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Budget 2018: A development & infrastructure view

November 12, 2018

By Keith Mitchell

Whatever your views on Monday's Budget its clear it contained a lot of announcements that will influence the pace and direction of development and infrastructure improvement

Future High Streets Fund: Most notable of the Budget’s announcements from PBA’s perspective was a long awaited announcement aimed at bringing practical help to the UK’s High Streets. The £675 million Future High Streets Fund is aimed at supporting investment in town centre infrastructure, including to increase access to high streets and support redevelopment and densification around high streets. It will include £55 million for heritage-based regeneration.

PBA has long been an advocate of the role of infrastructure improvements to stimulate growth and add value for both communities and investors. However, the problems of the high street are systemic and ingrained, and need multi-faceted responses. So the accompanying announcements about business rate relief, and the role of a High Streets Task Force in disseminating good practice are very welcome.

One area of good practice that seems to be on the minds of policy makers is how to address the issue of fragmented ownership. We have been raising this issue as one of the more intractable barriers to reinventing the High Street for many years. Our report, Town Centre Investment Management, caused a great deal of interest from retailers and investors at the time, and became an integral part of the policy discussion.

We were therefore delighted to see the announcement of the Future High Streets Fund, and the direct reference this makes to our work for the British Property Federation about Town Centre Investment Zones. We are firmly of the view that there are solutions to the problems of the high street, but it will need a determined approach to the tackling the underlying problems, and finding a new role for each town centres based around local needs.

Other announcements included support for transport projects, including £25.3BN for the second Roads Investment Strategy (to be funded from the National Roads Fund); allocation of £150M of the National Productivity Investment Fund to Local Authorities for small transport improvements, and continuation of the Transforming Cities Fund into 2022/23 to support transport projects in core cities, including the creation of New Mobility Zones to test new technology. With smart mobility being a key plank of the UK’s Industrial Strategy, are we moving fast enough to get ahead of the game? Our new North American colleagues from Stantec seem to be deeply involved in trialling new transport technologies in the USA, and there is no doubt that other countries are taking this very seriously indeed.

There was also continuing support for housing and regional projects. The Housing & Infrastructure Fund will be extended by £500M, with the aim of unlocking 650,000 homes. There is also support for house building SME’s and housing associations, and abolition of the Housing Revenue Account cap to allow local authorities to become more active in the market, as efforts continue to broaden the mix of housing delivery.

Despite Chris Grayling’s seeming uncertainty about HS2 north of Birmingham, there was £37M funding to ensure that HS2 infrastructure can connect to Northern Powerhouse and Midlands Engine rail services. There was also a further £20 million to develop a strategic outline business case for the East-West railway from Cambridge to Oxford, and support for a study to develop options for a Great Thames Park. So even as HS2 is put under the spotlight, central government support for regional projects seems undimmed, for now.

Tucked away here though were expected proposals to reform Community Infrastructure Levy to introduce a Strategic Infrastructure Levy, and to remove restrictions on Section 106 pooling towards a single piece of infrastructure. As ever, this is a complicated area of policy, and no doubt there will be more unintended consequences of these policies – but they do seem to be moving in generally the right direction.

Here are our Development & Infrastructure Budget Headlines:

Measures to help the High Street attracted a lot of headlines:

  • A £675 million Future High Streets Fund.
  • Consultation on new permitted development rights that make it easier to establish new mixed use business models on the high street.
  • A register of empty shops with selected local authorities, and trial a brokerage service to connect community groups to empty shops.
  • A High Streets Taskforce to disseminate best practice among local leaders.
  • A one-third reduction in business rates for retail properties with a rateable value below £51,000, benefiting up to 90% of retail properties, for 2 years from April 2019.
  • 100% business rates relief for all public lavatories.

The Budget set out future plans and funding for roads:

  • The National Roads Fund will be £28.8 billion between 2020-25.
  • The draft Roads Investment Strategy 2 was announced. The government expects to spend £25.3 billion on this strategy, funded by the National Roads Fund, between 2020-25.
  • To support projects across England that ease congestion on local routes, the government will make £150 million of National Productivity Investment Fund (NPIF) funding available to local authorities for small improvement projects such as roundabouts.
  • The Transforming Cities Fund is being extended by a year to 2022-23. This will provide an extra £240 million to the six metro mayors for transport investment in their areas. A further £440 million will be made available to the twelve city regions shortlisted for competitive funding.
  • £90 million from the Transforming Cities Fund will be used to create Future Mobility Zones. This will trial new transport modes, services, and digital payments and ticketing. £20 million of this will be allocated to the West Midlands.

The Budget provided more funding and initiatives to support the government's house building commitment:

  • £291 million to unlock 18,000 new homes in East London through improvements to the Docklands Light Railway
  • A new British Business Bank scheme to provide guarantees to support up to £1 billion of lending to SME housebuilders
  • £653 million to 2021-22 for strategic partnerships with nine housing associations to deliver over 13,000 homes • £75 million from the Home Building Fund for St Modwen plc, to fund infrastructure to build over 13,000 new homes
  • The Housing Revenue Account cap that controls local authority borrowing for house building will be abolished from 29 October 2018 in England, enabling councils to increase house building to around 10,000 homes per year. The Welsh Government is taking immediate steps to lift the cap in Wales.
  • The Housing Infrastructure Fund will increase by £500 million to a total £5.5 billion, unlocking up to 650,000 new homes
  • The government will honour any Help to Buy Equity Loan funding commitments made to sites with existing outline planning permission, regardless of any new planning policy on differentiation.
  • A consultation on new permitted development rights to allow upwards extensions above commercial premises and residential properties, including blocks of flats, and to allow commercial buildings to be demolished and replaced with homes.
  • Developer contributions reforms include simplifying the process for setting a higher zonal Community Infrastructure Levy in areas of high land value uplift, and removing all restrictions on Section 106 pooling towards a single piece of infrastructure. The government will also introduce a Strategic Infrastructure Tariff for Combined Authorities and joint planning committees with strategic planning powers.
  • The government will make £10 million capacity funding available to support ambitious housing deals with authorities in areas of high housing demand to deliver above their Local Housing Need
  • A new Help to Buy Equity Loan scheme will run for 2 years before closing in March 2023. The new scheme will be available for first-time buyers only, and for houses with a market value up to new regional property price caps. The government does not intend to introduce a further Help to Buy Equity Loan scheme after March 2023.
  • £8.5 million of resource support so that up to 500 parishes can allocate or permission land for homes sold at a discount. The government will also explore how it can empower neighbourhood groups to offer these homes first to people with a direct connection to the local area.
  • Five local authorities have been successful in the first round of applications for access to a local infrastructure rate to support infrastructure projects that are high value for money. Calderdale, Luton, St Helens, Transport for London and the West Midlands Combined Authority will be able to borrow a total of £275 million at the new discounted interest rate of gilts +60 basis points.
  • Consultation on the legal framework for Development Corporations and a £10 million competitive fund, to enable local areas to generate locally-led proposals for new business backed Development Corporations and similar delivery bodies.
  • £165 million investment to support the Commonwealth Games Athletes’ Village, which will unlock 5,000 new homes in the area after the Games.

Key regional projects received some help from the Budget:

  • A further £37 million to ensure HS2 infrastructure can accommodate future potential Northern Powerhouse Rail and Midlands Engine Rail services.
  • A Special Economic Area covering the South Tees Development Corporation (STDC) site and up to £14 million in funding for the STDC. Designation of the site as a Special Economic Area would allow for the local retention of additional business rates growth.
  • A further £20 million to develop a strategic outline business case for the East-West railway from Cambridge to Oxford.
  • Drawing on the Thames Estuary Commission report, the government is supporting a study to develop options and consult the local area on a Great Thames Park.
  • The government is considering the recommendations of the Independent Affordability Review of Crossrail 2, and will consider the case for the project at the Spending Review.
  • £150 million for a Tay Cities Deal and negotiations for a Moray Growth Deal and growth deals for Ayrshire and the Borderlands.
  • £120 million for a North Wales Growth Deal and negotiations for a Mid Wales Growth Deal.
  • £350 million for a Belfast City Region Deal, and negotiations for a Derry/Londonderry and Strabane City Region Deal.

Plans for a nationwide full fibre network by 2033 are being ramped up:

  • £200 million to pilot innovative approaches to deploying full fibre internet in rural locations, starting with primary schools, and with a voucher scheme for homes and businesses nearby. The first wave of this will include the Borderlands, Cornwall, and the Welsh Valleys
  • Consultation on mandating gigabit-capable connections to new build homes and speeding up the delivery of upgraded connections to tenants. The aim is to make it quicker and easier for communications providers to roll out full fibre networks
  • Suffolk is the first local area to be awarded £5.9 million of funding from the third wave of the Local Full Fibre Networks challenge fund, enabling next-generation full fibre connections to key public buildings.

Originally published by PBA, now Stantec.

  • Keith Mitchell

    Keith provides strategic advice relating to major infrastructure planning and transport decarbonisation. He has worked on a wide range of national infrastructure and planning projects in the UK, as well as in the European Union and Australia.

    Contact Keith
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