Turbulence Ahead 

Some assumed the arrival of a Labour Government would herald a smoother ride for a Labour-dominated London, after a turbulent few years. And more so given the city’s key role driving the nation’s prosperity and the Government’s determination to kickstart economic growth, reiterated so strongly last week in the Chancellor of the Exchequer’s speech.  

But, as we start the year, things could get bumpy, and particularly so across the built environment. Here’s my nine takes on what to watch for in the coming months, so please fasten your seatbelt and place your tray in the upright position.  

1. How will the Government square levelling up with a short-term dash for growth? 

They won’t, and it might lead to backlash from the north and the Midlands.  

Here’s the dilemma – the Government wants to boost the nation’s level of growth but at the same time narrow the gap between the most and least prosperous parts of the country. Levelling up as a slogan might be dead, but the ambition lives on.  

The last Government discovered the difficulty of squaring these two ambitions – solving levelling up will take decades and requires billions in investment, yet the nation must pay the bills today. The slowdown in the economy is compounding matters, with Ministers scratching around for anything that boosts confidence.   

So where does this leave us? With little money, Ministers – mindful of the political cycle – want shovels in the ground now to maximise growth before the next election. Might this mean that projects (such as Northern Powerhouse Rail) – which are some way from the start of construction – look less attractive than schemes ready to go, just waiting for the money from the Treasury? Quite possibly. That some of these projects, itching to get going, happen to be in London and the south-east complicates matters. I’ll return to this later. 

And as we’ve seen with the announcement that the Oxford-Cambridge Arc (now known as the Oxford Cambridge Growth Corridor) is to get rocket boosters under it, Ministers aren’t shying away from focusing on high growth industries in the wider southeast. 

2. How big a cost is the Government prepared to pay for supporting Heathrow’s third runway? 

I’m not sure if anyone has thought that far ahead. 

The Chancellor has signalled the Government’s support for a third runway. On the face of it, it might seem like a win-win – it signals Reeves’s determination to support growth however difficult the decision. At the same time, Reeves stressed that there mustn’t be any call on public money.  

Support for a third runway comes with both political and economic costs, and this story is likely to run and run, becoming a significant issue in London’s political scene right up to the next local elections (and beyond). But with a majority of 174, the Government will have factored in that even with a chunk of their own MPs opposed, it still leaves plenty more to get it over the line. Besides, with a strategy for the next General Election focused on taking on Reform in the north and Midlands, Labour has probably concluded the loss of some MPs in London is acceptable collateral.  

3. Will we see Sadiq Khan and Andy Burnham on the same side? 

On Heathrow expansion, we could do – but don’t expect them to lie in front of any bulldozers together any time soon. 

The third runway is opposed by some MPs and council leaders representing patches under the flight path to Heathrow and the Mayor of London has made clear he continues to be against the plans. Yet it’s by no means a united front – some London politicians will be in favour, as are most of the city’s business groups. What this means for the London Growth Plan (which is a matter of weeks away from publication), given the hard work that’s gone into creating consensus between City Hall, Town Halls, the private sector and central government, remains to be seen. 

As in past campaigns against airport expansion, we could see a coalition across political parties that stretches beyond London. Opposition may come from even further afield – Greater Manchester Mayor Andy Burnham has questioned the merits of expanding an airport in an already over-heated part of the country. 

4. What might the Mayor extract from the Government to soften the pain? 

If he’s canny, cash for a wish list of public transport improvements, designed to mitigate the impact on air quality and congestion.  

Given the Mayor’s previous legal challenge failed, it’s unclear if there is scope left for this to be pursued further. Instead, in return for muting his disquiet over the third runway, the Mayor might demand funding for a swathe of improvements to public transport in and around West London. Top of the list would be the modernisation of the Piccadilly Line signalling and resurrecting southern and western rail access to Heathrow, but as with any good negotiating tactic, always start with much more than you actually want. Crossrail 2 back from the dead, anyone? 

5. How will the new borough housing targets go down? 

It’s going to be a bumpy ride.  

With the new London Plan process underway, not only must it reflect the raft of planning reforms flooding out of Whitehall, but also the significant uplift in the capital’s housing target. Some boroughs face eyewatering increased expectations for new homes, albeit London has failed to achieve the old targets let alone even higher ones. But for many in the sector, it’s the impact current viability pressures are having on the ability to build in London that is the pressing challenge. Expect more pressure to be heaped on City Hall and the boroughs to relax some of their planning demands to help unlock the system. How far will the City Hall be prepared to bend, and how much pressure might Ministers place on the Mayor? 

6. And on this point, might Ministers’ patience wear thin with London over new housing numbers? 

It might do if the construction of new homes doesn’t pick up soon.  

Ministers, with the enormous 1.5 million new homes target, know how critical London is in achieving this – the slowdown in the capital is a headache. Some may argue Whitehall doesn’t understand the complexities of London’s built environment sector, even with the Housing Minister, Matthew Pennycook, being an MP in the capital.  

But the fact remains that Ministerial frustration could tip over into a blame game, with the Mayor and councils in the firing line. This might spill into the open but few politicians like public spats with their own side – but the pressure behind the scenes could still ratchet up considerably. 

7. Will London see any devolution? 

The signs don’t look encouraging.  

The Government’s devolution agenda is about life beyond the M25, with little of significance for London beyond a commitment to review the Greater London Authority Act 1999 (good luck to those engaged on this mammoth task) to ensure it’s still fit for purpose and a working group to look at the powers held by other similar global cities. If these amount to more than just a tidying up exercise and a talking shop and seriously explore greater powers for the councils and Mayor, then it could get interesting. 

City Hall will be keen to exploit the current favourable political climate by gaining more power over housing, planning and transport. The establishment of Oxford Street’s new Mayoral Development Corporation (MDC) may lead to more MDCs across London, with Euston seen as the most likely next location. The Mayor may also use this window to gain Ministerial approval for re-allocating some borough roads to TfL’s control (bringing them into the Red Route network), particularly in key spots where there is a history of clashes over cycling infrastructure.  

8. Is this the year the BLE and DLR Extensions are finally approved? 

I hope so, but the politics make it tricky.  

June’s Comprehensive Spending Review looms large – the Mayor will push hard for a big increase in the affordable housing budget, plus a multiyear settlement for TfL’s capital programme. As well as exploiting Heathrow expansion to secure additional funding, some projects (the Bakerloo Line and Docklands Light Railway extensions) are pretty much ready to go, but need funding.  

If the Government is serious about promoting growth and unlocking new homes, both ought to have a good chance of being green lit. The DLR Extension itself could unlock over 15,000 new homes, more than what the Government has in mind for their ‘New Towns’. But the nervousness of being seen to favour London over the north and Midlands may well damage their chances.   

9. What does the future hold for London’s local authorities? 

I doubt there’s much let up for council bosses trying to balance their budgets.  

For London’s local authorities, the big ask is a sustainable, long-term funding settlement. It’s fair to say the enthusiasm of council leaders at a change of government might be wearing off, as we’ve seen from Monday’s statement from London Councils. 

Many thought the cycle of short-term sticking plaster funding settlements would be broken, but so far this has continued. Councils didn’t get as much money as they felt was needed to cope with temporary accommodation pressures, and so the threat of some declaring s114s has merely been pushed down the line. Newham has in the last week received dispensation to raise council tax beyond the threshold where a referendum would normally be required – others may be forced to seek similar flexibility in 12 months’ time. 

The boroughs will remain hopeful that radical reform of local government funding will still happen, but whether that comes in time to help councils over the coming year is another matter. The impact on the delivery of basic services and the message it sends to those wanting to invest in an area if the council is effectively bankrupt cannot be underestimated.