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What does the Spending Review mean for London?

The Chancellor announced a £20 billion investment in housing over the Spending Review period. This will fund the delivery of 400,000 affordable homes by 2020-21, with a focus on low cost home ownership, including 200,000 Starter Homes which will be sold at a 20% discount for young first-time buyers.

Other announcements include:

  • A London Help to Buy scheme in recognition of the higher housing costs in the capital. The scheme will offer buyers with a 5% deposit a loan of up to 40% of the value of a new build home, interest-free for 5 years.
  • Higher rates of Stamp Duty will be charged on purchases, such as buy to let properties and second homes, with effect from 1 April 2016. The higher rates will be 3% above the current rates.
  • The Department for Transport will release public sector land creating space to build 38,000 homes.

Will Higham, Director of Campaigns at London First, said:

“Of course it’s good that the Chancellor wants to increase housebuilding. But these measures simply don’t go far enough. We need to double housebuilding in the capital, so that we deliver a minimum of 50,000 new homes each and every year.
                                            
“The impact of increased stamp duty on second homes will have some effect. The London Help to Buy helps on the demand side, but the root of London’s problem lack of supply. There’s so much more unused NHS and other public land that the government ought now to be using to create new homes, which could give a significant help to those in London struggling to find a home that’s actually affordable.”

Find out more about our business-led housing campaign group, Fifty Thousand Homes, set up to double housebuilding in London to at least 50,000 homes a year by 2020.

Transport

Our Director of Infrastructure, David Leam, has been on BBC TV discussing what the Spending Review means for transport.

Transport for London grant 

The key piece of good news for London is the continued support for Transport for London’s (TfL) investment programme through to the end of the decade. The £11 billion deal agreed with Government will allow TfL to continue to modernise and improve London’s Tube, rail and road networks – and was our main lobbying priority.

We will now engage with TfL, the mayor and mayoral candidates to ensure this headline deal is translated into a firm delivery programme for the new signalling, trains and station and road improvements that London needs.

More challenging (but unsurprising) is the government’s announcement that it will phase out the resource grant made to TfL by 2018/19. This currently represents 6% of TfL’s annual budget. So it will require TfL to become both more efficient and more commercial, for example though making better use of its land and property holdings to support additional housing and retail. This is not in itself a bad thing of course, but the reductions in grant do represent some significant short term pain for TfL which will require it to scrutinise and prioritise future spending options more harshly than it might have hoped for.

Post 2020, the government has also signalled a willingness to look at further moves in the direction of fiscal devolution – by allowing London to retain a greater proportion of business rates (and reducing remaining TfL government grant in return). A consultation from the Treasury is promised, which we now await.

Transport Development Fund

Also of note was the announcement of £300 million over the next 5 years for a new Transport Development Fund within the DfT, for the next generation of transport infrastructure projects. Crossrail 2 was mentioned as one prime candidate – but will have to jostle for funds with other potential projects around the country such as rail projects across the northern powerhouse.

The next key milestone for Crossrail 2 remains the Budget next March by which time the Chancellor will have received recommendations on the scheme from Lord Adonis and the new National Infrastructure Commission. So expect to see an uptick in activity from us on Crossrail 2 in the new year.

Overall then, there was more good news for London transport than bad. TfL have been in touch to thank London First and its members for their support over the past year. So thanks to all those of you who took part in working groups, signed letters and attended meetings with government ministers and officials. Every bit of activity really does count.

Find out more about our work on Crossrail 2

Business Rates

By the end of the Parliament local government will retain 100% of business rate revenues to fund local services. This will give them control of £13 billion of additional local tax revenues, and £26 billion in total business rate revenues.

Elected city-wide mayors will be able to increase business rates to pay for new infrastructure, provided they have the support of the local business community (through a majority of business members of their Local Enterprise Partnership).

The Department for Communities and Local Government will shortly consult on changes to the local government finance system to pave the way for councils to retain 100% of business rates by the end of the Parliament.

Apprenticeship Levy

The apprenticeship levy on larger employers announced in the Summer Budget will be introduced in April 2017 – set at a rate of 0.5% of an employer’s pay bill.

London First responded to the Department for Business, Innovation & Skills consultation on how the levy should work. You can find our full consultation response here.
We warned that where a business already runs apprenticeship or other successful training programmes, they should be taken into account when considering whether a skills levy should be applied.
Each employer will receive an allowance of £15,000 to offset against their levy payment – this means that the levy will only be paid on any pay bill in excess of £3 million and that less than 2% of UK employers will pay it. By 2019-20, the levy will raise £3 billion in the UK.
As well as increasing the numbers of apprentices, the government will ensure quality is increased too through a new employer-led body to set apprenticeship standards and ensure quality. The body will be independent of government and will also advise on the level of levy funding each apprenticeship should receive.

Read the full Spending Review and Autumn Statement 2015

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