Delivered against a backdrop of a stubbornly sluggish economy, the chancellor’s autumn statement featured a range of announcements that have the potential to positively impact economic activity across the UK, particularly its commitment to substantially increase investment in infrastructure.
Yet despite responding to some of Lord Heseltine’s recommendations, the government can still do more to “go further and faster to boost economic growth”, strengthen economic demand, increase jobs and get the economy growing more strongly in the months and years ahead.
So what are the most relevant parts of the autumn statement for cities? For us, there were three areas that stood out.
First, the new welfare cuts. On top of the £18 billion of welfare savings previously announced, the chancellor said in his statement he would be introducing a 1 per cent uprating cap that will apply to most working-age benefits. Designed to save up to £4bn annually from the welfare bill, this measure will undoubtedly have a big impact on economic demand, principally in our major towns and cities.
The cap will affect all kinds of benefits, from maternity pay to Jobseeker’s Allowance, and will be particularly significant for those cities with most people dependent on benefits, such as Hull, Birmingham and Grimsby. At present, cities have very few means at their disposal to react to, or mitigate, the impact of these changes.
With a view to the 2013 budget, the chancellor should consider how cities can be granted greater responsibility for directly shaping support for the needs of individual city populations, as well as considering whether there are other ways to support working families, for example through measures to reduce the cost of childcare.
Second, housing and infrastructure. Despite its potential to provide a boost to the UK economy, there were very few new announcements on housing. The chancellor did confirm “funding and reforms” to assist the construction of 120,000 homes, but it is unclear whether this represents new investment, or the recycling of an old announcement.
Given we are currently only building a small proportion of the at-least-232,000 homes DCLG has estimated we need each year, there is an urgent requirement for government, cities and others to do more to meet the housing challenge we face.
On infrastructure, there were a greater number of individual announcements, with the chancellor announcing a replacement programme for PFI, and promising an additional £5bn of new capital for spending on infrastructure and support for businesses. There was also a promise to further increase the Regional Growth Fund and a pledge to invest in a select number of regional transport priorities including extending High Speed Two.
Yet despite these targeted interventions, there remains a sense more fundamental incentives and reform will be required to promote and deliver the scale of infrastructure investment needed to significantly impact upon the growth of our cities in the short and long term.
Finally, and perhaps most significantly, several of Lord Heseltine’s recent recommendations also made it into the statement. For cities, the commitment new money will be provided to support Local Enterprise Partnerships (LEPs) is welcome, but it is the creation of a single capital pot that is potentially most significant.
Cities and businesses are best placed to prioritise local transport, housing and other infrastructure investments, so a place-approach to budgets can only be a step in the right direction, as it ensures they have the tools to take charge of spending in their area. Nevertheless, the devil remains in the detail of these new arrangements, and a great deal of work, by cities and others, will be needed to ensure we get this right.
When looked at individually, a number of the measures announced today are to be welcomed and there are growing opportunities for cities as they seek to improve local economic growth. But overall even when taken together, the various announcements fall short of a strategy to boost growth as quickly as the UK’s struggling economy needs.
Looking ahead to the mini-spending review expected in 2013, one way to help this happen is by giving cities, home to more than half of all businesses, and responsible for 60 per cent of the UK’s GDP, the freedom and resources to deliver the new homes, improved skills and overhauled infrastructure they require to grow.