A guide to what the key policies in last week’s Autumn Statement and National Infrastructure Plan update will mean for the industry
Delivering the Autumn Statement last Thursday, chancellor George Osborne confirmed that the age of austerity will continue. Despite the good economic news he was able to deliver on jobs and growth, the deficit remains stubbornly large and further cuts in public spending are planned in order to shrink it.
Thankfully though, boosting construction remains a priority with both Osborne’s statement and the update to the National Infastructure Plan announced the previous day peppered with new policy measures designed to achieve that.
Here, Building examines the potential impact of five of the key announcements.
Insurers to invest £25bn in infrastructure
What the government says
“The following insurers - Aviva, Friends Life, Legal & General, Prudential, Scottish Widows and Standard Life - will work alongside partners with the aim of delivering at least £25bn of investment in UK infrastructure in the next five years. Suitable projects will include, but are not limited to, those included in the National Infrastructure Plan (NIP) 2013 and can include major infrastructure projects led by private sector sponsors.”
What it means
This move, which follows a highly significant relaxation of the regulations covering how insurers can invest their money under the EU’s Solvency II directive, is likely to see the six insurers investing in a range of sectors including housing, hospitals and schools as well as areas covered by the NIP such as energy and transport. However, the agreement does not contractually commit the insurers to invest in projects and there is scepticism over whether the £25bn target will be hit, given the regulatory environment and the limited success the government has had in this area before.
What the industry says
The focus on infrastructure is a confidence boost
Duncan Symonds, WSP
Duncan Symonds, head of infrastructure at consultant WSP: “The continued focus on infrastructure is a great confidence boost to the industry, but the proof is all in the pudding. We had the promise of the pensions investment fund last year, which hasn’t yet made a tangible difference to delivery, so it will be interesting to
see if this new scheme will have the desired effect.”
Pilot scheme for households to share development benefits
What the government says
“Building on the measures we have already put in place at the local authority and community level (including the neighbourhood funding element of the community infrastructure levy and the New Homes Bonus), the government will work with industry, local authorities and other interested parties to develop a pilot for passing a share of the benefits of development directly to individual households.”
What it means
Arguably the most eye-catching proposal in a set of tweaks to the planning system was the suggestion that households should benefit financially from new development in their local area, a move with the potential to transform nimby attitudes and make us more like the French, who are famous for generously compensating those affected by major new development.
What industry says
This could transform the debate over UK infrastructure
Richard Threlfall, KPMG
Richard Threlfall, partner and head of infrastructure, building and construction at KPMG: “Just imagine if the proposals for a new bypass near your house meant that you could be offered twice the market value for it and could move to somewhere better that, perhaps, you could only have dreamt of before. This would transform the debate over UK infrastructure and change the face of Britain. It would abolish the current compensation regime which, by paying as little as possible, ensures the strident opposition of all those nearby.”
Tackling the planning conditions logjam
What the government says
“The government will legislate to treat planning conditions as approved where a planning authority has failed to discharge a planning condition on time. The government will consult on legislative measures to strengthen the requirement for planning authorities to justify any conditions that must be discharged before building can start.”
What it means
Responding to lobbying by organisations such as the Home Builders’ Federation (HBF), the government here is attempting to cut the construction delays that take place after planning approval has been granted as a result of additional conditions placed on schemes. Many housebuilders see this as a major brake on development, with Bellway even highlighting the issue in its preliminary results in October.
What the industry says
These changes are sensible and will be very beneficial to the whole of the construction industry
Andrew Whitaker, HBF
Andrew Whitaker, planning director at the HBF: “These changes are sensible and will be very beneficial to the whole of the construction industry. The proposed measures to unlock the tens of thousands of homes held up by planning conditions will make the system more efficient and speed up the rate at which sites can be brought forward, thereby increasing much-needed housing supply.”
New boost for council housebuilding
What the government says
“The government will increase the funding available for new affordable homes, by increasing local authorities’ housing revenue account borrowing limits by £150m in 2015-16 and £150m in 2016-17, allocated on a competitive basis.”
What it means
This measure, part of a package designed to boost social housing supply, was a surprise and is believed to have resulted from last-minute pressure for the Lib Dems. It is expected to support around 10,000 affordable homes. The money will be allocated as part of the Local Growth Fund set up last year following the review of regional growth conducted by Michael Heseltine,s which will now see Local Enterprise Partnerships distribute a total of £2bn of funding each year for the next parliament. Councils will be able to bid for the additional borrowing capacity. Borrowing bids will be prioritised on a value-for-money basis with councils working in partnership with housing associations or in joint ventures. The move is a departure for the Conservatives, who have traditionally opposed giving councils this role.
What the industry says
The current housing debt cap is a real barrier to investment
Rob Beiley, Trowers & Hamlins
Rob Beiley, housing and regeneration partner at law firm Trowers & Hamlins: “The current housing debt cap is a real barrier to more significant investment in affordable housing - it is reckoned that a complete removal of the debt cap would facilitate borrowing to enable the development of 60,000 affordable homes in a five-year period. This announcement will go some way to meeting that ambition.”
A garden bridge for London
What the government says
“The government will provide a £30m contribution to support the construction of a new garden bridge across the River Thames in London. This will supplement funding from Transport for London and private donations.”
What it means
Thomas Heatherwick, the designer of London’s 2012 Olympic cauldron, has been working with Arup on designs for a tree-covered pedestrian bridge and “meeting point” spanning the Thames between Temple and the Southbank, slated to cost about £150m. The bridge has garnered support thanks to the success of New York’s much-lauded High Line.
Osborne’s announcement was actually worth £60m given that the Treasury money was immediately matched by London mayor Boris Johnson using TfL funds. Despite the taxpayer support, the bridge is still mainly dependent on private contributions.
What the industry says
The pledges are of vital importance at this key moment in the project
Thomas Heatherwick
Thomas Heatherwick: “The pledges are of vital importance at this key moment in the project. The contributions take us one big leap closer to making the garden bridge happen. I am very grateful for the overwhelmingly positive feedback from the public from all corners of the world. The garden bridge is starting to feel like it truly belongs in London.”
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