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Budget 2018: borrowing cap removed and money for Universal Credit 09/11/2018 Labelled as Development, Legislation

Following the Prime Minister's announcement of the intention to scrap the Housing Revenue Account (HRA) borrowing Cap, the Chancellor's 2018 Budget confirmed the removal of HRA borrowing caps for local authorities in England and Wales.

 

The removal of HRA borrowing caps became effective from 29 October 2018 in England.

 

Cost estimates provided in support of the Budget, project the additional local authority capital expenditure financed by new borrowing as a result of the lifting of the borrowing caps over the period to 2023/24 to be as follows:

 

2018/19

2019/20

2020/21

2021/22

2022/23

2023/24

£95m

£385m

£850m

£855m

£1235m

£1235m

 

These costings assume that the base includes the impact of the £1billion uplift in borrowing caps announced in the Autumn Budget 2017 ( that borrowing was to begin in 2019/20 but the bidding process for it has been superseded by this policy announcement).

 

Among other housing measures announced in the Budget, the Government confirmed allocation of resources for housing, including:

 

  • £291 million from the Housing Infrastructure Fund to unlock 18,000 new homes in East London through improvements to the Docklands Light Railway
  • A new scheme providing guarantees to support up to £1 billion of lending to small and medium housebuilders
  • £653 million for strategic partnerships with nine housing associations to deliver over 13,000 homes
  • £75 million from the Home Building Fund for St Modwen PLC to fund infrastructure to build over 13,000 new homes
  • A new five year strategic business plan for Homes England.

 

Alongside the Budget, Sir Oliver Letwin published his independent review into build out rates, examining the gap between housing completions and the amount of land allocated or granted planning permission. The review found no evidence that speculative land banking is part of the business model for major housebuilders. The Government will respond to the review in full in February 2019.

 

An announcement was also made in the Budget that the Government has launched a consultation on new permitted development rights, to allow upward extensions above commercial premises and residential properties, including blocks of flats and to also allow commercial buildings to be demolished and replaced with housing.

 

A further announcement was made that the Government will make £10 million capacity funding available to support Strategic Housing Deals in areas of high housing demand.

 

By March 2021, the Government expects to have invested around £22billion in the current Help to Buy Scheme. The Budget contained an announcement that a new Help to Buy Equity Loan Scheme will run for 2 years from April 2021. Unlike the existing Scheme, the new Scheme will be available for first time buyers only and for houses with a market value up to new regional property price caps set at 1.5 times the current forecast regional average first-time buyer price. The caps range from £186,100 in the North East to £600,000 in London.

 

On the back of concerns regarding the impact of welfare reforms and further expansion of the introduction of Universal Credit, the Budget also included a number of changes to Universal Credit including:

 

  • A fixed cash increase of £1,000 to Universal Credit work allowances (the amount that can be earned before the Universal Credit taper rate applies) effective from April 2019
  • Extra help in the amount of £1bn over the current and next 5 years for households moving onto Universal Credit  
  • A revised implementation schedule for "managed migration" of existing claimants to Universal Credit which will start in January 2020 and will end in June 2024.

 

Full details of the Budget 2018 can be found on the HM Treasury website.

 

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