Budget - 2013
Economic woes continue to form the backdrop to the Coalition Government’s annual attempts to stimulate the economy, and the much anticipated 2013 Budget is no exception.
The Chancellor’s aspirations are clear: to assist those who ‘aspire to work hard and get on’. But the Government has little room for manoeuvre, with a flat-lining economy prompting revised growth projections - downwards; lower than anticipated tax revenues; borrowing levels that stubbornly refuse to fall despite austerity measures; and continuing trouble in the Euro zone. Further deregulation and decentralisation, and radical proposals to stimulate the housing sector - too radical in the view of some - are the ‘stand out’ measures that the Chancellor hopes will promote growth.
The planning system, housing sector, and infrastructure and development have not escaped attention. Turley Associates considers the detail of the Chancellor’s proposals to further simplify the planning system, and the implications for the housing sector and development industry.
Overview
The UK economy is continuing to recover from the “biggest financial crisis in generations”, but the pace of recovery is slow. Growth projections for 2013 have been halved and the resulting forecast is modest, at 0.6%. Measures to boost the economy include tax cuts (Corporation Tax reduced to 20% in 2015), supporting growth in the housing market and introducing more aggressive monetary policy.
Further changes to planning
The Government considers that the introduction of the National Planning Policy Framework (NPPF) (March 2012) - underpinned by the presumption in favour of sustainable development - is already achieving positive outcomes; a boost to the number of planning approvals and an increase in the pace of Local Plan making. The Government intends to maintain this momentum through further planning reform - the objective is to ensure that the planning system supports growth and is responsive to housing needs:
Planning guidance - the belief that the planning system unnecessarily impedes growth is seen in further deregulatory measures in the Budget. The NPPF is to be supported by new ‘slim-line’ planning guidance which will be published this summer. As well as aiming for simplicity and clarity, greater use of pricing information will be made to ensure that sufficient land is allocated to meeting housing and employment needs. Effectively an England-only measure, despite the UK-wide scope of the Budget, it remains to be seen whether similar approaches will follow in Scotland, Wales and Northern Ireland.
Judicial reviews - judicial reviews have, in the view of the Government, created ‘unacceptable delays’ to the development of infrastructure and large housing schemes. The judicial review process will be shortened and simplified by the summer.
Planning Use Class - the Government will consult on proposals to relax rules governing changes of use from certain retail and agricultural uses to residential use to ‘increase the responsiveness of the planning system’. Town centre decline is a hot topic. The proposals are intended to secure the long-term future of the high street by making better use of empty buildings, whilst also increasing the availability of housing in rural areas for local people. How these permitted development rights will operate remains to be seen. Nick Boles is reported in the Telegraph as saying that permitted development rights for change of use from offices to residential will come into force on 30 May, and these measures will be ‘significant’.
Local growth deals - following Lord Heseltine’s review and the Government’s endorsement of the majority of his recommendations, local areas will be asked to publish “bespoke pro-growth planning policies and delivery arrangements” as part of new local growth deals. These are likely to emerge from the comprehensive spending review in the early summer.
Shale gas guidance - this controversial issue will be addressed through the publication of new planning guidance by July 2013. The Government claims that this will allow those local communities with shale gas wells to benefit from low-cost energy.
Radical proposals for housing
Help to buy - the wide gap between the deposit required to secure a mortgage, and the average household’s ability to save - particularly in the current economic climate - is seen as the principal impediment to the efficient operation of the housing market. In recognition of this, the Budget includes Government-backed loans for mortgage deposits of up to 20% of the value of a new build house (valued up to £600,000) for those saving a 5% deposit. The rapid introduction of this measure on 1 April is a clear statement of intent. In addition, from 2014, £12 billion of Government mortgage guarantees will be made available to support people who cannot afford a deposit or secure a lower interest rate.
Both elements of the scheme are intended to trigger a major expansion in the construction industry by increasing the financial support available to first time buyers and those ‘trapped’ further up the housing ladder. The approach is undeniably radical and, as a stimulus to growth, has already been well received by some. The potential of the scheme to unleash inflationary pressures in house prices, similar to those that followed the Nigel Lawson Budget of 1988, is a genuine concern of others. Consensus exists on the need to provide more homes and stimulate the housing market, but it remains to be seen whether house price inflation will be the unintended consequence of these proposals.
Zero carbon homes - although focusing on the economy, the Green agenda has not been ignored. The Government is committed to implementing zero carbon homes from 2016 and will publish detailed plans on energy efficiency requirements by May 2013.
Infrastructure and energy
Investment - although the headlines have focused on public sector cutbacks and austerity, the Chancellor has deployed conventional ‘pump priming’ measures in infrastructure and other capital programmes to stimulate activity. He announced increasing capital investment plans for infrastructure by £3 billion a year - but not until 2015 (and to some extent only reversing savings made since 2010). The Infrastructure Delivery Update published alongside the Budget, includes £9.4 billion of expenditure on railways, £14 billion on Crossrail and £5.5 billion on roads, schools and housing.
Energy - the Government will take forward two Carbon Capture and Storage projects in Aberdeen and Yorkshire to detailed planning and design stage at a cost of £1 billion. If successful, this could allow for the commercial removal and storage of carbon emissions from coal and gas-fired power stations and heavy industry.
Comment
The Chancellor is attempting to stimulate the economy but has little money to spare. There is emphasis on further deregulation, removing obstacles to growth and introducing the radical measure of offering financial support to homeowners. Whether this is a master stroke that frees up the housing market, or whether it unleashes unwelcome inflationary pressures, remains to be seen.
Although austerity and spending constraints are at the heart of Government thinking, the Budget includes a range of conventional ‘pump priming’ measures, particularly in infrastructure. The scale of proposed capital spending is significant despite the cut-backs.
In planning, the further simplification of national guidance follows the introduction of much reduced policy guidance - the NPPF - as recently as March 2012. There are, however, no details at this stage. This and the proposed changes to the judicial review process reflect the Government’s desire to reduce regulation in an area seen as a key impediment to growth. Changes to permitted development rights form part of a package of proposals designed to limit the impact of planning on the economy.
The devil is in the detail and it will be crucial for the Government to ensure that its proposals are formulated and funds managed responsibly for the Budget announcements to have their desired effect in kick-starting the economy.
We anticipate that the Budget proposals will be clarified in future Government announcements shortly and Turley Associates will be on hand to provide in-depth analysis when the details become available.
Philip Challen
0117 989 7000
[email protected]
Download
You can read the full article as a downloadable pdf here.