Spending Review: Industry reaction

Infrastructure

Graham Kean, EC Harris: “The expected confirmation to pass legislation to use growth in future business rates to create upfront investment funds through the implementation of a Tax Increment Financing scheme is welcomed. This will undoubtedly complement the localism agenda and create one of the key funding mechanisms available to the newly formed Local Enterprise Partnerships.”

Housing

David Eastgate, chief executive of the Hyde Group, says: “The priority now for providers to be innovative in financing the building of new homes and providing support services that help people adversely affected by spending cuts. Hyde has already shown it can raise money through the bond markets and we are pressing public bodies to bring forward under-used public land for development. Such imaginative solutions will enable the government to reach its target of building 150,000 affordable homes for the next four years.”

Jennet Siebrits, Head of Residential Research at CB Richard Ellis, said: “The housing industry has been preparing itself for the worst for some time, so while the cuts outlined today are not welcome, nor are they a surprise. Cuts to the social housing budget do not inevitably have to cause a cataclysmic decline in the number of affordable homes built each year. There is now an opportunity for the private sector to step in and provide suitable housing where it is most needed.

“The private rented sector will have a critical role to play, but the industry has been disappointed with the Government’s lack of enthusiasm to date. A short sighted approach has prevailed whereby those not in social housing are assumed to be either owner-occupiers or aspiring to be. The Government should recognise that the private rented sector is not only part of the intermediate housing market, but one full of opportunities.

Brian Green, economics commentator: “It will be interesting to see what constitutes the mix of “affordable” housing in the future. Will low cost home ownership grow substantially as a proportion of the mix of affordable new homes? Probably.”

National Housing Federation chief executive David Orr said: “The fact that the housing budget is being cut by 60% is deeply depressing – and shows that providing affordable housing is no longer a government priority.Cuts on this scale will come as a devastating blow to the millions of low income families currently stuck on housing waiting lists.

“We do however welcome the Government’s decision to give social housing providers greater flexibility as to how they deliver their services.”

Andy von Bradsky, chairman of PRP Architects on housing: “The announcement today by the Chancellor that the social housing budget will be cut by over 50% will have a significant impact on the supply of affordable homes in the short term. Whilst raising rent levels will potentially plug the gap of reduced grant levels, some Registered Providers will choose not to develop new homes in the absence of grants.

Those that are keen to develop will have to find new ways of raising finance, new partnerships and ways of operating. Whilst this offers an opportunity for the sector, it will take a while for it to adapt and in the short term we will see a shortfall in supply. With the private housing market far from fully recovered and in the absence of a clear planning policy, the housing market in the UK will be depressed for the foreseeable future.

Richard Parker, head of housing at PwC: “The Government is committed to building 150,000 affordable homes over the next four years. This equates to 37,500 new homes a year - which should be achievable if the Government can better align the £4bn of grant funding to other capital contributions including public sector land. The Government will also get ’more for less’ if grant is used to support shared ownership and intermediate housing which require a lower capital subsidy.

Green energy

Richard Diment, Director General of the FMB said: “Householders wanting to upgrade their homes to make them greener and more energy efficient might be encouraged by the £1m investment for the green investment bank but the truth is this is little more than a token and it remains to be seen if the bank will attract the additional funding that will be needed to retrofit the UK’s 26millin existing homes.”

Colin Butfield, Head of Campaigns at WWF-UK said: “Whilst there is good news on the commitment to fund a renewable heat incentive, we have not seen the same commitment towards energy efficiency. With the Warm Front scheme being scrapped it is disappointing not to get further detail on the Green Deal today.

We hope that means the Government will provide clarity on how they will meet their ambition - to retrofit 14 million homes by 2020 -  when they lay the Energy Bill down in November.Tomorrow, WWF and the Great British Refurb Campaign will host a live webinar with Greg Barker, and we will push for some clear answers on how they will incentivise householders to take up the Green Deal at a time when everyone is feeling the financial pain of spending cuts.”

John Alker, UK-GBC director of policy and communications said on the The Green Investment Bank
“The £1bn for the Green Investment Bank, delayed until 2013/14 is disappointing. This is not as much as was hoped for. But the devil is in the detail. The Bank needs to be able to leverage the necessary private sector finance to meet both climate change targets and boost job creation in the construction sector. The Bank could be a major vehicle for getting private sector finance into the ’Green Deal’ for energy efficient homes and buildings.”

On the Renewable Heat Incentive Alker said: “Heat has been the elephant in the room, so commitment to a Renewable Heat Incentive is very welcome indeed. If combined with minimum energy efficiency standards, this is an important development.”

On the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme Alker said: “The announcement that government is keeping the money from Carbon Reduction Commitment allowance sales has come out of the blue and we look forward to working closely with government on what the implications of this are.”

Comment from Mike Brogan, chief executive of Procure Plus: “While we welcome the Government’s decision to continue with the ‘feed-in-tariff’ we feel that it is a missed opportunity not to extend it beyond 2012 to encourage local enterprise to support as the supply chain currently exists predominantly outside the UK.

Planning

Ian Anderson, Head of National Planning, CB Richard Ellis, said: “There is a potential paradox in the cuts suggested through the Comprehensive Spending Review in some local government departments, such as planning, and the coalition’s localism agenda. For example, at a time when the development industry needs transparency and certainty in planning decisions, what we could be faced with is planning departments cut to the bone without the resources or training needed to embrace a new ‘localism’ tool kit. 

“This could result in poor planning decisions and/or the hi-jacking of the planning process by local pressure groups with the unintended consequences of the real decision making and interpretation of the Government’s localism policies being carried out through the Courts, which is neither devolutionary nor localist.” 

PFI

Shapna Roy, law firm Wedlake Bell: “It looks like the Government may be transferring responsibility for the revenue costs of local government Private Finance Initiative (PFI) projects from local government to the sponsoring department. Today’s review also showed a clear commitment to capital expenditure on transport projects and the Chancellor gave an impressive but incomplete list of which projects will continue to go ahead.  How they will be funded remains unclear and it will be interesting to see all the details in the transport review next week when they are published.

“Elsewhere, there was a lot of uncertainty and I suspect this is because the government is still  considering what it can and can’t do in terms of what it can and can’t afford - what can and can’t be canned.  I think we’ll have to see what comes out in the wash in the coming weeks.  

“It is also interesting that the government is to all-but abolish ring-fenced finance in local authority spending. This could open the way for health and education authorities, for example, to sell assets to raise cash to allow them to contribute more to capital projects that the Treasury says it cannot afford. This way, public bodies will be able to continue to procure PFI projects that deliver the infrastructure the government is keen to develop to encourage growth while keeping Treasury input to a minimum.”

Apprentics

Richard Diment, Director General of the FMB said: “The boost for more apprenticeships does offer some real hope for those seeking to learn a skilled trade. However, employers in the construction sector will want to be convinced the economy is strong enough to take on new trainees.”

Scotland

Michael Levack, Scottish Building Federation chief executive: “The true impact of these cuts on the Scottish construction sector will only become clear once the Scottish Government has determined how to spread the pain of a £1.2 billion cut in the Scottish budget next year and further substantial cuts in the years that follow. With most of the rhetoric focused on protecting frontline services, Scotland’s capital budget is extremely vulnerable.

“Although politically expedient in the short term, failure to maintain investment in affordable housing and core infrastructure will seriously hamper Scotland’s economic recovery in the medium term.”