Taking difficult decisions may lead to difficult conversations – our top 5 Autumn Statement takeaways

Taking difficult decisions may lead to difficult conversations – our top 5 Autumn Statement takeaways

The Autumn Statement was a chance for the new Prime Minister and Chancellor to fully detach themselves from the short-lived economic policy and plans of their even more short-lived predecessors – and they didn’t fail in that endeavour. Just a few short weeks ago, the Conservative leadership was championing themselves as a low-tax, high growth government, with significant tax cuts and the promise of major supply-side reforms. Instead, Jeremy Hunt set out an economic plan that is based around the highest tax burden since 1945, hitting 37.1% of GDP in 2027-28. The response from the Government benches was surprisingly muted, with few cheers during the hour-long speech.

The Chancellor insists that “taking difficult decisions now” will deliver stability in the long term, whilst also being “compassionate” to the most vulnerable in society. But these difficult decisions might lead to some difficult conversations to get the backbenches on board. Here are our top five takeaways from yesterday’s Autumn Statement:

  1. The party of low-tax no longer

This Statement was a stark contrast to the plan set out by Kwasi Kwarteng in September, with tax cuts replaced by rises and freezes. The most eye-catching was the decision to lower the threshold for paying the additional 45% rate of income tax – one that was going to be scrapped altogether until Hunt became Chancellor – from £150,000 per year to £125,140, which was designed to demonstrate that those with the broadest shoulders take on more of the burden for filling the budget black hole.

But for lower earners – those who will be struggling to make ends meet anyway – there is little joy on tax. Having had the basic rate reduction snatched away from them before it even started, the bad news for low-earners is that the six-year freeze on income tax will drag 3.2million into paying basic rate and 2.6million into paying higher rate. And to add insult to injury, the real terms value of the personal allowance will only be worth what it was in 2013-14. The squeeze will only get tighter.

There will inevitably be some backlash on the Tory benches about the tax changes – see below for more on that – which has already been seen on fuel duty. Following the Statement the Chancellor has had to calm concerns that fuel duty will rise next year for the first time since 2011, as predicted by the OBR. Expect the long-term lobbying from backbench Tory MPs to continue on that in the run up to the Spring Budget.

  1. The drive to net zero is still there, but don’t expect special treatment

To encourage a transition to greener and lower carbon energy and vehicles, there have been exemptions from certain taxes – such as Vehicle Excise Duty (VED) and exemptions from the windfall taxes. No longer. From 2025 electric vehicles will no longer be exempt from VED, removing one of the main incentives to switch to an EV. Clearly this exemption had to be temporary but at a time where people are having to make difficult decisions with their finances, and the higher prices of EVs anyway, this could inadvertently slow down their uptake.

Windfall taxes have been a bone of contention for the Conservatives, but clearly they can generate significant income for the Treasury. The existing oil and gas windfall tax will increase to 35% until 2028, but significantly a new 45% windfall tax will be put on the low carbon electricity generation sector. Once again this represents an odd move from the Government – encouraging a low carbon energy transition relies on incentives to grow and the fact that the low carbon generation windfall tax is higher than the one for fossil fuels seems counterintuitive.

  1. The energy crisis isn’t going anywhere

Arguably the biggest challenge facing the Government and wider economy is the energy bills crisis. For all the troubles of the Truss Government, the Energy Price Guarantee was a positive legacy but one that is wildly expensive and can’t continue forever at this rate of spending. The Guarantee will continue, but at a lower rate of support – with the typical annual bills now set to be £3,000 per year rather than £2,500. Taken alongside the freeze on tax bands and the personal allowance and the rising inflation on food, household budgets will be tighter than ever.

Targeted support for business energy bills will be offered after the current package expires in March 2023, while additional support such as business rate reliefs will also be extended to support businesses with their rising bills. Clearly the Government expects, with the economy in recession, that it will have to go all out to protect businesses and jobs over the coming years.

  1. Social care remains a challenge for tomorrow

Since it emerged that 40% of government day-to-day spending goes on the health service, the UK has often been described as “a health service with a country attached to it”. Of course, Covid has significantly increased the pressure but with every annual increase in funding for the health service comes concerns that something needs to be done to avoid it becoming a bottomless pit.

Adult social care reform has been ‘a priority’ for every Government since records began but one gets the impression that it’s an issue no one really wants to tackle. After Boris Johnson promised to finally solve the challenge, it has once again been kicked into the long-grass and while there will be significantly more funding for adult social care – the biggest increase ever – the changes to funding have been delayed again. Like many of the difficult decisions, one wonders if the Government are simply hoping that it’ll be Labour’s problem in a couple of years rather than having to sort it themselves.

  1. Infrastructure remains central to levelling-up

Infrastructure spending is often the first thing to be cut when savings are needed, but clearly there is an understanding that without it you cannot achieve levelling up and economic growth. So, the much-delayed and controversial HS2 will continue to be delivered, alongside Northern Powerhouse Rail and East to West Rail – all of which are central elements of the growth agenda in the Midlands and North of England.

Expect there to be some backlash on this: Esther McVey, previously Jeremy Hunt’s ‘running mate’ as part of his leadership bid in the summer, said at PMQs on Wednesday that “If the Government has got enough money to proceed with HS2 at any cost then it has sufficient money not to raise taxes. If it has so little money it has to increase taxes then it doesn’t have sufficient money for HS2” and that she wouldn’t support both. Persuading those tax-sceptic, HS2 hating Tory backbenchers to support both proposals will be a big challenge for the Whips office in the next few weeks.

Want to know more about how the Autumn Statement might impact your business? Contact David Button

Looking ahead to CIH Housing 2022

Looking ahead to CIH Housing 2022

 

In a few days’ time the great and good of the housing sector will be heading to Manchester to celebrate its achievements and discuss the significant changes and challenges that will face the sector in the next 12 months.

We’re excited to be seeing friends and colleagues from across the UK’s housing sector again, and hearing from sector experts at the many events taking place (including at our two brilliant events – details below).

Housing is never far from the national agenda, and it’s fair to say that the last few weeks have been pretty eventful for the sector – from the passing of the Building Safety Act, to planning reform and plans for the new Infrastructure Levy, the Social Housing Regulation Bill, and the re-announcement of the extension of the Right to Buy.

These points will no doubt be hot topics for the conference, and we look forward to discussing the opportunities and challenges in implementing them. It’s going to be a busy couple of years for the sector, with significant political focus on how the sector reacts to the new requirements.

The agenda also includes a significant number of events on net zero, including our own on the opportunities for housing associations that will come through the retrofit agenda. We hope to see many of you there, as well as at our other events. We’re at stand G46 – come say hello!

Find out more about our activities at the conference below.

 

Join our panel discussions

How can housing associations harness the opportunities created through the retrofitting agenda to rebuild trust in building, and managing quality, safe and efficient homes fit for the future?

Insight Stage, Tuesday 28 June, 12:30-13:15 

Join Doug Bacon, Director of Asset Management at Thirteen Group, Jessica Levey, Director of Communications at the Federation of Master Builders, Tom Jarman, Network Development Lead for Social Housing and Local Government at The Retrofit Academy and Karin Stockerl, Director of Asset Strategy & Services at Optivo as they examine the current retrofit landscape, identifying how housing associations can overcome barriers and enhance the value of retrofitting. 

Harnessing the power of social: How can housing associations embrace social media to create real change?

Insight Stage, Thursday 30 June, 10:30 -11:15 

Join SoCrowd’s CEO James Leavesley, Beth O’Malley, Digital Manager at CIH and Tanya Moravec, Digital Communications Officer at Hyde Housing as they discuss how now is the time for housing associations to make a long term commitment to social community engagement and relationship building to create real change.

Join us for a drinks reception with Communities that Work: Annual reception at CIH Housing Conference 2022

We are thrilled to be sponsoring Communities that Work’s drinks reception on Wednesday 29 June from 6 pm to 7.30 pm at Dirty Martini on Peter Street.

    The Levelling Up White Paper – Our 5 takeaways

    The Levelling Up White Paper – Our 5 takeaways

     

    After many months of waiting, the Levelling Up White Paper is finally here. It’s a monster at 332 pages, and it is not until page 159 that you actually get to the ‘policy programme’. There is a lot of theory and evidence base, but is there any real depth to the detail?

    We set out our five key takeaways from the Levelling Up White Paper:

    What is levelling-up?

    The biggest criticism of Levelling Up has been the lack of clarity on what it actually means. It has largely been seen as a nebulous concept without any real understanding of what it includes. While the White Paper confirms that the Levelling Up concept is very broad, it does at least give a clearer understanding of their thinking through the 12 missions.

    It’s a wide-ranging document, including measures on housing and development, broadband and mobile internet, education, skills and training, healthy lifestyles, public transport, tackling crime and even grassroots football.

    With multiple departments involved, it’ll be interesting to see who is in overall charge on these measures – and where the buck ultimately stops. Michael Gove’s role as Minister for Intergovernmental Relations as well as being the Secretary of State for Levelling Up could mean he has more steer over the direction of multiple government departments than any politician in recent political history and while, the details are still being worked out, it confirms that he is at the heart of Government decision making.

    There are actual targets

    Notably, the Government has set out targets against which it can be judged – something that previous government strategies have been criticised for not including. Some provide enough leeway to be open to interpretation (e.g. the public’s pride in place) but others will be easy to judge against, such as education attainment and life expectancy, with deliverables that will be the focus of future election strategies.

    These targets have been well-received and are quite sensible, with some comparison to Gordon Brown’s approach to regional inequalities and Public Service Agreement targets. Helpfully too the 2030 target date falls outside the General Election cycle, giving government extra time to meet them.

    No new funding

    It is clear that there is very little new funding to back the White Paper, instead previously announced funds will be redirected or redistributed to support the missions. Most expected this, given the difficult economic times in which we live, but Michael Gove has indicated that future Spending Reviews could provide additional funding to support these measures.

    Levelling up will, instead, be achieved by ‘rewiring’ the system. Homes England will be refocussed to look at regional growth and development, a new local government body will be established to monitor how local performance and policies are being implemented, more devolution is being offered to hand responsibility for much of this to existing and new Metro Mayors, and more civil servants will be moved to the regions. The White Paper gives eight years to achieve these ambitions – these new systems will need to be in place very quickly to get the job done.

    Cross-party working

    The pandemic and the impact of it has exposed some of the issues with there being a national government run by one party and major city Mayoralties being held by another – London being the prime example. It is very hard to argue that much of the Government’s stance on ‘bailing out’ Transport for London during the pandemic was anything but political ahead of the London Mayoral elections.

    The White Paper could give significant new powers to Labour Metro Mayors – in particular Andy Burnham – as they look to offer “a ‘London-style’ devolution settlement to every part of England”, including on public transport systems. Manchester and West Midlands will be the pilots for these, but it is noticeable that the Government could soon be handing out extra powers to Mayors who are not Conservative – eight of the current ten Metro Mayors are Labour.

    The politics of this is clever. On the one hand, the Government allows more local decisions and more people driving change; on the other if one of the regions does not hit the targets set, the Government will have somewhere to pass the blame now that Metro Mayors will have deliverables to be held accountable for.

    A vision, not a plan

    As is often the case, the devil will be in the detail – this is not a comprehensive plan to level up the UK, it is a statement of intent. While some policies are set out in full, the planning reforms, which will be fundamental to achieving levelling up, will be confirmed “in due course” – we know, that there is a Planning Reform policy paper coming after the local elections.

    It is unlikely that we will see the full extent of the specific policies that will achieve these missions until the significant amount of engagement and informal consultation that is being planned has been completed. This includes setting up local panels, and “a structured process” of ministerial visits to discuss how levelling up can be achieved in different areas.

    That there is more than 100 pages setting out the scale of economic disparity, and even a look at economic growth theory that reads more like a dissertation than a government policy paper, gives the impression that the idea is to make it clear that the scale of the challenge is so vast it will take time to actually work out what to do to solve it. It remains to be seen whether this rhetoric can ever be achieved through action.

    Join our webinar:

    What does Levelling Up mean for decision-making on new development and infrastructure?

    In our upcoming webinar, expert panellists will be discussing the potential implications, and inviting questions from attendees. 

    Our panel speakers include:

    • Andy Street, Mayor of West Midlands
    • Lord Bob Kerslake, Former Head of the Civil Service
    • Jan Bessell, Board Chair of the National Infrastructure Planning Association
    • Steve Norris (Chair), Advisor to BECG

    Conference fun is over. Time to get back to work.

    Conference fun is over. Time to get back to work.

     

    As Parliament returns next week, we look at the key takeaways from conference and those issues that the PM and his Cabinet will be focussed on over the coming months.

    COP26 is less than a month away

    The Prime Minister has made reaching net zero a central tenet of his political ambitions and he will be desperate for COP26 to be a success. Expect there to be a lot of focus from the media and opposition on the Government’s green credentials in the coming weeks – particularly if the Environment Bill fails to receive Royal Assent before COP26, and if the net zero and heat and buildings strategies fail to emerge.

    This scrutiny began in earnest this week with the International Energy Agency arguing that current global climate policies will only decrease carbon emissions by 40% by 2050 and that £4tn of investment is required to get to net zero. Which, given the impact that Covid-19 has had on world finances, seems unlikely.

    A key driver for COP26 will be getting the public more invested in net zero. Our own research shows that 60% of the population have not heard of COP26, and while the majority of the public wants to see the Government prioritising climate change they are split on whether measures to combat climate change will have a positive or negative impact on their household finances. There will therefore need to be considerable weight thrown behind making net zero achievable and relatable for everyone.

    At Conservative Party Conference we held an event with the CBI, High Value Manufacturing Catapult, and the Institute for Government on how business can make net zero affordable and achievable – which set out a number of solutions to these challenges. You can watch the event here.

    Trade and border matters

    Less than a week before Parliament returns and we are already seeing Brexit and the deal rearing its ugly head again. This time, Lord Frost attempted to overcome the bad blood between the EU and UK by arguing that the EU would be making “a serious historical error” by not agreeing to changes to the Northern Ireland Protocol which he himself helped to negotiate. With Dom Cummings weighing in that it was always the intention to go back on it, there will be major implications on trade and imports via Northern Ireland.

    With HGV driver shortages, supply chain pressures and concerns about the availability of food at Christmas, there are likely to be very choppy waters ahead for the Government.

    Build back better?

    It is still a few weeks before we get our first Department for Levelling Up, Housing and Communities (DLUHC) Questions in the House of Commons, with the new look department facing questions from the House.

    At Conservative Party Conference, the Government seemed keen to downplay housing and planning as subjects, with few references to them in either the Leader’s speech or Michael Gove’s debut speech as the DLUHC Secretary of State.

    When the planning reforms were first published in 2020 they were heralded as “a once in a generation set of reforms that lays the foundations for a better future”. Now it seems like a watered-down version is inevitable, with the Government now suggesting that the biggest reform being announced is now the Infrastructure Levy, which replaces the existing system of developer contributions. Expect the reforms to be significantly less grand than before, and likely to be wrapped up in a ‘levelling up’ package that will see more homes delivered in the north and midlands.

    As with trade, though, there are major challenges that have been faced by the sector for a number of years which are only going to be exacerbated by similar pressures elsewhere – including the shortage of hauliers, materials and skilled tradespeople. For the construction industry to be at the heart of the ‘Build Build Build’ agenda and Covid-19 recovery, the Government will be expected to intervene.

    At CPC21 we held an event with experts from the National Housing Federation, Federation of Master Builders, Chartered Institute of Building and the Government’s Champion for MMC in Housebuilding to look at what more needs to be done to allow the construction and development industry to flourish. You can watch this again here.

     

    Watch our Party Conference Fringe Events again

    The Cavendish Advocacy and BECG teams were out in full force at Party Conferences this year, and once again our fringe event programme was one of the most prominent at the conference – and tied into the key themes of the day.

    If you did not have an opportunity to virtually our events, you can watch them now, by clicking on the links below.

     

    Can we ever solve the housing decarbonisation challenge?

    Can we ever solve the housing decarbonisation challenge?

    The housing sector faces a number of competing challenges, and the building safety crisis is one that is currently taking up the bulk of the political and media bandwidth.

    But perhaps the challenge with the longer-term, more widespread impact is that of decarbonising the UK’s existing housing stock – especially in the social housing sector. There are around 4 million social housing units across the country, but only 56 per cent of social housing stock currently meets EPC band C – which the Government has set a target to reach within this decade.

    Retrofitting existing homes will be a key part of reaching net zero – but funding them is a major challenge, one that housing association CEOs are scratching their heads over, especially when they consider tackling the building safety crisis, delivering new homes, and improving services for customers as the Social Housing White Paper measures take effect.

    It’s a challenge that the political world acknowledges too. Earlier this year, Cavendish Advocacy commissioned polling by Yonder. It showed that MPs believe that decarbonising existing housing stock and buildings will be the greatest challenge to the Government in achieving its ten-point plan for a green industrial revolution (31% of MPs and 42% of Conservative MPs).

    And when you crunch the numbers, you can understand why they think this. The Government has pledged to provide £3.8 billion over the next decade through the Social Housing Decarbonisation Fund (SHDF) to tackle the retrofit challenge. However, analysis by Savills suggests that it costs around £25,000 to retrofit each social home, a total of approximately £4.3 billion every year for the next 25 years. The most recent wave of the SHDF, £160 million, will fund 6,400 homes using Savills’ figures, out of 2.24 million that do not currently hit EPC band C.

    Ahead of COP26, the scale of the challenge is clear, and it’s welcome that the National Housing Federation has launched its sustainability strategy group. For the Government, this is a once in a lifetime opportunity to define the future, and make homes truly green. At the moment we risk falling short – the Government also needs to get its act together. Much of the feedback provided by the sector on the Social Housing Decarbonisation Fund pilots (including that housing associations should be able to apply directly rather than through local authorities) has not been taken onboard, and the amount of funding behind it needs to increase. Alongside this, the long-awaited Heat and Building Strategy needs to emerge to give the sector and the supply chain the confidence to invest.

    For the sector, though, we need a concerted effort to talk about the challenge faced. Some housing associations have been fortunate to not be impacted by the building safety crisis and so have more resource to dedicate to this area. Our client, Stonewater, is a prime example of this. Over the past two years, Cavendish has been working with Stonewater to campaign for more action – including through the funding of IPPR’s All Hands to the Pump, the first major think tank piece that seeks to find a solution to this challenge.

    Stonewater is rightly banging the drum on this issue because they know it’s fundamental. You can find out more about our work on this issue, which has recently been nominated at the 2021 PR Week Awards for public affairs campaign of the year, here.

    CIH Housing 2021 has a number of events focussed on net zero and decarbonisation, which will hopefully put this vital issue in the spotlight. Our team, including experts on communicating the challenges of decarbonisation in housing, is looking forward to hearing what the sector has to say and how we can solve this challenge.

     

    We’ve enjoyed speaking to so many people at CIH Housing 2021 conference this week, and want to keep the conversation going. Get in touch to find out about how we’re helping housing associations to shout about decarbonisation and net zero.