Keeping our capital working for the UK

What the budget means for London business: our round-up

This year’s Budget committed to “build a Britain fit for all”, with the Chancellor pledging to deliver on the PM’s pledge to tackle the housing crisis and hailing the economy as one that “continues to confound those who seek to talk it down”.

And it will be important to examine gaps between planning permissions and housing starts, which is exactly what our Fifty Thousand Homes campaign has highlighted. Our ‘Scores on the Doors’ data found that over one in three homes (36%) are not built after planning permission is granted, exacerbating the huge challenge London faces.

London needs to significantly increase housebuilding to attract and retain the people it needs to remain globally competitive post-Brexit. The Mayor’s new London Plan which is set to be published at the end of the month, will increase London’s housebuilding target to 66,000 new homes every year, but our own data shows that we haven’t built more than 24,000 homes in any year over the past decade.

The Budget’s housing announcements are, in general, a welcome first step in the right direction to increasing supply in the capital. Of note is the £15.3 billion of new financial support available for housing over the next five years. This, however, only amounts to £3 billion of additional funding across the country each year, which means thousands of additional new homes each year, not the tens of thousands we’ve been promised. Other encouraging announcements include the lifting of borrowing caps – the so-called Housing Revenue Account – for councils in areas of high affordability pressure, and further loan funding for estate regeneration and the exploration of the new guarantees to support housebuilding. The government must remain focused on freeing up land and making the best use of it, and the Mayor must use the full weight of his powers and influence to bring more land forward for development.

A range of planning measures were announced, but the government has not heeded calls to review green belt policy. Changes to Community Infrastructure Levy (CIL) are proposed, including a consultation looking into speeding up the process of setting and revising the levy. It will also consider allowing some councils to introduce an additional Mayoral type CIL for major infrastructure and new CIL rates to reflect land value uplift for a change of use. While these measures address some of our members’ key asks, they do not go far enough to reduce complexity or address the impact of the current CIL regime on viability and affordable housing delivery in many parts of London.

Skills shortages are a top concern for business, and the £406m for maths and technical education is welcome. Business would like to see a similar investment in soft skills and careers education, areas where our Skills Commission has identified poor performance affecting productivity and growth. The launch of a National Retraining Scheme is also a positive step. £34 million has been pledged towards addressing construction skills shortage, an area of particular concern for business. London’s construction sector currently employs some 300,000 people, half of which are overseas workers. With restrictions to expected migration post-Brexit, it is crucial that the government works closely with business to see these announcements through. Business is committed to playing a full role in developing its workforce, and our Skills Commission is bringing a strong business voice to the table.

And, hidden away deep in the Budget paper, are two commitments we’ve long been calling for: the government will make it easier for skilled students to apply for work in the UK post-study, and scientists and valuable researchers will be wooed by a series of important changes to the immigration rules. We heartily welcome this move and will work with government to ensure London benefits from these changes.

An extra £3 billion is being set aside for Brexit contingency planning, but interestingly the new OBR economic forecasts make no attempt to factor in the current uncertainty of the Brexit negotiations. Rather, it assumes an orderly Brexit and no cliff-edge. Our survey of over 1,000 businesses found that two-thirds need a transition deal in place by the summer of 2018. The government must make sure that it secures this deal without delay to provide certainty for the 54% of businesses that have been putting off vital decisions on investment and recruitment.

London business will also welcome the Chancellor’s explicit commitment to work with TfL on the funding and financing of Crossrail 2. This will continue to be a priority area of work for us over the coming months. Looking more broadly, the planned £1.7 billion of investment in transport across English cities represents a positive step in the right direction in addressing regional imbalances in transport investment. Cities across the country must put across a strong joined-up message to government that better cooperation and connectivity is critical to retaining our post-Brexit competitiveness.

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Waiting with bated breath for CIL reform

Sara Parkinson, Programme Director, London First

With the arrival of Budget day, the development and planning sector will be keen to see the government make a firm commitment to review the planning gain system comprising Community Infrastructure Levy (CIL) and Section 106.

Following calls from the industry in the past decade, the CIL regime was introduced in 2010 with the aim of simplifying the planning process,  enabling local planning authorities to set a fixed, non-negotiable charge or a planning tax for each square metre of new development floor space created.

This was intended to create a faster, fairer, more certain and transparent means of collecting developer contributions to infrastructure. This meant individually-negotiated Section 106 planning obligations would be scaled back significantly, and generally only used for affordable housing or site specific improvements.

In setting CIL, the local authority can vary the  charge for different types of development (for example housing, office, retail) and for location (for example where land values will support a higher charge).

The charges are index linked for the period from publication of the local authority’s schedule of charges up to the date the planning permission is granted and are payable upon commencement of development.

In 2012 the London Borough of Redbridge introduced the first London CIL and was followed shortly by Mayoral CIL, a London-wide CIL to fund Crossrail. More London boroughs followed suit, with  varying charges. Far from being simple, the CIL process was fraught with problems including complex regulations and difficulty in calculating the rates.

In areas where CIL rates are high, there has been an impact on viability which has created tension with the delivery of affordable housing,  a priority for London and the UK.

Despite amendments to the CIL regulations every year since 2010 (apart from last year), the CIL regime is still not operating efficiently. This was acknowledged by the Government in November 2015, and an independent review, led by Liz Peace CBE, was established. The Review Panel’s report was finally published alongside the Housing White Paper at the end of 2016.

London First supports the simplification of CIL and, in principle, a low flat rate, and have setup a working group to test the reviews recommendations and how they can be applied in London. A  short paper has been prepared, which was discussed with the Department of Communities and Local Government.

Put simply, we have found that the proposed methodology for calculating the local infrastructure tariff (LIT) on a range of development types (using development projects that are either complete or in the pipeline) in London would increase the scale of the charges, in some cases by a factor of 5 or 6.

Whilst we are not expecting a specific mention of CIL in the Chancellor’s statement – we are hopeful that we will see a firm commitment to CIL reform within the budget papers and a consultation on the detailed reforms to follow.  Following many years of lobbying, it is about time that this conservative government addresses the fundamental issues in the planning gain process that are impeding housing and affordable housing delivery.

 

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Will the new London Plan deliver for London?

Sara Parkinson, Programme Director, London First

For the first time in almost a decade, a new London Plan will be published for consultation on 29 November.  The Plan will set out the Mayor’s strategic policies to guide development and growth in the capital, and also set the framework for determining planning applications.  This is one of the most significant milestones for Sadiq Khan.

Since the last administration London First has been influencing and informing the GLA’s plan using evidence from member consultation. Over the past 18 months we’ve continued this work with Sadiq’s team, drawing up ‘key asks’ on the most important issues for London including housing and economic development.

London is not delivering enough homes and is falling far short of meeting its annual housing target. The most crucial role for the Plan is to set out the scale and areas of growth expected in the capital and provide a clear framework for how this will be delivered.

The new Plan should set an expectation for all boroughs to be pro-growth, meeting both their own housing need and contributing towards pan-London housing need. It should be clear that boroughs will not be able to ‘opt out’ of growth. It’s important the Plan outlines how outer London boroughs will be expected to significantly increase housing delivery, addressing constraints to land supply through its more detailed policies.  For example, on increased densities; industrial land consolidation, co-location and bottom up reviews of Green Belt.

As the density matrix is being scrapped and boroughs will be required to identify locations for tall buildings, the Mayor must take a firmer stance with boroughs. It’s vital he sets out how he will use his planning powers, and intervene where required, to ensure boroughs deliver effective density borough wide, not just in one chosen location.

We understand the new Plan’s policies will push for even greater densification and making the best use of land. This includes new policies that will push the boundaries of mixed use development, consolidating and intensifying existing uses such as retail, office space and industrial land promoting co-location with residential.

Whilst we welcome this, it’s only part of the solution for delivering the homes and jobs London needs. Borough led green belt reviews, subject to robust evidence, are essential to unlock land for new homes and business growth, tapping into opportunities from major infrastructure projects like the Bakerloo line extension, Heathrow expansion and Crossrail 2.

It’s also essential the new Plan supports and encourages economic growth to create new jobs and deliver the services London needs across retail, leisure, office and industry. We have set out how the plan and its policies should enable this.

Our work on influencing and shaping the plan will continue through the consultation period ending 4 March and throughout 2018 towards the Examination in Public.

If you would like more insight on the plan and its implications or would like to be more actively involved, please get in touch with Sara Parkinson.

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London’s Housing Crisis – how business can intervene

Natasha Ryan, Campaigns Manager

I attended an event last week hosted by the Cabinet Office Business Partnerships Team and the Whitehall & Industry Group, with London First and employers Deloitte, Starbucks and Golin sharing how they have implemented policies to help their employees in the private rented sector. My colleague Naomi Smith, Executive Director of Campaigns spoke to businesses and Government about initiatives alleviating housing costs for employees.

As recognised by our Fifty Thousand Homes campaign, average monthly rents have soared to £1,714. Shockingly, 20% of Londoners surveyed have had to borrow to cover their deposit, and 58% of private renters in work have struggled to pay rent. Employers are feeling the effects: 7 in 10 report that they are concerned about the impact of London’s housing costs on their staff recruitment and retention.

In tackling the difficulty posed by the housing crisis, Deloitte outlined their offer to graduates of discounted rental accommodation and Golin provide interns with free accommodation for the duration of their internship. Starbucks have recently extended their Home Sweet Loan tenancy deposit loan to employees who have been in employment with Starbucks for six months (previously a year), and plans to offer the scheme to all employees are underway.

Employers wanting to take action to assist their staff can sign our Employer Housing Pledges, introducing a range of initiatives, such as paying the London Living Wage, offering a season ticket loan, offering housing advice and the tenancy deposit scheme or a different financial initiative. Signing is free, and signatories include Heathrow Airport, Westfield, Arup and many more, covering 130,000 working Londoners. For more information, please contact nryan@londonfirst.co.uk.

The following companies were represented at the event:

DCLG, HMRC, Legal & General, EY, Lloyds Banking Group, KPMG, GLA, Young Foundation, Westminster City Council, Centrica, RICS, CBI, BEIS, Simmons&Simmons, Lush, UK Export Finance, Nationwide, Kingfisher, DexEU, Capgemini, XSH, Mill Group

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Every budget is difficult

John Dickie, Director of Strategy and Policy, London First

Every budget is difficult. Chancellors seldom have enough cash to meet the combined needs of the spending departments, let alone the demands from their stakeholders. But this budget will be particularly difficult.

First, there is going to be less money than had been thought. The Office for Budget Responsibility’s predicted £26bn of headroom in 2020-2021 is likely to come down substantially given the very poor recent productivity performance.

And demand for greater public spending is growing after seven years of austerity.  Take but three areas that resonate strongly with Conservative MPs, many of whom are feeling rather bruised after this year’s election. The political pressure to lift the 1% cap on public sector pay across the board is growing.  Canvassing public sector workers who have seen their real incomes fall is never pleasant.  Similar pressures come from the NHS, struggling to cope with a growing, and ageing population. And one of the reasons that Universal Credit’s roll-out is creating political problems for the government is that it is being done on the cheap.

So, not a lot of room for manoeuvre. And the budget won’t even be the most important fiscal event before Christmas. That will be the European Council which may – or may not – see progress towards a transitional deal, which will have more impact on the economy than some budget tinkering.

Given this, what would London business like from the Chancellor?

First of all, we’d like him to set out how the government will make an economic success from Brexit. We have two years to get London, and the UK, into the best possible shape for Brexit and the government must start making decisions now.

We’re not expecting an announcement on Crossrail 2 next week, as it’s not a budget issue, but a positive mention for this vital scheme is always welcome.  The next step here is for the Department of Transport to begin the consultation on the route so that it can be done before the local elections in May.

There isn’t the cash for big tax cuts: but cutting the increase in business rates would be welcome.

And as for new spending, one comprehensive deal the government could agree on is housing: not just more public investment (which is desperately needed) but also improving skills provision; reforming regulation, so that the parts of the greenbelt which offer no civic or environmental benefit can house our growing urban populations; and reforming property taxes, particularly the high levels of stamp duty which discourages people from moving home.  Achieving this through greater devolution to England’s city-regions, so they can tailor the precise details to meet local needs, would be particularly welcome.

Fundamentally, the Government can’t lose sight of what it stands to gain by taking action. If we get this right and grow our economy just 1% faster, London will generate an extra £146bn, helping to create further growth and benefitting the whole of the UK

 

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