A less than enthusiastic response from the Office for Budget Responsibility (OBR) following the Spring Statement by the Chancellor of the Exchequer. Economic growth forecasts have been cut from 2% to 1% for 2025 and by the end of the parliament, fiscal headroom will stand at £10 billion, which in the words of the OBR ‘remains a small margin against the risk of further shocks to interest rates, productivity, or global trade’.
There was also disappointing news for those attached to the 1.5 million new homes target by the end of the parliament. The OBR today forecast that even with the recent interventions in the planning regime, the country is on track to build under 1.3 million new homes during this period. This figure, the OBR states, could be revised down further to 1.2 million due to capacity constraints or local opposition.
Pre-announcements already highlighted an additional £2 billion for social and affordable housing for 2026-27 – creating up to 18,000 new homes, with a £625 million funding package for skills in construction, expected to provide up to 60,000 more skilled workers by the end of the parliament.
In June, the government will make further announcements on wider long-term investment into social and affordable housing through the Spending Review, to give social housing providers ‘the stability and confidence they are calling for’. Ahead of the Spending Review, the £2 billion announcement is intended to give providers greater certainty in the short term and give them confidence to continue investing in their development pipelines.
The Spring Statement also confirmed news of the postponement of the Building Safety Levy by a year to 1 October 2026. Exemptions on the levy, which is designed to raise revenue to be spent on building safety include affordable housing, and developments with fewer than ten units. Previously developed land also benefits from a 50% reduced rate to help ensure these sites remain viable.
The OBR notes that pressure on local authority finances remain a substantial risk to the public spending forecast. Local authorities have statutory duties to provide a range of services, such as temporary accommodation or social housing for homelessness and social care for adults and children, where demand has increased significantly in recent years.
The Government has already granted 29 out of 317 local authorities in England ‘exceptional financial support’ (EFS) in 2025-26 to use capitalisation directions, allowing them to use revenue from asset sales or borrow from the Public Works Loan Board (PWLB) lending facility for current spending. The Government has not yet set out how local authority spending pressures will be managed after 2025-26 in the next Spending Review period.
Lee Goodenough, Director at Harmony Fire, commented: “Despite the supportive words from the benches directly behind the Chancellor during the Spring Statement, there is no doubt that today’s announcement underlines the significant challenges facing the UK economy today and over the course of the parliament. Much will be made of the OBR’s dose of realism over the 1.5 million new homes target, which Rachel Reeves admitted in the chamber was now reduced to 1.3 million homes, but the growing squeeze on local authority finances could have a profound impact on budget decisions around resident safety programmes in existing homes.
“It is now more important than ever that landlords prioritise those safety interventions and upgrades that are the most consequential to protecting the lives of residents. With budgets under so much pressure, as a society we cannot afford to misallocate resources on low level actions that will not save lives or stand up to scrutiny when an emergency situation occurs.”