In the first multi-year Spending Review since 2021, Chancellor Rachel Reeves set out the government’s plans for both day-to-day and investment expenditure over the next three and four years respectively. Our group chief executive officer Simon Toplass gives his verdict on the announcement from a public sector procurement perspective.
The headline announcement of the £39bn, 10-year Affordable Homes Programme is a seismic shift in the way affordable housing will be funded and delivered over the coming decade, and represents the biggest cash injection into social and affordable housing in half a century.
Programmes such as this are a catalyst for greater stability, innovation and capacity in the housing sector – all of which are critical to meeting the UK’s chronic need for affordable homes.
Setting a decade-long funding horizon also provides much-needed certainty for housing associations, local authorities, and developers – stability which in turn empowers the sector to invest in skills development, modern methods of construction and long-term partnerships. To further support these areas, the frameworks we manage are proven in delivering lower procurement risk and quicker project starts.
By redesignating Homes England as a public finance institution, new financing models will also be brought to the table, which can open the door to larger-scale funding without breaching borrowing limits. For example, the possibility of amortising grants that blend upfront support with repayable investment could accelerate delivery of regeneration or brownfield sites.
This evolution will require the housing and construction sector to adapt quickly to these new funding models and delivery mechanisms, especially when it comes to making sure that procurement can integrate seamlessly with funding and delivery of schemes that are both affordable and high quality.
We are committed to working alongside public bodies, developers, and investors to navigate this complex and changing landscape – to help ensure that the promise of increased, sustained investment translates into more affordable homes built efficiently and sustainably across the UK.
Reducing the capital burden on developers is vital to unlocking the full potential of affordable housing supply – especially where SME developers are involved. Our robust, compliant procurement routes and expert supplier networks are already helping drive down construction costs and timescales, complementing the financial benefits that Homes England’s transformation seeks to deliver. We anticipate increased demand for frameworks that not only meet public sector compliance, but also integrate financial structuring expertise – an area where our collaborative approach can add significant value.
Our recent experience has shown that public-private partnerships involving local authorities, private developers and local consultants offer a model that gets homes and wider development on site much more effectively. It’s a model that does not currently receive the appreciation it deserves, but we are seeing increased engagement with available procurement routes which help facilitate growth.
As ever with such large-scale housing programmes, it will be imperative that positive social outcomes remain at the forefront of the minds of those charged with delivering it – and embedding this into procurement processes and contracts can be effective in assuring that delivery.
For the revamped Affordable Homes Programme to be a success, it needs to ensure that the promise of increased, sustained investment translates into more affordable homes being built, rather than just spreading the existing commitments more thinly. Enabling organisations to maximise social value is at the heart of what we do, so we’re particularly excited to see how this essential responsibility of the built environment sector develops.
Elsewhere, the other clear winners from Wednesday’s review were the health and defence sectors. While the NHS is set to receive an additional £29bn for service delivery, working out at an increase of 2.8% of GDP per year over the next three years, financial support for the Ministry of Defence is to grow to 2.6%.
Overall, with total departmental budgets set to grow by 2.3% a year in real terms, it’s important that money is used effectively and efficiently. Not only to reach desired outcomes sooner and derive value from procurement, but to help justify spending £190bn more than the Conservatives had planned.
Looking at the spending forecast, it’s expected that growth in real terms will reduce in the final three years of this parliament. While government headlines paint a positive picture, real judgement can only be made if and when the initial momentum expected is maintained.
With £113bn allocated for capital spend, the hope is that a strong pipeline of projects across green and nuclear energy, housing and infrastructure come to fruition. From central government to local authorities, the prospect of competitive tendering should excite both our industry and the communities that will benefit.
With any form of public sector, compliance is key – as scrutiny will remain. Now the Procurement Act is also in place and additional obligations must be met, organisations across the public sector will need to balance their ambitions to procure both quickly and compliantly.
I expect this will be particularly true in relation to retrofit and decarbonisation projects, where targets are in place and the clock is ticking. The benefits of energy efficiency work can come about quickly for those living in unsatisfactory homes, which I am sure the government considered when deciding to expand its Warm Homes Plan.
And finally, touching on the £15 billion boost to support regional transport connections, this is welcome news for the towns and cities of the north. The time to talk about connectivity is over, and it’s time to deliver.
As a Hull-based business, we would like to see the vision for proper coast-to-coast connectivity become reality, though we will settle for our surrounding towns and cities first. Not only will this benefit us from a recruitment perspective, but more importantly it will improve many people’s everyday lives and create new opportunities. We’ve seen more rapid evolution of transport infrastructure in the south, so it’s time for the same commitment to the north.
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