London First responds to Autumn StatementDecember 3, 2014
Responding to today’s Autumn statement and yesterday’s National Infrastructure Plan, Baroness Jo Valentine, Chief Executive of London First, said there were some notable positives for London .
“We welcome the investments announced for the Barking Riverside Overground extension, the support for Crossrail 2, as well as the additional investment in house building projects,” she said.
“The move away from ‘slab rates’ of Stamp Duty is also a very welcome reform that we have long called for.
“But the fact remains that the vast majority of those who will pay more will be in London, where there is a greater proportion of homes valued over £1 million – many of which are flats and modest family homes,” she added.
“To make these reforms work for London, the Chancellor should go further and implement the recommendation of the Mayor’s 2013 London Finance Commission, which recommended that Stamp Duty – along with other property taxes – should be devolved to the London government.
“This would give local leaders the certainty, stability, and accountability they need to take on the big challenges the capital faces, like housing shortages and strains on transport infrastructure.”
Impact on London
• Confirmation of support for Barking Riverside Overground extension
We strongly welcome the news of a £55m loan to support the extension of the Overground to Barking Riverside. This will support the development of the brownfield site that is London’s largest regeneration scheme and will help deliver nearly 11,000 homes and support 2,500 permanent jobs. Developments of this size and nature, supported by rail infrastructure, were a key recommendation in our Home Truths report, which called for new suburbs to be created in London.
• £2m further support for Crossrail 2 business case
The Government has confirmed an additional £2m of funding to be used to prepare a full business case for Crossrail 2, “a serious analysis of potential costs and timescales, to be ready ahead of the Spending Review in the autumn next year”, according to Mr Osborne. Crossrail 2 will be crucial in supplying extra transport capacity for London’s rapidly growing population. This high-capacity rail line running through London and into Surrey and Hertfordshire would also boost economic regeneration by supporting the development of up to 200,000 new homes, as well as thousands of new jobs. In the Chancellor’s words: “Now we need to look at how to get the idea off the page and into construction”. We will continue to make the case for investment in essential new schemes like Crossrail 2 in the lead up to the next Spending Review.
• Stamp duty
The Chancellor has announced stamp duty reforms on residential property that will see us move from a ‘slab rate’ to only paying the rate of tax on the part of the property within each tax band – like income tax. This is a very welcome reform that we have long called for.
However he has also adjusted the marginal rates. The result is that on £510,000 – the price of the average London home – this will result in a saving of £4,900. However, above £937,000 stamp duty starts getting more expensive than before. At £2.1m this results in an increase in tax of £18,750.
The move away from ‘slab rates’ of stamp duty is a very welcome reform that we have long called for, but the fact remains the vast majority of those who will pay more will be in London where there is a greater proportion of homes valued over £1 million, many of which are flats and modest family homes.
To make these reforms work for London, the Chancellor should go further and implement the recommendation of the Mayor’s 2013 London Finance Commission, which recommended that Stamp Duty – along with other property taxes – should be devolved to the London government. This would give local leaders the certainty, stability, and accountability they need to take on the big challenges the capital faces, like housing shortages and strains on transport infrastructure.
• Building houses
With annual house-building running at half the rate we need, London has a severe housing shortage. To this end, on top of the projects above, we welcome:
– the £150m of funding that the Government has earmarked for spending on regeneration work across four major housing estates in the capital. Estates in Southwark, Barnet, and two in Tower Hamlets should greatly benefit from the 8,000 new homes that will be created – an increase of 3,000 on the current total – across the four projects;
– the 7,500 new homes planned as part of the redevelopment of Brent Cross;
– the release of £100m to fund infrastructure and land remediation at Ebbsfleet, as well as a review of transport provision for the area, which could deliver up to 15,000 new homes.
However, London’s chronic housing shortage requires bolder steps by central government if we are going to avoid a full blown crisis. We have called on the government to take three key steps; these are:
– Giving greater powers to the Mayor so he can set tougher requirements for London boroughs;
– Giving the Mayor power to lead on identifying and disposing of strategic sites owned by the public sector that are surplus to requirements;
– Allowing London councils to invest in housing by scrapping the arbitrary restrictions placed on local authorities’ Housing Revenue Accounts.
• Review of Business Rates:
We welcome the Chancellor’s decision to review business rates, which are an increasingly distorting and dysfunctional tax. The fact they go up with inflation every year – no matter how well the economy or a business is doing – coupled with changes in how businesses work in the digital age, means they need to be reviewed and restructured. It is wrong that an online business with high turnover, high margins and low property costs, can pay far less than a company with lower turnover and lower profits, but which has, say, a big presence on the high street.
One of the big challenges following the success of the Olympics was to ensure that, with austerity looming large, the battle for the legacy of the Games was won as the memory of the Games faded. We therefore welcome the £141m of Treasury investment in the so-called “Olympicopolis” scheme, which will create a new higher education and cultural quarter at the Queen Elizabeth Olympic Park. It is expected to deliver 3,000 jobs, attract 1.5 million extra visitors to the capital and generate £2.8 billion of economic value to Stratford and the surrounding area through the creation of a new Sadler’s Wells dance theatre, a world-class V&A museum and exhibition space, as well as two university campuses that are dedicated to arts, design and engineering.
The Chancellor had welcome news for Northern Ireland and Wales with work set to begin on devolving corporation tax setting powers to Northern Ireland and an agreement with the Welsh Government on the full devolution of business rates, as well as discussions on further powers due next March. This follows the announcement of the Smith Commission, which will see more powers devolved to Scotland.
London has a bigger economy than these three countries put together and it is time more powers were devolved to London government. We support the London Finance Commission’s recommendation that property taxes, such as stamp duty, be handed to London government.
Further devolution would offer certainty, stability, and accountability to local leaders and could be instrumental in ensuring London’s future success, particularly in terms of housing and infrastructure.