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150,000 new affordable homes to be built in next four years

Announcing plans to slash the Department for Communities and Local Government's budget by over 30%, the Chancellor of the Exchequer, George Osborne, reaffirmed the government's commitment to widespread reform of the planning system, including devolving a swathe of powers away from central government.

After months of speculation, Osborne announced the results of the government's four-year Comprehensive Spending Review (CSR) to parliament this afternoon, disclosing the deepest cuts the country has seen for decades.

The CSR was conducted in response to Britain's budget deficit and has been a contentious issue politically, with some accusing the government of using the review to make ideological cuts, going further than is absolutely necessary. The government claims its cuts are needed to reign in Britain's budget deficit, the largest in peacetime history.

On average, departmental budgets will be cut by 19% over the next four years, with around 490,000 public sector jobs likely to be lost. Osborne began his speech by declaring that this was the moment that "Britain steps back from the Brink". Commenting on the job losses, he said: "We feel responsible for every individual who works for the government and will do everything we can to help them find new jobs."

Following the announcement during the Conservative party conference that child benefits would be cut, the welfare budget faces an additional £7bn reduction. Other important announcements included police funding, due to be cut by 4% per annum, and the retirement age which will rise to 66 by 2020.

The NHS budget was ringfenced by the Conservatives prior to the election along with international development aid, and the government will provide an extra £2bn towards the cost of social care. Some commentators, however, have suggested that with inflation and increased need, this could have more or less disappeared by 2014.

Of particular importance to the planning sector is the DCLG budget, which will be reduced in real terms by about 33% by 2014-15. Council's will face cuts of around seven % per annum to their own budgets. KPMG, the national auditor, predicted this would "severely test the financial viability of some councils".

Although Osborne committed the government to build 150,000 affordable homes in the four-year period the review covers, the budget for social housing itself will be cut by 60 %.

Osborne used the speech to reaffirm the government's commitment to localism, noting that the changes currently being implemented to the planning system marked a "dramatic shift in balance of power from central to the locality". Part of this reform, he said, meant making the social housing system "more flexible... We will reform the planning system so we put local people in charge, reduce burdens on builders and encourage more homes to be built, with a New Homes Bonus Scheme."

Some projects currently in the pipeline were spared the axe, as Osborne pledged the government's commitment to the refurbishment of the Tyne and Wear metro and Tees Valley bus network, rail electrification between Manchester, Liverpool, Preston and Blackpool and a new suspension bridge over the Mersey. The Crossrail project in London will go ahead.

Osborne also announced plans to implement the TIF (or Tax Increment Funding) scheme in order to fund key projects. The system, widely used in the USA, operates by borrowing against future increases in locally collected business rates. The government will also provide £1bn for a Green Investment Bank and £200m for offshore wind farm and manufacturing at port sites.

Responding to the announcement, shadow chancellor Alan Johnson said the Labour opposition believed there should be a "more gradual reduction, securing growth." He said: "I don't believe that the prime minister or the chancellor sufficiently understand the worries and concerns of families up and down this country - and I think those worries will have multiplied considerably as a result of his statement today."

David Orr, chief executive or the National Housing Federation, said that the cut to the housing budget reflected the government's priorities, of which providing affordable housing was no longer an important one. "The harsh reality is that because of these cuts, the new social homes this country so desperately needs can now only be built by dramatically increasing rents for some of the most vulnerable and poorest in our society."

Chief executive of Shelter, Campbell Robb, accused the government of "turning its back on those most impacted by our affordable housing crisis." He said: "The triple worry of cuts to housing benefit in the emergency budget, the slashing of the affordable house building subsidy, changes to tenancies and council house rents, coupled with a total lack of vision for the nation's long term housing needs, will be devastating. 

"They show the government is completely out of touch with how millions of people across the country already face a continual struggle to find and keep a decent affordable home. These policies, and more importantly lack of policies to address our housing crisis, will see the door firmly closed on the aspirations of a whole generation for decent, secure, affordable housing to rent or buy."

Charles Mills, head of planning at Knight Frank, was more positive, arguing that the New Homes Bonus Scheme offered a "real incentive for some local authorities to encourage house building in their areas."

He added: "The proposed 150,000 new affordable (intermediate rent) homes hints at the need for local authorities to take a more active role in their delivery."

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