Blog

27 November 2015

Blog: D2N2 Chief Executive David Ralph on the Comprehensive Spending Review

David Ralph, Chief Executive of the D2N2 Local Enterprise Partnership, looks at the further details behind this week’s Comprehensive Spending Review from the Chancellor.

There were a lot of positives in the Chancellor’s Spending Review.

We had the commitment to LGF funding; the extension of capital allowances at Infinity Park at Derby, part of the Nottingham and Derby Enterprise Zone we are investing in, to ease businesses’ tax burden; and the £1.25million HS2 Growth Strategy funding for Toton.

However, we had hoped to hear more about the ‘Midlands Engine’ and of the practical measures the Government will bring in to support it. Similarly, there was a lot on Devolution for other UK areas but no big announcement on our area’s deal; which we are continuing to negotiate for and hope to shortly conclude.

My takeaway points of things significant for our area, and the D2N2 Local Enterprise Partnership and its Growth Hub, were:

*Local Growth FundThis will remain at £12billion between 2015/16 and 2020/21. This means indicative Growth Deal allocations and core funding by Government for LEPs are confirmed, subject to local match funding. I understand that all 2016/17 and 2017/18 LGF indicative allocations have now been confirmed. The timetable for the outstanding £4.3bn not yet allocated from the £12bn will emerge in the coming months.

*Enterprise Zones – The Spending Review announced 18 new Enterprise Zones and the extension of a further eight, in addition to new Zones previously announced in Plymouth and Blackpool. This included the extension of capital allowances for the Infinity Park site in Derby. Further information is available at: www.gov.uk/government/news/the-new-enterprise-zones

*Devolution –The government has agreed that in 2017, there will be at least five new Northern Mayors, covering 54% of the population of the North, backed by over £4billion in central funding. There was no big announcement on our area’s Devolution deal but we are continuing negotiations, which we hope to shortly (and successfully) conclude.

*Housing – The Spending Review announced a doubling of the housing budget from 2018/19 and set the target of 400,000 affordable housing starts by 2020/21, as well as a five point plan for housing, including further planning reform. This will assist the housing targets of the D2N2 LEP.

*SkillsThere will be an extension of advanced learning loans to cover Level 3 and 4 courses for young learners (aged 19 to 23), and Level 5 and 6 courses for all learners. Funding will be protected for “core adult skills participation budgets in cash terms, at £1.5billion. Sixth Form colleges will be allowed to become Academies – so they no longer have to pay VAT. The Apprenticeship Levy for employers will be set at 0.5% of their pay roll cost and offset by a £15,000 allowance. This means an employer would need payroll costs in excess of £3m to pay the Levy. 

*Transport – A £1.25million HS2 Growth Strategy fund was announced for Toton, proposed as a hub for the planned HS2 (High Speed 2) line. There were no similar references to Sheffield or Leeds, and no big announcement on Phase 2 of HS2. So this area appears to be ahead of the rest of the Eastern leg, at least for the time being.

The Midlands Connect initiative by business, national and regional transport agencies, and local authorities to integrate transport networks across the Midlands was given £5million in the July Budget.

The Chancellor has now further announced the Government will work with the Midlands to create a Midlands Connect Strategic Board. Members will include the Department for Transport, Highways England, Network Rail, HS2 Ltd, and Midlands’ local authorities and Local Enterprise Partnerships.

The Chancellor argued businesses “need an active and sustained industrial strategy” and confirmed the continuation of the Industrial Strategy launched in the last Parliament. Although not specifically mentioned, the Strategy confirms the Department for Business, Innovation and Skills will maintain Innovate UK support for businesses, and funding for aerospace and automotive technologies in cash terms.

*Low Carbon/Energy – £60m will be invested in the new Energy Research Accelerator – a major project to develop future sustainable energy technologies – by a partnership of the British Geological Survey in Keyworth, Nottinghamshire; and Nottingham, Loughborough, Leicester, Birmingham, Warwick and Aston universities. Development of ‘low carbon technologies’ is one of D2N2’s eight key sectors.

*Business investment – Building on their ongoing collaboration, all 11 LEPs in the Midlands are working with Government to maximise the impact of the new round of European financing for smaller businesses across the Midlands.

A £5 million sum will also be provided to develop the ‘Midlands Engine’ Trade and Investment Plan, to market the world-leading strengths of the Midlands overseas; including through an integrated events and trade missions programme, new specialist advisers and new resources to support inward investment.

The Spending Review repeated the requirement, announced in the Chancellor’s speech to the Conservative Party Conference in October (2015), that “a vote of the majority of the business members of the LEP board” will approve the addition of a premium to business rates to pay for new infrastructure.