Chancellor of the Exchequer Phillip Hammond announced new housebuilding investments in his first Autumn Statement (23 November), along with new funds for roads and to improve the UK's digital infrastructure.
Mr Hammond said the Autumn Statement would "prepare our country to seize the opportunities ahead and create an economy that works for everyone".
Many of the changes introduced were part of the Chancellor's plans to prioritise high value investments in infrastructure and innovation to boost the country's productivity, which, according to Mr Hammond, lags significantly behind countries such as the US, Germany and France. "Too many British workers work longer hours for lower pay than their German counterparts,” he said. "This must change to deliver higher living standards for British workers."
Following on from the £3 billion Home Building Fund for England announced in October, the government has now allocated a further £3.7 billion of spending for a variety of housing projects over the next five years. Acknowledging that one of the biggest objections to new housing developments at a local level are its impact on the local infrastructure, Mr Hammond allocated £2.3 billion of this spending for infrastructure projects – such as roads – to support the building of up to 100,000 new homes.
A further £1.4 billion will be used to boost affordable housing in England, with the Treasury estimating this could lead to 40,000 more affordable homes being built. Local authorities will be able to access this second fund through the existing Shared Ownership, Rent to Buy or Affordable Rent schemes.
While announcing further devolution of power to regional governments, an investment package for London was also outlined that would, the Treasury said, allow 90,000 affordable homes to be built in the Capital.
Government will relax the current restrictions on its grant funding, in order to allow a more varied mix of affordable homes to be built. Work will also begin on a White Paper in due course to investigate the "urgent" challenges that currently face the housebuilding sector.
Mr Hammond said this new funding would, in real terms, more than double the government's capital spend on housing, which he described as "a step change in our ambition to deliver a housing market that works for everyone".
Other infrastructure investments announced during the Autumn Statement included:
Addressing the wider economy, the Office for Budget Responsibility (OBR) has upgraded its projected growth forecast for 2016 to 2.1% (up from 2.0%), but has downgraded its 2017 forecast to 1.4% from 2.2%. This, the Chancellor said, was as a result of lower investment and weaker consumer demand, as a result of higher inflation and continuing uncertainty.
According to the OBR, UK growth by 2020 will be 2.4% lower than it would have been had the UK voted to remain within the European Union.
Turning to taxes, Mr Hammond confirmed that government still planned to reduce the rate of Corporation Tax to 17% by 2020, as was announced in the March Budget, and that April 2017's planned increase in the personal income tax threshold to £11,500 would go ahead. Mr Hammond also announced that by the end of this Parliament, they would increase the threshold again to £12,500, and the higher rate income tax threshold would rise to £50,000.
In April 2017, the National Living Wage will increase from £7.20 to £7.50 while, in June 2017, the rate of Insurance Premium Tax will increase from 10% to 12%. The government will, however, introduce legislation to limit the maximum compensation payable to whiplash claims, which it says will reduce average motor insurance premiums by £40 per year.
The planned increase in Fuel Duty is being cancelled for the seventh successive year, which Mr Hammond said was an average saving of £130 per year for car drivers, and £350 per year for van drivers.
The construction industry reacted positively to the additional housebuilding investment.
"More money for new houses means more work for plumbers and installers - good news all round then,” said Martin Hurworth, managing director of Harvey Water Softeners. "40,000 may be a fraction of the number needed to meet the UK's housing crisis but it's a start, and a signal that the government intends to make construction a priority for the rest of this Parliament.
"Other measures such as a drop in corporation tax and a rise in the National Living Wage will reassure many small businesses and sole traders, but the success of today’s statement will depend on what Brexit actually looks like once we start negotiating next year."
David Roberts, managing director of Nu-Heat, also welcomed the Housing Infrastructure Fund, on top of the £3 billion Home Builders' Fund that was launched in October. "It's also encouraging to see that the Government’s Housing Infrastructure Fund will spend £2.3 billion improving infrastructure in high growth areas, along with a further £1.4 billion to deliver new affordable homes.
"This means that providers are urged to widen the types of houses they build, and should encourage many more first time homes. Today's statement hasn't fully answered the question of whether we'll get a 'housing market that works for everyone,' but if these plans come to fruition it will feel like a step in the right direction."
The UK Green Building Council (UK-GBC), while also welcoming the boost for affordable housing, warned that energy bills are a growing financial concern for many families, and that these new homes must be built to high energy efficiency standards to make them cheaper to heat and healthier to live in.
"Government must do more to ensure that our homes are cost effective to run in the long term," said Julie Hirigoyen, chief executive at UK-GBC.
Ms Hirigoyen's call was echoed by the Solar Trade Association (STA), which expressed its disappointment that the Statement had no mention of climate change or renewable energy.
Leonie Greene, STA's head of external affairs, commented: "Only the week after the UK ratified the Paris Agreement, the Chancellor made no mention of climate change. It is deeply frustrating at this point in time that we have to battle against a tax regime that is rewarding investors in fossil fuels over solar energy. Very modest intervention is needed to unlock a billion of investment in solar over this Parliament. The UK economy, as well as the climate, urgently needs this investment."