economy.

 Meanwhile, the sector will be awaiting clarity on many of the measures mentioned above. In some areas (reform of planning policy for example) we can expect detail sooner rather than later.

 In other areas, social care for example, the Chancellor’s failure to mention the subject is a cause for concern. Indeed, while health was rightly front and centre stage in discussions on the Coronavirus, the impact on social care was forgotten. Nor did the Chancellor provide any detail on the government’s long-term plans for social care policy or funding. 

 Overall, the budget may have provided some welcome news for the social housing sector. Many questions, however, remain unanswered. Perhaps our second budget of the year in the autumn might provide some answers.