Latest Public Sector News

21.03.13

Government tackling house building ‘head on’ – Budget 2013

The Budget has incited comment from across the public and private sectors, as organisations welcome investment, but warn of the implications of a further squeeze to fund it.

Sir Merrick Cockell, chairman of the LGA, highlighted the prospect of additional cuts to local government funding as “extremely worrying”.

“Councils are already dealing with a 33% cut in funding from central government. This has led to reductions in local services. Any new cuts next year and beyond will have a significant negative impact, particularly as the rising cost of services such as adult social care and changes to National Insurance are already guaranteed to soak up an increasing share of local government funds.”

Sir Merrick welcomed moves towards promoting growth but cautioned: “The proposals won't be viable unless the budgets are properly devolved. Councils have a lead role on this work and it is essential that they are given oversight to ensure projects are carried forward and that money is spent in an effective, transparent and democratically accountable way.”

Social Enterprise UK praised the tax incentives which could benefit social enterprises.

Peter Holbrook, chief executive of SEUK, said: “Growing the UK’s social investment market is crucial as traditional sources of finance continue to dwindle in the economic downturn. Capital needs to be raised in new ways to support social enterprises working to address the country’s social and green issues – levering in private investment is vital. 

“We recognise that social investment is not a panacea for all social enterprises, but it’s an important piece of the jigsaw. We also need to see full implementation of the Social Value Act to ensure government spending works as hard as it can for communities – social enterprises are well placed to win and deliver public sector contracts.” 

Steve Simkins, head of public sector pensions at KPMG, warned that higher pension and National Insurance contributions would become increasingly difficult to afford. He said “Morale across the public sector is already fragile, so the decision to drive up National Insurance Contributions will put further strain on employee engagement.

“It will also come as little comfort to employees across the public sector to hear that what they sow today will be reaped several times over, tomorrow. The simple fact is that most will be smarting at today’s news; they will not be focusing on the value of their pension in years to come.”

Liz Peace, chief executive of the British Property Federation, was ultimately positive about the announcements around more house building. She said: “Overall there’s more good than bad for the property industry in this Budget.

“For too long time the size of deposit needed to get on the housing ladder has proved prohibitive and has been the missing piece in a coherent housing strategy, it’s good to see the Government move to remedy this. Time will tell whether this policy will prove effective, but taken with the fivefold expansion in the ‘build-to-rent’ fund the Government is certainly tackling the problem head on.” 

Mark Beatson, chief economist at the CIPD, said there were “few surprises” in the new economic forecasts and said: “The difficult fiscal situation gave the Chancellor little room for manoeuvre, in terms of measures to stimulate the economy, but the budget did contain a few measures that should encourage employment creation and retention and provide a degree of support and certainty for employers.

“The proposed reduction of up to £2,000 in employer National Insurance Contributions, to be introduced in 2014 for all employers, will provide a marginal incentive for small businesses to create new jobs and the announcement of growth vouchers to enable small firms to access business advice has the potential to provide them with invaluable help in recruiting, managing and engaging employees in support of business growth.” 

The CIPD also welcomed bringing the flat rate state pension forward from 2017 to 2016, which could encourage more employers to invest more.

Institution of Civil Engineers (ICE) director general, Nick Baveystock, said: “A £3bn a year boost for public infrastructure investment, despite it not being available until 2015, is a positive and welcome move, as are plans to boost Whitehall’s capability to deliver major infrastructure projects. If we are to deliver existing projects more effectively and generate short term growth quickly, this is vital.

“However as Government itself acknowledges, 70% of investment in UK infrastructure will come from private investors and owners and Government must not lose sight of the scale of this challenge. The drawn out process of the Electricity Market Reform, and the scaled down hopes for investment from sources such as pension funds, show there is an urgent need for Government to improve its role as a facilitator of investment.

“We therefore welcome Government’s commitment to consider options for using independent expertise to help shape its strategy – and urge them to engage with the work of Sir John Armitt’s independent review which is looking at this issue.

“We would also like to see real, visible progress and fewer re-announcements on existing initiatives – such as the projects identified as receiving assistance under the infrastructure guarantees scheme and the level of funding available through the Pensions Investment Platform.”

RIBA president Angela Brady added that while further spending on housing and infrastructure should be welcomed: “it will barely make a dent in the delivery of the sustainable new homes and communities we desperately need”.

“Whilst today’s Help to Buy announcement will enable greater access to mortgage finance, it does not sufficiently address the root cause of the housing crisis: we are not building enough homes, many of those that are being built aren’t good enough, and we cannot rely on private house building alone to turn things around.”

She warned: “Today’s Budget was the opportunity to kick start a major programme of capital investment in new affordable homes and to lay the foundations for the green economy – on both counts the Chancellor has failed to deliver.

“We weren’t expecting a game-changer budget today, but this country desperately needs one.”

Anne Longfield OBE, chief executive of 4Children welcomed support on house buying and covering the cost of childcare, but said: “With families set to be financially worse off in 2015 than they were in 2010, many still face an uphill battle to make ends meet against the soaring cost of living.”

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