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31 OCT 2018

Budget 2018: Spotlight on the Devolved Nations

Hew Edgar RICS

Hew Edgar

Interim Head of UK Policy

Edinburgh, UK

RICS

The UK Budget on Monday 29 October saw the Chancellor make many announcements and financial handouts. In addition to increasing the block grants of the Devolved Nations, the Chancellor also announced city deals and transport measures.

The devolutionary settlements of Northern Ireland, Scotland and Wales mean that many of the legislative and policy levers that affect land, property and construction are controlled by the devolved administrations. 

However, the Chancellor can still introduce measures on ‘Reserved’ matters (powers that are not devolved), and the subsequent “Barnett Consequentials” that arise from increased UK Budget spends mean the Devolved Governments can see an increase in the block grant. So, for example, if the UK Budget increase spend for NHS spend, the block grant to the respective devolved Governments also increases by a set percentage based on the Barnett Formula.

This Budget did see increased spends, thus the block grants will increase in Northern Ireland, Scotland and Wales. The Governments, however, are not restricted on where they spend the increases in revenue. Using the previous example, UK Budget increases on NHS will not, therefore, necessarily lead to increased NHS spends in the devolved nations.

Barnett ‘Consequentials’

The increased UK Budget spends saw increases for the devolved nations through to 2020-21 (before adjustments for tax devolution) by:

  • £320m in Northern Ireland;
  • £550m in Wales (this includes over £25m as a result of a 5% uplift in Barnett consequentials agreed as part of the Welsh Government’s fiscal framework); and
  • £950m in Scotland.

This addition to national Government spend is not restricted, and we would urge the administrations to use the extra monies to bring forward affordable housing and shovel-ready infrastructure projects. The Scottish Government, however, has already indicated that much of their increase to their block grant will be earmarked for the NHS.

City and Growth Deals

The Budget committed the UK Government to providing £150m to allow a Tay Cities Deal to be agreed – a sum which fell short of the Scottish Government’s challenge to meet their commitment of £200m announced one week before the Budget Statement. The Tay Cities deal will cover Dundee, Perth, Angus and north Fife and will bring forward infrastructure and housing projects over the next 20 years.

The UK Government also pledged to begin formal negotiations on a Moray Growth Deal, and continue discussions on growth deals for Ayrshire and the Borderlands. The Borderlands deal is of vital importance to a region that was severely impacted by the financial crisis, and will require dialogue with local partners on the English side of the border. An economic and impact assessment of an extension of the reopened Waverley line would be valuable.

The UK Government committed £120m to a North Wales Growth Deal to be agreed - the third deal to be agreed in Wales. RICS called for a North Wales Growth Deal in its 2016 Assembly Election manifesto which should bring much needed support for the rural economy and, ideally, links to metropolitan areas in relative close proximity; as well as the projects being discussed in the proposed Mid-Wales Growth Deal.

The final City Deal announcement was for a Belfast City Region Deal; again, an RICS recommendation from 2016, and one which is welcomed. Aging infrastructure is a particular area in need of investment, and the City Deal could also provide a sufficient supply of Grade A Office space in Belfast which, as present, is limited. Appropriate office accommodation and workspace is crucial for the economic development of the city.

A further £2m for the recovery and regeneration of Belfast city centre following a fire at the Bank Buildings in August – through Belfast Regeneration Funding – will also contribute to property improvements in Belfast.

The UK Government will also begin formal negotiations with local partners towards a Derry/Londonderry and Strabane City Region Deal. Again, welcome news – particularly if the City Deal projects can link up.

Transport

The UK Government committed to the removal of tolls on the Severn Crossings from 17 December 2018, and the Department for Transport and the Welsh Government will continue to develop proposals for a number of potential rail schemes within Wales.
Severn Bridge tolls were reduced in early 2018, following their return to public ownership; the removal of [the equivalent of] VAT from the toll contributed to this reduction. Following the agreement to reduce tolls, it was envisioned that they would be scrapped completely “by the end of the year” – the 17 December 2018 deadline, therefore, meets this commitment by a couple of weeks.

The scrapping of tolls could have implications for congestion and pollution. It would therefore be prudent of the Welsh Government to direct some of the Barnett Consequentials into readying the Bridges, and surrounding areas, with necessary infrastructure to support a potential increase in traffic.

The UK Government also showed support for the delivery of a new M4 relief road through a review of the Welsh Government’s capital borrowing powers at the Spending Review – this review will consider whether the borrowing cap should be increased by up to £300 million to support this vital project.

RICS recognises all of the concerns over the M4 relief road, but it is major artery for Wales, and the UK as a whole. Indeed, RICS called for the project in our 2016 Assembly Manifesto, and continue to view it as a vital project for Wales.

There will be no changes to the VAT or APD (Air Passenger Duty) regimes in Northern Ireland at this time, but the Government will continue to explore ways to support a successful and growing tourism industry. In particular, establishing a technical working group to consider the practical and legal challenges to changing short-haul APD in Northern Ireland. APD is currently devolved in Scotland, and discussions are underway about APD devolution to Wales. Full devolution of APD to Wales and Northern Ireland could create market competition between the UK’s airports, and airports in close proximity; this could, however, have both positive and negative implications.

Hew Edgar RICS

Hew Edgar

Interim Head of UK Policy

Edinburgh, UK

RICS

Hew leads the team driving policy development across RICS’ sectoral remit. This involves setting team strategy for the UK policy papers and positions that demonstrate and promote RICS’ thought leadership. He also works in partnership with RICS professionals and stakeholders to take forward engagement programmes with government and parliaments.

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