Autumn Statement: £800m boost to Scottish Government’s capital budgets

Philip Hammond
Philip Hammond

Chancellor Philip Hammond has announced an £800 million increase in capital spending for Scotland over the next five years.

Delivering the UK government’s Autumn Statement at Westminster yesterday, the Chancellor also revealed a £1.4 billion investment in affordable housing south of the border which could mean a further £100m for the Holyrood budget through the Barnett Consequentials.

Whilst a number of his proposals apply to England only, the additional capital revenues that will accrue to the Scottish Government will enable an increase in its planned infrastructure spend.

Among the Chancellor’s announcements was a £23 billion National Productivity Investment Fund over next five years which will be used for projects such as roads and water connections that will support the construction of up to 100,000 new homes.

On top of that, the £1.4bn will provide 40,000 new affordable homes, including some for shared ownership and some for affordable rent. Another £1.7bn will be used to speed up the construction of new homes on public sector land.

There was also measures unveiled to relax restrictions on how existing affordable housing funding can be used, enabling the delivery of a range of products for different circumstances, a taper to Universal Credit rates from 65 per cent to 63 per cent and a regional roll out of the Voluntary Right to Buy scheme.

Mr Hammond also outlined a £450m investment to trial digital signalling on railways to” achieve a step-change in reliability”,£1.3bn for upgrades to ease highways congestion and £1bn to invest in full-fibre broadband and trialling 5G networks.

The decision to focus on infrastructure spending means that Holyrood’s budget will increase by more than £800m through to 2020-21, though the Scottish Government will decide how the investment is spent.

Further commitments were given for Scotland’s City Deals with funding confirmed for deals in Aberdeen and Inverness, negotiations with Edinburgh ongoing and proposals to be considered from Tay Cities.

The Chancellor also announced for the first time that the UK government will also open negotiations with Stirling, a move that means that deals will have been agreed, or in the process of being agreed, with each of Scotland’s cities.

Other measures to directly benefit Scotland include an increase in research and development investment by £2bn a year by 2020-2.

Fuel duty is frozen for the seventh successive year, which should save the average car driver in Scotland £10 each time they fill their tank. The National Living Wage is increasing from £7.20 to £7.50.

Scotland is also benefiting with more than £3.3m of LIBOR funding raised from fines levied on banks being distributed to good causes.

Additionally, the government will meet its manifesto commitment to increase the personal allowance to £12,500. Over the last Parliament, 2.4 million individuals in Scotland saw an average gain of £517, due to an increase to the personal allowance.

Chancellor of the Exchequer Philip Hammond said: “The investments I have outlined today will have benefits right across the Union.

“Research and development funding will benefit the United Kingdom as a whole and where responsibility for infrastructure investment rests with the devolved administration in Scotland, they will receive the appropriate funding share.

“The decisions I have announced today mean that Scotland will receive very significant additions of £800m to its capital budget.

“It is also great news that I can also confirm wider investments for Scotland including the opening of city deal negotiations with Stirling and announcing that we are open to doing so with the Tay Cities.”

Secretary of State for Scotland, David Mundell, added: “The Autumn Statement will build an economy that works for everyone in Scotland and the rest of the UK. The rise in the National Living Wage means a well deserved pay rise for thousands of Scots, and the freeze in fuel duty will make it about £10 cheaper for drivers every time they fill up their car.

“Most significantly for Scotland is the £800m of extra capital funding. This is as a result of the Chancellor’s decision to invest in infrastructure, but it is for the Scottish Government to step up now. If it is used properly by the Scottish Government, this will make a real difference to productivity, jobs and growth in Scotland.”

Sector response

CIH Scotland executive director, Annie Mauger, said: “Tenants in England will welcome the new ban on letting agent fees, which have already been successfully introduced here in Scotland. We would like to see a greater focus from the Chancellor on boosting the supply of a wider range of housing tenures.

“Private housebuilders cannot build homes at a faster rate than they are able to sell them. Even with increased government support for first time buyers, there will still be a natural limit to demand and the rate at which the market can ‘absorb’ new homes.

“Building for a wider range of tenures, including more affordable homes to rent, would increase absorption rates. I hope that the Scottish Government will consider this when determining how to use the consequential additional funds that will flow to the Scottish budget as a result of today’s Autumn Statement.”

Annie Mauger added:“We also share concerns with many others in the housing sector about the negative impact of proposals to widen the Local Housing Allowance cap to include all tenants on Universal Credit rather than only those starting a tenancy after April of this year. Our hope remains that the Scottish Government is able to counter this damaging change in policy as new welfare powers are transferred to Holyrood. But better still would be for the policy not to go ahead in the first place.”

The Scottish Federation of Housing Associations (SFHA) said the Universal Credit taper rate reduction will represent a modest increase in the benefits received by those in work.

Mary Taylor, chief executive of the SFHA, said: “Whilst the modest reduction in the Universal Credit taper rate is welcome to anyone claiming or receiving Universal Credit, it is important to note that the Autumn Statement came immediately after the announcement of further damaging changes. Vulnerable tenants are paying the price of the UK government’s failure to invest in social housing particularly in England, which has contributed to the housing benefit bill growing out of control with more tenants living in more expensive private accommodation. The much-vaunted simplicity that Universal Credit was supposed to deliver now seems a distant dream. Claimants and their advisors increasingly have to navigate a maze of regulations and entitlement conditions.

“The Scottish Government will have to implement its welfare powers in the midst of this uncertainty and our members, housing associations across Scotland, face trying to protect rental income whilst securing funding to invest in the affordable home the country so desperately needs.

“As well as the concerns we have previously articulated about funding supported housing, we will be particularly anxious about the future for the 11,000 single tenants under-35 living in housing association accommodation reliant on Housing Benefit. Along with our colleagues in England and Wales facing the same challenges, we will be pressing for safeguards for vulnerable people, for example those leaving supported housing, homeless people and pregnant women.

“In terms of the announcement on funding, SFHA welcomes the announcement of £800m additional funding for the Scottish Budget, and notes that the £1.4bn investment in affordable housing south of the border should mean a further £100m for this budget through Barnett Consequentials. The Scottish Government’s commitment to increase funding in order to build 50,000 affordable homes, 35,000 for social rent, over the next 5 years has been greatly welcomed by the sector, and the SFHA calls for any Barnett Consequentials to be invested in affordable housing.”

With the capital budget set to increase by more than £800 million through to 2020-21, the country’s home building industry called for the same funding priority for housing to be given north of the border as was set out by the Chancellor for England.

Nicola Barclay, chief executive of Homes for Scotland, said: “Nothing is more important to Scotland’s social wellbeing and economic success than ensuring we have enough homes to meet the needs and aspirations of our growing population. focus on housing by the Chancellor not only recognises the importance of this but also generates a significant budget boost for the Scottish Government which we must see similarly prioritised towards home building, if this country is to thrive and grow.

“No other single industry has the potential to positively impact so many different policy areas. Whether it’s jobs, skills, health or education, building homes makes a hugely positive difference to the lives of all those living in Scotland.

“We therefore urge the Scottish Government to make the most of this additional money and attract further private sector investment by allocating it to a national all-tenure home building programme.”

RICS Scotland welcomed the additional funds for Scotland’s capital budget but warned that it is vital that the money is put into infrastructure projects that return the highest economic and social impact, whilst stimulating the Scottish construction industry.

Gail Hunter, Director RICS in Scotland, said: “The UK government’s £1.4bn commitment to affordable housing is much needed. RICS market surveys have shown a consistent lack of housing supply across Scotland over the last two years, increasing property prices and rents within the sector. This announcement will result in Scotland benefiting £100m and we encourage the Scottish Government to utilise this money to further increase their commitment to building 50,000 new, affordable homes.

“In addition, the Scottish Government should use this opportunity to increase supply by investing in raising the standard of existing housing stock, through a planned maintenance scheme for tenement properties.

“RICS has long called for the expansion of City Deals across Scotland. We welcome the announcement of City Deals for Edinburgh and ‘Tay cities’ of Perth and Dundee, together with plans for a further deal for Stirling, ensuring all Scottish cities are in line for funding.”

Patrick Harvie MSP, co-convener of the Scottish Greens, urged the Scottish Government to use consequential capital funds to invest in energy efficient homes and high quality childcare, and to commit to progressive tax policies.

Mr Harvie said: “The Tories’ Brexit mess poses huge threats to our economy and public services, and Autumn Statement requires strong action from the Scottish Government using the full range of devolved powers. Extra capital funding means Scottish Ministers now have no excuse for not funding the warm homes programme they promised two years ago, or the expansion in high quality childcare capacity.”

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