The Chancellor, Rishi Sunak, has now delivered his much-anticipated budget. It is the first UK budget since 2018 and has been given ahead of a Bank of England Rate interest rate cut from 0.75% to 0.25%. But, what will it mean for the regions of the UK, and more importantly what will it mean for the West Midlands?
During the general election, the Government pledged to level-up regional economies. With the UK suffering the worst intra-regional inequality for growth and productivity in the G7 the ambition is ambitious. Today’s budget was the first opportunity for the new government to flesh-out that vision.
There were several wins for the West Midlands and the wider region in the budget. Firstly, the commitment to the Midlands Rail Hub, a £2 billion rail plan to improve east-west rail connectivity, and capitalise on HS2, will provide a productivity boost via a greater and enlarged labour force. It will bring the poorly connected East Midlands into the sphere of Birmingham and the wider West Midlands. The director of City-REDI and myself have previously called for the Government to support this when the plans were first revealed.
The commitment to Midlands Rail hub is part of a wider national commitment to grow capital expenditure on infrastructure to £600 billion over the lifetime of the parliament. The Midlands Rail Hub is forecast to cost 2bn, so it is possible that further commitments to regional transport projects could be committed further in the spending review.
The Chancellor announced the Govt’s plan to build on the Transforming Cities Fund. The government is providing £4.2 billion from 2022-23 for five-year funding settlements for eight Mayoral Combined Authorities, including the West Midlands Combined Authority. The responsibility will fall to the elected mayors of each combined authority to submit local transport proposals that will receive funding from the Transforming Cities Fund.
Alongside that, the government is devolving over £160 million from the Local Growth Fund to the West Midlands Combined Authority to bring forward delivery of the Eastside Metro extension and phase one of the Sprint bus rapid transit network. 3 Sprint bus rapid transport networks are planned to be ready for the Commonwealth Games. The Eastside Metro Extension goes from Birmingham to Solihull through Sparkbrook and East Birmingham and is the infrastructure spine of plans to regenerate East Birmingham,
The budget has also allocated £21.3 million for the Birmingham 2022 Commonwealth Games Trade, Tourism, and Investment Programme, with the aim of maximising the opportunities to create a lasting economic legacy for Birmingham and the wider region from the upcoming commonwealth games.
In addition, the Chancellor revealed a £12bn multi-year settlement for affordable housing. The West Midlands has already performed well in the construction of new dwellings, building a net of dwellings of 16,615 in 2018-2019, an increase of 14.7% on the previous year. In Q3 the West Midlands (7 met) had 150 housing association dwelling starts, with 110 dwelling completions, compared to 1,060 private enterprise dwelling starts and 1,270 dwelling completions. Extra funding to increase the build-out-rate of affordable housing is needed in the region.
To complement this, the Budget launched a new £400 million brownfield fund for local authorities that put forward a brownfield-first policy, such as the current policy adopted by the West Midlands Combined Authority.
The aim is to create more homes by bringing more brownfield land into development, whilst the support budget document states: “The government will consider proposals from areas such as the West Midlands Combined Authority to expand their existing brownfield land fund.”
Small businesses in the West Midlands also look set to benefit from the measures announced. Business rates for retail – shops restaurants etc, with rateable value under £51,000 will be abolished for this year. This has been extended to museums, art galleries, Bed & Breakfasts, sports clubs, guest houses, and others. The retail sector is the largest employer in the region, accounting for 16.5% of jobs, and employing 306,000 people. Cultural economy including sports employs 135,150 people in the region. This effective stimulus will provide support to significant regional sectors, particularly retail, as it absorbs shocks from decreasing footfall and reduced domestic demand due to coronavirus.
The budget was light on DevoNext proposals, however, the supporting document did reveal the increased Business Rates Retention from the original devolution agreements will be maintained in 20-21.
The West Midlands appears to have secured several wins from the Government and the region should be pleased with what it has secured. However, for the levelling-up agenda to be fully realised greater devolution is needed and a fully realised skills strategy is required.
Most importantly, the UK is set to absorb a sharp economic shock from a disrupted global supply chain and reduced domestic demand following a COVID-19 pandemic. The West Midlands is particularly vulnerable to disrupted supply chains due to the high number of businesses that export. Despite the transport and infrastructure funding wins, the £30 billion cash stimulus to the national economy, which will provide West Midlands businesses with a Business Rates reliefs, a Coronavirus Business Interruption Loan Scheme to support up to a further £1 billion lending to SMEs, maybe the most important of them all.
This blog was written by Ben Brittain, Data and Policy Analyst, City-REDI.
The opinions presented here belong to the author rather than the University of Birmingham.
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