Quote of the Day
“A promising young man should go into politics so that he can go on promising for the rest of his life”
It’s Budget Bingo – just how many times did Hammond commend the ‘hardworking British people’, and has he been watching us all individually? If we haven’t worked hard enough, will we not be getting a present from Santa this year?? Apparently we have been very good boys and girls and the economic outlook is rosy – no really, that’s what he said and no one in government would lie to use would they? Apparently Britain is in the midst of a jobs miracle – all those workers from Toys R Us, Debenhams, House of Fraser, Maplin, Mothercare and BHS (not to mention the workers from Ford and JLR who are having an extended holiday this autumn) must be delighted.
Hammond made a bold opening statement announcing that the cuts of the past few years were not driven by ideology (tell that to the NHS and public sector workers). Although, given the complete disarray of the Conservative Party, it is difficult to distinguish which ideology in particular is driving the system at any one time. At the same time he hailed the remarkable achievements of the British people in dealing with the cuts, I’m not sure that most of the British people were actually consulted on any of it though – perhaps we should have had an Austerity Referendum, or better still, a Referendum on every Budget? That would be fun.
In exciting news, depending on the outcome of Brexit (deal or no deal, you decide), there is the potential to upgrade the Spring Statement to a full fiscal event, which would sound a bit rude coming from anyone else, but just sounds dull from Hammond. And maybe that explains why he is in his job. The following document is long, but bear with it, the speech was light on housing and planning but the document was heavy – I have highlighted the key areas for easier skimming.
Stealing Corbyn’s Thunder
In a sign that the Government is clearly worried about the Labour party when it comes to the next election, there were a series of announcements taken directly from the Labour playbook
- Money for the NHS – clearly aiming to demonstrate that the Government isn’t actually seeking to systematically dismantle it as a public service. New Mental Health Crisis Service and huge investment into CAMS. Very topical currently – and, genuinely, very much needed. That said, the 10 year plan for the NHS has yet to be published so maybe we should wait for the detail before we get too excited.
- A further £650m of grant funding for English authorities – doesn’t really touch the sides of the cuts but hey, its still cash that no local authority will refuse.
- VAT donation of £10m to armed forces covenant fund trust to support veterans with mental health needs marking 100 years since the end of World War One. You could argue that instead of a one off donation there should be a long-term and ongoing investment into this. Or maybe that is just ungrateful.
- Funding also to go to Holocaust memorials – basically a bit anti-semitism announcement which would have been somewhat classier without the jibe at the Opposition – some things are more impactful when you don’t actually say them.
- A one off capital payment directly to schools of £10,000 per primary school and £50,000 per secondary school to buy equipment.
- No further PFI contracts to be issued.
So, the detail of what exactly lifting the cap on borrowing for local authorities would mean, appears to be that it is abolished entirely. Which is really quite significant. Local authorities actually will have the ability to become housebuilders – whether on their own or in partnership – but certainly have significant freedoms that they haven’t had for many years. Realistically, this is the only way to address the need for affordable housing and is a bold move, one which Labour will support fully but probably won’t want to admit to.
Housing and Infrastructure
The Transforming Cities Fund will receive an extra £240m to be given to the six metro mayors with £21m going to Cambridgeshire and Peterborough, £69.5m to Greater Manchester, £71.5m to the West Midlands, £23m to the West of England, £38.5m to Liverpool City Region and £23m to West of England.
The government is also consulting on making it mandatory to provide gigabit capable connections to all new build homes. Which raises many questions is homes are being built in areas where the network is not in place and what that actually looks like in practice.
Key announcements include:
- £291m from the Housing Infrastructure Fund to improve the DLR and unlock 18,000 new homes (no, I don’t have any more detail than that, and yes, this is very interesting so detail would be helpful)
- £1bn of funding to the British Business Bank for SME housebuilders
- £653m to establish strategic partnerships with nine housing associations to deliver over 13,000 new homes
- St Modwen are the housebuilder of the moment clearly, with £75, going to them to fund infrastructure to build over 13,000 new homes. Is it just me or does it seem odd that one individual housebuilder gets a mention and a huge wad of cash??
- A new five year strategic business plan for Homes England to be published on Wednesday
- Additional £500mto take the HIF to £5.5bn and unlock 650,000 homes.
- Parishes and neighbourhoods are to be enabled to build homes for sale with funding provided for local areas to deliver homes at a discount in perpetuity. This is basically continuing the drive to support local areas setting up Community Land Trusts.
- As expected, a consultation on new PDR for upward extensions and to allow commercial buildings to be replaced with homes.
- Introduction of a simpler developer contribution system along with a Strategic Infrastructure Tariff for Combined Authorities… Watch this space on that one.
Help to Buy will – in theory at least – close in March 2023. This extends it from 2021 and allows some further pipeline planning but gives a much more fixed end date than has been the case to date. This may well have an impact on the shares of the larger housebuilders as well as future housing development. It may also have an impact on built to rent, which has a great opportunity to move to fill the gap in supply if areas where market sales are likely to reduce.
Government is also keen to encourage a ‘new wave’ of shared ownership homes, inviting people to work directly with central government – as opposed to local authorities – to deliver those homes. I am a little confused by the lack of detail on this and what the government is actually trying to achieve specifically…
I like the idea of ‘unlocking’ homes but I’ve never really understood what it actually means. Government seems to be keen to avoid using the word ‘building’, so I take unlocking to mean – ‘we are giving you the tools and cash, therefore we abdicate all responsibility and any failure to build will not be ours and we can just blame you’. Or maybe that is just 20 years of analysing Budgets for housing announcements that has made me weary…
Government is also finally attempting to get its own house in order by creating a Digital National Asset Register to better manage and commercialise the £420bn of government property assets. It would indeed be a revolutionary thing if government actually knew what it owned and had an idea of what to do with it.
Whilst the Conference announcement threw a considerable number of cats amongst some very easily agitated pigeons by announcing a 2-3% SSDLT levy on non UK buyers, this has been quietly watered down to Government announcing that it will publish a consultation in January 2019 on a Stamp Duty surcharge of 1% for non- UK residents. Perhaps the slide in shares of major housebuilders – and the subsequent impact this has on pensions across the board – gave pause for thought.
The overall focus is on improving the lot for first time buyers with Stamp Duty relief to be extended to shared ownership properties up to £500,000 and applied retrospectively to the last Budget.
Capital Gains on Second Properties
Demonstrating once more that government is keen to crack down on the accidental landlord market, a further crackdown in lettings relief was announced. From April 2020 this will only apply where the owner shares occupancy with the tenants. This is all logical in principle but there is a question as to whether the nascent (albeit extremely buoyant) build to rent sector is mature enough and widespread enough to fill the gap which is likely to be left as private sector landlords leave the market.
This is a step back from the 2-3% announced at Conference and is a consultation rather than an immediate introduction so gives some breathing space.
The Future of the High Street
Clearly, High Streets are facing challenges and many local authorities are unsure how to deal with rapidly changing fortunes and struggle to let go of the traditional idea of a High Street anchored by large footprint tenants. To support high streets, government is proposing:
- The modernisation of UCO and CPO regime to facilitate transformation of the High Street. Surely this will also bring into question a whole raft of issues to do with UCOs and a push from some within the BTR sector for a specific UCO?
- For the next two years up to revaluation, all retailers in England with a rateable value of £51,000 or less will have bill cut by 1/3 – what about all other businesses?? Or does being a small business only count if you are a shop?
- A Future High Streets Fund of £675 million to invest in infrastructure etc.
- Proposals for business led development corporations.
- The ability for local authorities to bid for funding at preferential interest rates to support local infrastructure projects.
The conversion of commercial space is potentially the real controversial point – does government risk attempting to solve a housing crisis by creating a future employment crisis? It is already unpopular with local authorities. At the very least this should be contained within a broader masterplan for high streets and town centres which enables a vision bringing in homes at the same time as allowing the high street to evolve but without decimating employment.
We are looking through this in more detail for what is sure to be a thrilling conclusion to a frankly white-knuckle ride of a reporting process so far. However, for now, our immediate take is: there is no landbanking, just maybe do a masterplan and build a few different types of housing.
Also, maybe find a few more bricklayers as post March 2019 we’re probably all doomed if we want anything built. But not to worry as the government has a plan for upskilling UK workers and learning on the job, so if anyone wants their house built by a some construction workers who have never laid a brick before, sign up now!
One little nugget – Letwin suggests that viability is not an excuse to not deliver particular types of housing and that applicants will need to basically sell of parcels of land for other developers to build the bits they won’t/can’t build.
Important to note that this is all recommendation and it really comes down to what Government decides to do with it. If they are brave they may make some changes in the new year, if not they may announce some more consultations.
In a follow up to the ‘Back Business’ comment by Theresa May, Hammond announced that the government will back enterprise and the market economy which underpins it. Although, based on the references Hammond used, our industrial strategy appears to be based on those modern day heroes, George Stephenson, Brunel and Faraday. I guess he couldn’t mention Tim Berners Lee at the same time as announcing a tech tax…
Government will stimulate business investment through:
- Increasing annual investment allowance from £200K to £1m for two years
- Providing permanent tax relief for new non residential structures and buildings
- Additional £200m of funding to British Business Bank
- Extending Start Up Loan funding to 2021
- Halve amount small firms contribute to taking on apprentices from 10% to 5%
- Employment allowance doesn’t provide an incentive for larger businesses. Will target it at businesses with NI bills of under £100m per year
- Retention of entrepreneurs relief with period extended from 12 months to 2 years
Tech tax – aiming for new global agreement but progress painfully slow. UK unilaterally introducing a UK digital services tax, narrowly targeted on UK generated revenues on digital platforms, tech giants not tech start-ups. Not an online sales tax as that would fall on consumers. Fall on companies generating at least £500m per year and are profitable (cue a load of businesses suddenly becoming really unprofitable in the UK but very profitable in Southern Ireland).
So, it’s all clear then. Brexit isn’t a problem. Hammond has saved the UK economy and, to paraphrase Michael Fish circa 1987, ‘don’t worry, there’s no political hurricane coming’…