Budget summary
The two most encouraging points to come out of the Budget 2009 for the Core Cities group were;
- the recognition of the importance of city-regions to future growth and the announcement of the two forerunners (Manchester and Leeds); and
- the inclusion of a commitment to explore our proposals for innovative financing – Accelerated development Zones – and report back on them within the next Pre Budget Report.
City regions
Although only two pilot city regions have been announced so far, this is a big win for the Core Cities Group as a whole. They are the original and most vocal champions of city region working and developed much of the thinking that has now found its way into national policy. It is important that these pilots are a success so that benefits can be realised by the other cities in due course.
The pilots will be overseen at ministerial level and the Government has pledged to work with the pilots to develop proposals for new strategy-setting powers over adult skills funding, expected to be in place within three to six months, new joint investment boards with RDAs, the Home and Communities Agency (HCA) and other partners to coordinate and align investment and pilot new employment programmes.
The Core Cities group has been at the fore in promoting the devolution of powers to the city region level. The creation of the new pilot city-regions in Manchester and Leeds will allow city’s to demonstrate the impact they can have on their economies and communities when they have access to the appropriate powers. These pilots will hopefully encourage central Government to reassess the sub regional policy landscape in the future and move towards full scale devolution of powers enjoyed by London to the two pilots areas and other cities.
Innovative financing
The Government also announced its interest in developing new opportunities for innovative financing mechanisms to support locally driven investment in growth and regeneration. The Government will work with interested local authorities and city-regions to assess the scope for accelerating development by allowing investment in infrastructure to be financed from the increased property tax base that could be enabled by the existence of improved infrastructure. As part of this, the Government will explore with local authorities the potential benefits, costs and feasibility of piloting such an approach. In the 2009 Pre-Budget Report, the Government will report on this analysis and the options for taking it forward.
Over the last 18 months the group has been working with Government and partners to demonstrate the benefits new innovative financing tools could have on major infrastructure projects. The Budget has acknowledged this potential and the pledge to work with interested Local Authorities to assess the potential benefits, costs and feasibility of a pilot project is an encouraging step forward for the Accelerated Development proposal. The Core Cities group will continue to work with Government representatives on the ADZ concept and will be working towards an announcement of a full scale pilot project within one of the Core Cities in the 2009 Pre-Budget report.
Additional headline statements to come from the Budget 2009;
- The UK economy had contracted by 1.6 per cent in the last quarter of 2008 and would do so by a similar amount in the first quarter of 2009. The total reduction for 2009 would be 3.5 per cent, but recovery would begin by the end of the year.
- Growth would run at 1.25 per cent in 2010, from 2011, the economy would grow by 3.5 per cent, with the trend rate running at 2.75 per cent. Inflation would fall to one per cent by the end of 2009 and the Bank of England's target would remain unchanged.
- The Jobcentre Plus network was core to the Government's approach, stating that it had helped one million people move back into employment since November. The network would receive an additional £1.7 billion, on top of that announced in the pre-Budget report.
- Considering long-term unemployment for young people, from January, every under-25 out of work for a year or more would be guaranteed employment or training.
- An extra £260 million for education and training and the creation of 54,000 more places in sixth forms and colleges for the next academic year.
- Extension of the stamp duty holiday to the end of the year and pledged £80 million more for Homebuy Direct.
- The budget deficit would be halved in the next four years, but would expand by 0.5 per cent of GDP in 2009. The UK would borrow £175 billion in 2009, 12 per cent of GDP, but would fall to 5.5 per cent in 2013/14.
- Plans to raise the 45 per cent rate for those earning over £150,000 to 50 per cent and to bring this in a year earlier, in 2010/11.
- Fuel duty would increase by 2p a litre in September, while alcohol and tobacco duties would both increase by two per cent. By 2012, this would raise an additional £6 billion.
- There would be no immediate public service cuts. Extra efficiency savings of £9 billion by 2013/14 had been identified which would allow real-term spending to grow.
- The Government pledged £3 billion for jobseekers, £1 billion for low carbon industries and almost £1 billion for housing supply and the construction industry. In addition there would be an additional £2.5 billion to encourage investment in high-paid, high skilled jobs.
- The Government would work with the construction industry to help house-builders tackle the constraints preventing them from meeting demand. There would also be £500 million of extra support to help projects stalled by the credit crunch. This included £100 million for low-energy local authority homes and £50 million to modernise service personnel accommodation.
- A £750 million investment fund would be set up to provide support for emerging technologies such as high-tech manufacturing and biotechnology.
- Green technology would benefit from £435 million extra support to develop energy efficiency measures for homes, businesses and public buildings. £525 million of additional money has been pledged for offshore wind through the renewables obligation.
- Furthermore, UK renewables stood to benefit from £4 billion from the European Investment Bank. The new mechanism would be used to fund the development of carbon capture and storage.
KEY FIGURES
GDP Growth
2009 -3.5%
2010 +1.25 %
2011 +3.5%
GDP growth will then return to a trend rate of +2.75 %.
Inflation/prices
2009 – 1% (year end)
2010 – RPI inflation 0%
The 2% Bank of England target would be retained.
Borrowing
2009 £175 billion (12% of GDP)
2010 £173 billion (11.9% of GDP)
2011 £140 billion (9.1% of GDP)
2012 £118 billion (7.2% of GDP)
2013 £97 billion (5.5% of GDP)
Net debt
2009 59% of GDP
2010 68% of GDP
2011 74% of GDP
2012 78% of GDP
2013 79% of GDP