Jack Simpson, International Services Executive, latest column for the Journal
Last week, the UK Chancellor gave a “Spring Statement” to Parliament, an update on the country’s finances and government’s spending plans, but you’d be forgiven for not knowing it even happened.
I say that because there was a lot of words about the economic pressures impacting the UK, it lacked any major support to tackle this historic cost of living we are all experiencing.
The cutting of fuel duty was one of the “major” announcements, and any cut will be welcomed by those in the haulage industry especially. But the rate at which living costs have been rising over the last six months, the cut of 5p a litre probably only takes us back to the price of fuel last Wednesday!
To me, this Statement represented a major flaw in modern politics in which policies addressing symptoms are favoured, rather than tackling the long-term causes.
Part of this is down to election survival, and the cynics among us will note the Chancellor announced a planned tax cut in 2024, the year of the next UK election. Working election to election favours short term fixes, rather than long term solutions to problems, as that Government may not be around to reap the rewards.
For example, the logistics industry has bee struggling for years with driver shortages, border delays and rising energy and fuel costs. We’ve all seen the pinch over the last year, as goods struggle to move in ad around the UK prices rise or stock vanishes from shelves.
We need Government and opposition to collaborate seriously to take on these long-term issues, not just in logistics, but in housing, living costs, high street development and more.
As part of the Chamber’s International Team, I must mention (again) the absence of global support. UK export growth, particularly in the wake of Brexit, is lagging behind international competitors.
Trade has been largely impacted over the last two years, lockdowns, Brexit and supply chains to name a few, yet little has changed in way of support or accelerating for exporting businesses. As a Chamber we have been supporting members navigate barriers or upskill staff, but Government needs to help business tackle the structural challenges pressuring our regional traders.
I felt Government recognised the economic pressures we’re seeing daily, but without the political capital to do so, failed to assure these problems will be resolved or confidence that economic life will get better.
Ahead of the Budget on Wednesday we’ve seen some suggestions in the press on what to expect.
We made some clear asks, summarised below.
Based on this weekend’s speculation, we seem no clearer on a definition of levelling up, on the future of the Shared Prosperity Fund and how it will replace EU funding, or on how business support packages could be reintroduced through the winter if Covid cases continue to rise.
One of the main expected changes will be an increase to the national living wage from £8.91 to £9.50 from the 1st of April next year. The apprentice rate and the national minimum wages for younger workers under 23 are also expected to be see and increase on Wednesday.
We’re also expected to see a focus on investment in skills with a £1.6 billion increase in 16-19 education funding, an expansion of T-levels, and a £170 million increase to the apprenticeship budget as well as a more funding for skills bootcamps and to expand the level 3 adult offer.
In terms of transport there’s an expectation that on Wednesday there will be an announcement of funding for train, bus and cycle projects in particular we’re expecting funding to be allocated to the Tees Valley for the upgrades for Darlington and Middlesbrough stations and improved rail connections.
But until we see the detail, we won’t know how much of the commitment for the Tees Valley has been announced previously.
There’s also speculation that the Eastern Leg of HS2 – the section that would travel from Birmingham through Yorkshire and on the North East – could be scaled back. This would be disappointing with existing capacity on the East Coast Mainline is so limited, and when connectivity from our region to other parts of the North and the Midlands remains poor.
We’re still waiting to see about other major transport announcements like Northern Powerhouse Rail.
We’ve also seen some reports of £500 million in funding allocated to create ‘family hubs’ which will give support and advice, the £500 million will also include funding allocated to mental health support services.
There’s also funding expected to promote electric vehicle production in the North East and the midlands, and some funding for regional museums.
We’ll wait to see the full details announced on Wednesday but the focus on skills is positive along with the funding for Darlington and Middlesbrough stations.
The Chamber team will be analysing the Budget tomorrow lunchtime – and we’ll be particularly looking for progress on levelling up, decentralisation, export support, regeneration and Covid support. All of which were missing from this weekend’s leaks.
March’s great reason to do business in the North East is our fabulous quality of life. Chris Smith, Executive Director of Business Growth at Thirteen Housing Group explains what’s brilliant about living here, and how Thirteen Housing Group are contributing to it.
Those of us born and bred in the North East – and those who have made their way here ‘temporarily’ to study or for a job, (and then never go back), know it’s a great place to live and offers a brilliant quality of life. We really have got some amazing assets in the North East, fabulous coastlines, accessible countryside, lovely towns and cities and then there’s the people! Of course, a fundamentally important issue is having somewhere to call home where you can be safe, thrive and give yourself and your family the best life possible. This has become ever more important over the last year when our homes have become our sanctuaries because of covid, and this has thrown into stark relief the fact that many people do not enjoy the same quality of accommodation as many of us take for granted.
As one of the largest social landlords in the North East, Thirteen Housing Group’s main purpose is to provide a range of affordable homes for rent and sale for people at any stage in their life. We’re passionate about building modern, spacious homes and have a large development programme delivering up to 600 new homes a year to add to our existing portfolio of over 34,000 homes. That might be a family home for rent, an apartment for people starting out in life, or more specialist accommodation for people who need more support to live independently. We also recognise that some people want to own their own home but can’t yet afford to, so we provide a shared ownership option, allowing customers to buy a part share of the property and rent the rest, buying more shares when they can until they reach full ownership if they want to. What matters is that we meet people’s individual requirements and provide the management and after care to ensure we provide a great experience to all of our customers.
But it’s not just about providing bricks and mortar, it’s also about supporting people at key stages, whether that’s to help them navigate the often-confusing benefits system, manage money, help them get a job or work to improve neighbourhoods and the community. These things make the difference to people’s wellbeing and help towards creating that quality of life we all strive for.
Unfortunately, there are areas in our region that there were once thriving communities, often linked to the old heavy industries around coal mining, steel production or ship building, but have declined over the years as the employment market and aspirations around housing have shifted. Some of these areas often display poorer housing standards, more transient populations and higher levels of deprivation. Funding to tackle issues like this on a large scale has all but dried up, but we can’t just abandon these places, especially when we have a stake in the area.
We like a challenge at Thirteen and regeneration has always remained on our agenda, so we have been actively working with communities and local councils in the region to help improve these older housing areas where we can.
One example of a successful project has seen us working in partnership with Middlesbrough Council in North Ormesby to deliver a range of interventions that might seem small scale but can make all the difference for people living in the community. And we think it’s vital to work with the local community, building on the positives that are already there rather than focussing on the negatives.
We’re three years into the project which has involved buying and improving empty homes to let at affordable rents, creating much needed green spaces, supporting local groups to grow, and helping people into employment and training.
We’re working on similar projects in Redcar and Sunderland, but our next big project is again in Middlesbrough in the heart of the town centre. Gresham has had its issues over the years and was once described as one of the most deprived areas in the country. Major plans to improve it collapsed mid-way through when the funding programme disappeared overnight and plans to regenerate the area stopped. That was 10 years ago, and Middlesbrough Council has tried to manage the area as best it can with little available funding.
Thirteen was approached to help out and asked to take a chance and develop 145 new homes in a large derelict area in the middle of Gresham. It was a big ask, but by working with the council to set out what else would be needed and to bring much needed resource into the mix, we have developed a bold plan for its regeneration. The council is actively doing its bit – basing front line services in the area to improve the environment, tackling anti-social behaviour and supporting the community to be resilient.
We’re optimistic about the future of Gresham now. While respecting its past we’re creating a whole new community in the heart of the town centre that will provide well designed, affordable homes for a diverse range of residents. It won’t exist in a bubble though, it will be part of Gresham’s history but in a new, improved and confident place that people are proud to call home. Alongside our other regeneration projects such as North Ormesby, Gresham is a demonstration of how regeneration projects are not just about bricks and mortar; they’re about making tangible improvements and helping to create a better life for people in communities for years to come and contributing to making the North East a great place to live, wherever your home is.
The Chamber and Homes for the North held a roundtable with a range of businesses and organisations across the North to discuss the role of housing in the North East’s economic recovery.
Nigel Wilson, Chair of Homes for the North and the Chief Executive of Gentoo Group opened the roundtable highlighting the need for clarity from Government on what the levelling up agenda is and a ten-year long-term strategy to help achieve this. We need to bring existing homes in the region up to standard as well as building new affordable homes. Decarbonisation and economic regeneration are both key priorities for the housing sector but there needs to be adequate funding from Government in order to reach these goals.
Key points from the discussion included the need for organisations and businesses to collaborate to put out a joint- message to Government on the role of housing in the economic recovery and achieving the UK’s net zero targets.
The importance of ensuring that Government policies such as standard methodology around allocating housing and the Treasury’s Green Book reflect the levelling up agenda was also highlighted. Policy needs to take into account economic potential and allocate fair infrastrucutre funding and housing numbers to the North East.
Attendees also discussed the changing role of town and city centres after the pandemic with the potential of more people living in towns and cities and the implications of this for our social infrastrucutre along with possible changes to where people are based due to flexible working.
Funding for local authorities and combined authorities was also highlighted as key to ensure the have the capacity to help coordinate work on improving the quality of housing in the region. Funding needs to be fairly allocated rather than competition based and combined authorities need to have devolved powers to help deliver on housing and regeneration in their area.
The decarbonisation of housing was seen as a key opportunity for the region to create jobs as part of a green recovery. There needs to be a long-term plan on how to decarbonise housing and funding from Government to ensure social housing can start this process.
North East England Chamber of Commerce has written to Government setting out how housing and development have the potential to play a key part of levelling up the country.
In response to the Planning for the Future consultation the Chamber highlighted the need for a proportional distribution of housing. It also urged Government to use new homes as potential for economic growth not to focus solely on affordability.
Marianne O’Sullivan, Chamber policy adviser said: “Housing targets need to meet local needs and achieve growth and job creation. Without this we will see a reduction in the number of homes in the North East which will harm economic growth as the formula to calculate future housing needs is not appropriate for our region.
“Housing and development need to be a key part of the Government’s ‘levelling up’ agenda to drive economic growth and regenerate areas, including the renovation and refurbishment of outdated housing stock.”
This is even more important in the current economic climate with the region needing investment and a quality housing stock to a fair recovery and for people to stay and move to the region
Overall, we need to see more funding for local planning offices and an acknowledgement of local differences within planning reforms rather than a one size fits all approach. Housing methodology and the new infrastructure levy need to fit with the levelling up agenda rather than discouraging development in the North East.
The new levy would be payable upon completion on a development and be based on an assessment of the final value of the development above a set threshold.
The proposals for the infrastructure levy could negatively impact the North East as land values are lower here. The introduction of the levy could have a significant adverse impact by slowing the supply of land for development. This could harm the levelling up agenda if the levy has an adverse impact in low value areas and relatively little impact in high value areas. There can’t be a one size fits all approach as land values across the country vary.
Justin Hancock, principal development planner, Banks Group said: “As one of the region’s leading development companies, the Banks Group welcomes North East Chamber of Commerce’s participation in the Planning White Paper Consultation. The strength of the Chamber is that it represents a wide range of businesses across the North East of England. Regular development forum meetings enable members to brief the Chamber’s officers about ongoing issues and concerns. This consultation response is the product of many such discussions.
“There is little doubt that the overall objective of government policy is in line with the region’s aspiration for commercial growth and green recovery. The proposed changes to the planning system will need considerably more detail before we can be confident they will help deliver those objectives but we support in principle changes which would make the planning system more dynamic, accountable and productive for the North East.
In 2018 the government introduced a new method for calculating housing need. They’re now proposing setting a much higher bar. Experts from planning consultancy Lichfields explain what this means for the region in their latest blog.
The current Standard Method for calculating housing need was introduced in 2018 and was intended to significantly simplify the process of establishing local housing requirements and improve the efficiency of the plan-making process. It was a step in the right direction but fell significantly short of the mark on a number of key points including reliance on authorities choosing to set a far higher requirement than their minimum figure to achieve the national 300,000 dwellings per annum (dpa) target and driving need into London and the South East whilst doing the opposite in the North – a point which is certainly at odds with the Government’s agenda to ‘level up’ the economic and social disparities between many northern and southern authorities.
On the 6th August, the Government announced proposals in its Changes to the Current Planning System document which seek to remedy the shortfalls of the current Standard Method; setting a much higher bar for many Local Authorities and resulting in an uplift to the national housing requirement of 35% against the current Standard Method – from 250,550 to 337,307dpa.
The recent blog published by my colleague Bethan Haynes explores the national implications of the Standard Method however, for the purposes of this blog, we consider what the new Standard Method means for the North East.
An Improvement on the Current Standard Method
Taken at face-value, the revised Standard Method has a positive outcome for the region – seeking to address some of the previous concerns raised about the impact of assumptions within the calculation on the North. Almost all authorities across the North East see an uplift against the current method (aside from Stockton-on-Tees, County Durham and Newcastle upon Tyne which see a 6%, 10% and 25% reduction respectively) resulting in an overall increase of 1,026dpa (from 6,262dpa to 7,288dpa) from the current Standard Method in the region – an uplift of around 16%. In theory this is a positive step and may see additional opportunities for land promotion in authorities where there is an uplift against the current Standard Method as Local Plans progress and/or are reviewed.
Contribution to the National Target
Delve a little deeper into the figures however and it becomes apparent that some of the issues with the previous Standard Method remain. First and foremost is proportionality of distribution; whilst the North East sees a 16% increase from the current to revised method this still falls well below the 35% national average uplift that the revised calculation brings and is in fact the third lowest proportional increase nationally (with only Yorkshire and the Humber at 9% and the East at 15% holding smaller proportions of the uplift).This shift also results in a reduction in the contribution that the region makes to the national total from the already inadequate 2.5% under the current method down to only around 2.2% – significantly below the region’s existing national household contribution of around 5%[1]. This is particularly concerning when measured against some southern regions such as London which will see a staggering 67% increase from the current method and which would constitute over 25% of the national total housing requirement alone under the revised method.
Restraining the Market
The revised method also still provides significantly fewer homes than recent delivery in the region – a clear spatial disparity for northern authorities compared with central and southern regions where the Method sets a need figure that is often far in excess of that which the market has been able to achieve. For the North East, the shortfall between the proposed new method and recent delivery is around 2,800 dwellings per annum – over 25% of the average supply delivered across the region in the last 3 years. Whilst it must be acknowledged that this is an improvement against the current standard method position (which sees a shortfall of around 3,800dpa) it still falls far short of the numbers currently being delivered in the region and would effectively restrain the North East housing development industry.
At a Local Authority level only two of the 12 authorities see an uplift against average recent delivery (Gateshead and South Tyneside) with some others falling well below the mark – most notably, Newcastle upon Tyne would see a 66% reduction against recent delivery.
Why does the Standard Method have these Impacts?
The new Standard Method is more complex than the original, moving away from the Government’s intention to make the process simple, transparent and understandable for non-experts. Whilst we are still analysing its mechanisms, it is clear that Step 1 of the proposed Method still results in a low starting point upon which Step 2 is applied. It has been widely acknowledged (including by the Government) that an over-reliance on population projections provides an inadequate basis for calculating housing need due to the way in which they continue patterns of historic undersupply in the region. Whilst the new Standard Method includes an alternative increase based on the size of the existing stock (if that is higher than the population projection), for most North Eastern authorities this isn’t enough (a 0.5% increase is used despite the Government acknowledging that annual growth is typically 1%) to overcome the constraints imposed by the baseline starting point for the Standard Method.
The Government’s intention to use the Standard Method to address affordability problems means that, when considered nationally, the North East’s affordability problems appear relatively less significant. This means that the part of the equation that boosts supply based on unaffordability is heavily skewed towards the acute problems with this issue in some southern authorities. It therefore doesn’t lift the North Eastern authority’s figures high enough to recover from the baseline starting position earlier in the equation.
In fact, housing need is based on a wide variety of factors, often with complex interactions. For example, the Government’s own consultation document refers to regeneration and stock mismatch due to insufficient homes of the right size, type and tenure at paragraph 19. However, the Standard Method largely disregards these factors and focuses solely on affordability, meaning North Eastern authorities’ ability to transform their areas, meet local housing needs and drive economic growth is constrained. Whilst each authority can choose to enhance its Standard Method figure, previous research by Lichfields has confirmed that in reality this does not occur sufficiently.
Conclusions
There is therefore huge cause for concern; whilst the overall increase in housing need figures will bring opportunities in some areas, the revised Standard Method would actually lead to harmful impacts for the North East. The disparity with previous delivery and the reduction in proportional distribution (particularly at a national level) are key areas of concern and risk restricting growth across the region to a level well below that which the market has delivered in recent years. Far from ‘levelling up’ the country, the new Standard Method could actually exacerbate the problem.
Opportunities however still exist – unless a dramatic increase can be achieved and sustained from the recent peak in delivery of c.40,000dpa the housing requirement set for London is likely to underdeliver by at least 50,000 units per annum . This alone would mean 300,000dpa nationally is not achievable without other regions delivering significantly more homes than the current and revised methods make provision for. The North East may hold part of the solution to this – if the revised standard method could ensure a more proportional distribution of the housing requirement across the country and seek to set much more ambitious minimum figures in authorities which have demonstrated they can deliver well in excess of the current and proposed methods (as many in the North East have) this would offer multiple benefits by reducing the over-reliance on London to achieve the 300,000dpa target and driving more clearly towards the Government’s ambition to ‘level up’ the country with all of the associated economic and social benefits that would bring for the North.
Changes to the Standard Method to achieve this could involve tweaks and adjustments to the Government’s equation (a greater increase based on the existing housing stock or an adjustment to the affordability multiplier for example). However, the solution may lie in recognising that it simply isn’t possible to standardise such a complicated matter, which becomes many times more complex when the huge variations in conditions across the country are taken into account. A more nuanced and subtle approach is required linked to the specific circumstances of each authority. That could mean returning to the pre-Standard Method approach and introducing a lesser degree of standardisation but still allowing for the crucial adjustments needed to reflect local circumstances such as historic growth, economic growth and spatial strategies. Whilst that won’t be a (relatively) simple equation, it should produce far more appropriate outcomes for more authorities and prevent the extreme positive and negative results generated by the Standard Method.
We are currently undertaking more research for various organisations to understand why the equation produces such negative results for the North East and how this can be rectified. The Government’s consultation on the proposed revised Standard Method closes at 11:45pm on 1 October 2020. Please get in touch if you are interested in making representations.
Dominic Crowley, Fiona Braithwaite & Michael Hepburn
