Invest to drive productivity – Reaction to the Autumn Statement

Houses of Parliament graphic

23 November 2016

The economic context for the Autumn Statement was one of significantly downrated Office of Budget Responsibility growth forecasts linked to expected lower levels of investment and consumer demand in the coming years. Balancing the budget deficit was also kicked into the long grass, with a commitment to balance the books in the next Parliament. In this context there were tough choices to make in terms of expenditure commitments.

The Autumn Statement was prefaced by a rallying call from the Chancellor:

“We choose to prioritise additional high value investment that will contribute to raising Britain’s productivity”

 

It was clear from this opening statement, and the expenditure announcements that followed, that this was a budget informed by the concept of getting a return on investment. The Chancellor’s focus was clearly on supporting delivery of the infrastructure which supports a productive economy, including delivering the housing that Britain needs.  

Developing a more flexible planning system is one aspect of the Government’s commitment to driving up productivity, but no details of how this will be done were revealed today. Reformed planning sits alongside promoting investment in innovation and infrastructure and developing a skilled workforce.

There was welcome news of capital investment to accelerate construction of the East-West Rail line western section and a commitment to the Oxford-Cambridge Expressway.  

Elsewhere there was a focus on measures for the regions with the Chancellor stating that economic growth is “…too concentrated in London and the South East.” The Northern Powerhouse Strategy for addressing productivity barriers was launched. A similar strategy for the Midlands Engine will also be developed, alongside the Government’s commitments to fund a feasibility study for the Midlands Rail hub. The Chancellor commended the Autumn Statement as providing for infrastructure investment in all regions.

The Government has stated its commitment to devolving powers to support local areas where this addresses barriers to productivity.

Housing received the largest single allocation of new spending with £7.2bn set aside to support the construction of new homes. The Government restated its commitment to getting Britain building, however the Autumn Statement remains light on the detail of how this will be done. The commitments to deliver 40,000 new affordable homes and the Housing Infrastructure Fund fall far short of what is required to boost the supply of land significantly to address the housing crisis.

The Autumn Statement 2016 provides no details of reforms to planning to make it more flexible or to support the delivery of new homes. 

The Chancellor promised a Housing White Paper “in due course” which would set out a comprehensive package of reform to increase housing supply and halt the decline in housing affordability. 

In our view this is more urgent than the Chancellor appears to think it is. The Housing White Paper needs to leave Gavin Barwell MP’s in-tray quickly and start to help to address the nation’s housing challenge.

In summary, whilst the Autumn Statement maintains housing and infrastructure at the top of the Government’s agenda, the detail of implementing a more flexible planning system and addressing the housing “challenge” (downrated from a “crisis”!) has been left for another day. We have high expectations of the Housing White Paper.