The Autumn Budget clearly signalled the government’s intention to look beyond the pandemic to the agenda of rebuilding, including its manifesto pledge to level up the UK.
We need to wait for the promised White Paper to get a more precise definition of what this government means by levelling up, but clearly, it will require huge and sustained investment. Centre for Cities estimated the total cost of levelling up could be near £2trn, the same cost as the reunification of Germany.
The government faces a significant challenge in balancing the books after the unprecedented support provided in the past 18 months. The question is: where will the investment come from?
The answer is from the private sector and from harnessing the capital in sovereign wealth, pensions and insurance funds looking to commit for the long term into sustainable structures and communities. In fact, these are the very sources of funding that characterise the property sector.
Property is a key partner for delivery and the creation of the Department for Levelling Up, Housing and Communities suggests government recognises this. But policymakers must address a number of barriers to investment in town and city centres if we are to maximise the opportunity to align public and private sector funding and deliver transformation on the ground.
First, the outdated and uncompetitive business rates system is a deterrent to investing in town and city centres. Measures announced in the Budget provide temporary relief against the worst impacts of the system, but fall far short of what is needed. The level of tax is simply too high and this must be addressed. The tax needs to be much more reflective of the market through annual revaluations. And bricks and mortar, the fabric underpinning people’s lives, needs to be taxed fairly in a digital economy.
Second, we need clarity on planning reform, which must be closely aligned with levelling up. The commitment to digitisation is welcome, but government should ensure local authorities are equipped to shape local plans and drive regeneration with the private sector.
The government must also take care not to deter the capital it is courting by importing further political, regulatory and policy risk into a sector for which, in many parts of the country, investment is already marginal or unviable. Investors may see through measures such as the commercial rent moratoriums but the abuse of the UK’s insolvency regime is undermining investment in property and must be addressed – something the BPF has long been calling for. The forthcoming review of landlord/tenant legislation is an opportunity to shape a modern relationship between economic partners but must offer investors in UK property a compelling proposition.
Levelling up in a way that allows the UK to meet its carbon reduction targets is a challenge beyond anything government or the industry has faced. It is also a once-in-a-lifetime opportunity for public and private sectors to come together to reshape the UK economy and society. Our industry has a vital role to play in helping to deliver this vision.
Melanie Leech is chief executive of the BPF