Budget broadly welcomed by housing sector but fuel poverty funding ‘falls short’



Derek Mackay
Finance Secretary Derek Mackay

The Scottish Government has reaffirmed its target to build 50,000 affordable homes and pledged more funding to offset the ‘bedroom tax’ though campaigners have criticised the Draft Budget for failing to provide the ambition required to crack the problem of Scotland’s inefficient homes.

Unveiling his first Draft Budget for 2017-18 to Parliament yesterday, Finance Secretary Derek Mackay announced over £470 million of direct capital investment to begin the delivery of the 50,000 new affordable homes promised by the government over the lifetime of this Parliament.

Over £140m was also pledged to support energy efficiency programmes as well as £47m to continue to mitigate the ‘bedroom tax’ and £10.9m for other Discretionary Housing Payment (DHPs) uses.

Mr Mackay said local government and local services will have over £240m more available them next year as he unveiled a package of increased investment in councils, schools, social care services and the potential for councils to raise additional revenue from the Council Tax.

Budget at a glance

  • Over £470 million of direct capital investment to begin delivery of 50,000 affordable homes,
  • Over £140 million for Energy Efficiency programmes to help deliver climate change targets
  • Over £100 million investment in digital and mobile infrastructure, to improve digital connectivity, grow Scotland’s digital economy and increase digital participation, including support for our commitment to deliver 100 per cent broadband access by 2021
  • Freeze on rates and bands for residential and non-residential LBTT
  • Develop a rental income guarantee scheme to kick-start delivery of private rented sector homes
  • Continued funding for City Deals in Glasgow, Aberdeen and Inverness and work to promote the case for City Deals for Edinburgh, Stirling and Dundee/Perth
  • Work to explore and make progress on the development of a potential Ayrshire Growth Deal and invite proposals for two further Tax Incremental Financing projects
  • Through the proposed local government finance settlement and local taxation over £240 million of additional spending power to support local government services, with all revenues raised locally being spent locally by councils

The Scottish Government will add additional funding and free up councils to raise additional revenue by:

  • Providing £107 million from the NHS to support Social Care Services and pay the Living Wage for Social Care workers
  • Allowing councils to retain £111 million from the reform of Council Tax multipliers for higher value homes
  • Provide the freedom to raise the Council Tax for all band homes by up to 3 per cent, raising up to £70 million if councils choose to do so.

Commenting on the Draft Scottish Budget, CIH Scotland executive director, Annie Mauger, said: “We understand the ongoing budgetary challenges the Scottish Government currently faces. In that context, we welcome its commitment to continue to prioritise funding for key housing priorities such as affordable housing supply, energy efficiency, delivery of enabling infrastructure and measures to offset the worst impacts of UK welfare reform. The commitment to maintain funding for local authority budgets next year will also be welcomed by the housing profession as helping to safeguard the delivery of essential frontline housing services.

“(Yesterday’s) reconfirmation of £3 billion of funding to support the delivery of 50,000 new affordable homes over the lifetime of this Parliament is welcome. As we work towards meeting that challenging target, we are keen to ensure in particular that the quality of new homes being built is also maintained. £140m in funding for energy efficiency next year is also welcome, albeit with home energy efficiency now officially identified as a national infrastructure priority, we would like to see funding commitments go still further with the aim of achieving the step change needed to tackle fuel poverty.”

CIH Scotland will be hosting a special budget briefing in Glasgow on January 31, looking at implications for the housing sector.

Annie Mauger added: “We have consistently raised concerns about the impact of UK welfare reform on the housing sector. Most recently, we highlighted the negative impact of the new reduced benefit cap on around 6,700 families across Scotland. In that context, we welcome the Scottish Government’s ongoing commitment to offset the worst effects of welfare reform and will continue to work with the Government on the design of a new social security system for Scotland that treats people fairly and with respect.”

Scottish Federation of Housing Associations (SFHA) chief executive, Mary Taylor, said: “The Draft Scottish Budget contained a modest increase in funds towards meeting the 50,000 affordable homes target. The £470m announced is in line with the £3bon committed over five years, but it is important that this funding grows at a level that will allow this target to be met and contribute towards solving the nation’s housing crisis.

“Whilst we are still awaiting full details of the proposed budget that will be announced in the coming days, we welcome the announcement of £47m to continue to mitigate the ‘bedroom tax’ and £10.9m for other Discretionary Housing Payment (DHPs) uses.  However, it remains to be seen if this will cover the increased pressure on DHPs, for example caused by the UK government’s benefit cap.

“The SFHA has long argued that investing in energy efficiency will create jobs, improve the nation’s health and reduce climate change, so it was pleasing to hear Mr Mackay say this when he announced £140m funding to support energy efficiency programmes.

“We look forward to seeing further details of the draft budget so that we can analyse its implications for our sector more fully.”

For the Existing Homes Alliance, the Budget failed to provide the “bold investment required” to tackle cold, draughty homes and fuel poverty.

The campaign group said the Scottish Government’s announcement that the total spend on fuel poverty and home energy efficiency for the financial year 2017-18 will be set at £114m, is a small increase on the 2016-17 figure of £103.3m, but a cut in comparison to the £119m spent in 2015-16.

It falls well below the £190m figure the Existing Homes Alliance believes is necessary to begin the transition to a programme capable of eradicating fuel poverty in Scotland and meeting our climate change targets. The additional £75m the Alliance believes is required represents just under a quarter of 1 per cent of the Scottish Government’s total expenditure.

Lori McElroy, chair of the Existing Homes Alliance, said: “While yesterday’s proposals do show a small increase in funding for fuel poverty and home energy efficiency work, it doesn’t even restore funding to the level it was at before last year’s cuts to this vital budget. Boosting home energy efficiency budgets to the level required is perhaps the most effective way to deploy capital investment, given the wide range of social and economic benefits this work brings.

“After decades of missed opportunities, we had hoped the commitment to energy efficiency as a National Infrastructure Priority would come with the transformative level of funding required to help people currently living in cold and draughty homes that are expensive to heat.

“Action to insulate cold homes will need to ramp up significantly in the coming years to tackle fuel poverty and climate change, and the supply chain stands ready to deliver. This is a missed opportunity to capture the massive benefits that a bigger investment would bring. We understand the public finances remain under significant pressure, but the extra money needed here represents less than a quarter of 1 per cent of the Scottish Government’s overall spending.

“It’s also important to remember that this is just a draft Budget. There is still time for Ministers to improve their proposals and for opposition parties to make home energy efficiency a priority before a final Budget comes to Parliament in January next year. Bold investment is required as a matter of urgency: the Alliance estimates the spend required for next year should be closer to £190m rather than £114m. We know that the recent UK Budget means substantial additional capital funds will be available to the Scottish Government, more than enough to ensure the improved commitment we need to see here. The broad benefits of investing in improving cold and draughty homes - from more jobs and better health to lower fuel bills - mean there can be no more obvious choice when Parliament is considering how to allocate those funds.”

Trade body Homes for Scotland said the Budget fails to unblock the barriers that are preventing the delivery of the homes the country needs.

Chief executive Nicola Barclay said: “The Scottish Government recognises the need to increase the delivery of new homes for the benefit of Scotland’s communities and economic growth but there is little in (yesterday’s) statement to make this happen.

“Whilst there is generous capital spend on the delivery of affordable homes, which is welcomed, our members tell us that it is harder than ever to commence new sites and get much needed homes of all tenures out of the ground.

“This is borne out by key indicators published this week which showed a flatlining of housing completions at a level still some 40 per cent below that before the recession, as well as a worrying fall in the total number of homes being started, but there are, unfortunately, no new announcements to help unblock the system.

“In particular, we are disappointed that none of the £800m of capital budget consequentials from the Autumn Statement will be used to unlock development in Scotland, especially in relation to the provision of education infrastructure which is now one of the biggest blockers to housing delivery.

“We had requested the Scottish Government extend the five per cent banding of the Land & Buildings Transaction Tax given the impact this is having on house purchases above the current £325k ceiling. Whilst we fully support the Scottish Government’s aim of helping First Time Buyers, we must ensure that the property ladder functions at all levels. When aspirational buyers choose not to move, this prevents others further down the ladder from being able to do so.

“We note with interest the proposal to ‘modernise compulsory purchase orders to ensure vacant and derelict land can be brought into use for communities’. It is right that positive opportunities to intervene are fully explored for sites where landowners would struggle to bring development forward without support. This echoes Homes for Scotland’s views on the need to prioritise positive interventions over financial penalties which would be unlikely to help unviable sites.

“We also look forward to seeing the detail of the SME Holding Fund as we recognise that the SME sector of the housing industry has been disproportionately impacted by the downturn and requires support if it is going to grow and help deliver the many thousands of homes this country needs.”

COSLA President Councillor David O’Neill said: “COSLA can never endorse a reduction to the core local government settlement as announced as part of the budget statement (yesterday).

“It is our understanding that the Scottish Government had significant additional cash for 2017/18 and therefore this decision will impact on services delivered by local government.

“We fully recognise that the Scottish government has made efforts to improve the settlement through their offer of a wider package including a major change on the council tax proposals. COSLA had lobbied the Scottish Government on their previous proposal and we are pleased that the Scottish Government has acknowledged this.

“Councils will now consider the whole package as part of their budget considerations and COSLA remains committed to working with Scottish Government across the range of common interests including public service reform.”

Graeme Brown, director of Shelter Scotland, said: “The £470m for affordable housing is welcome news, however, this budget compounds the fears of many across Scotland who provide support to some of the most vulnerable people in our society that things are not going to get better any time soon. It is a missed opportunity of using Scotland’s new powers to raise the extra money needed to safeguard vital services.

“Any cuts to local government funding bring the very real threat of cuts to vital services such as homelessness support. Combined with ongoing changes and reductions in social security payments and too few affordable homes across Scotland means the spectre of increased homelessness looms large.

“We urge local authorities not to cut homelessness support services and for the Scottish Government to ensure that there is a strong safety net in place to catch people if they do lose their home.”

Gail Hunter, director RICS in Scotland, added: “The £470m capital investment in housing is a welcome move as a means for the Government to meet its 50,000 affordable homes target by the end of the parliament, however, there is a lack of detail on any future funding or investment for the development of other housing tenures, which are also in very limited supply.

“The current LBTT bands and thresholds has caused a slowing of house sales in the middle and upper price brackets, and the Cabinet Secretary announced no changes to the current regime. This is a missed opportunity to provide exemptions for older people downsizing or exempting new build homes from the additional dwelling supplement for buy-to-let investors after a set period of time that would boost activity, and start to shift the static market that currently exists in the middle and higher market areas.”



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