While headlines focused on the immediate cut in National Insurance, the key element of the Autumn Statement was the focus on long term plans aimed at resolving difficulties in the housing and infrastructure sectors. The challenge for the Chancellor is whether the electorate view these plans as credible, given implementation will have started and not completed before the next election.
The housing market has been badly affected by rising interest rates. Housing completions in Q2 2023, at around 40,000, were down 12% on 2022 – ONS. There were hopes of initiatives such as a reduction in Stamp Duty Land Tax for first time buyers or people downsizing, to encourage greater activity with more housing moves.
Instead, the Chancellor chose a different route, focusing on a package of measures to enable development rather than encouraging private sector buyers. Steps will be taken to unlock planning backlogs. Accelerated approval of planning applications for major developments will be for a fee. There will be a new Permitted Development Right to enable conversion of one home into two flats, but what about health and safety issues? New technology is to be introduced to expedite sales and purchases; details are awaited. Transport provision is to be improved with agreed funding of the West Yorkshire mass transit, while East West Rail and a London Docklands rapid bus network are under review. The Affordable Homes Guarantee scheme will be increased by £3bn to help housing associations acquire more homes. While the Local Housing Allowance (claimed by tenants on housing benefit) will rise, it will be capped at the lower end of local rents, so may not attract more private landlords in this sector.
All these efforts are designed to support supply but the current problem is lack of demand. High interest rates and inflation have dampened most people’s appetite to move. Renters, who want to buy, are also faced with rent inflation (5.6% at September 2023 – ONS) so have found it hard to save a deposit. While the Government commitment to increase employee take-home pay, by reducing National Insurance and raising the living wage, is welcomed, this is not enough to get people moving. These promised savings will be eroded as more people move into higher tax bands.
Changes to planning rules will benefit housebuilders, but not yet. Housebuilders are faced with high interest rates, rising material costs, an increased wage bill and shortages of skilled staff. There will be no cut for them in National Insurance. It’s no wonder that housing completions are down – there will be little house building if there are no buyers.
It’s a different story for investors in commercial property. The Government announced permanent tax relief – 100% capital allowances – when they buy certain plant, machinery and IT, which may be extended to leased assets, subject to the results of a consultation. Investors in properties with tenants in retail, hospitality and leisure will be pleased with the freezing of the small business multiplier at 49.9p and the extension of the 75% relief, where eligible, until 2024-25. The continued support will improve the financial viability of these tenants.
The Government policy paper – Getting Great Britain building again: Speeding up infrastructure delivery – took a refreshing approach, beginning with a hard look at past failings. With a focus on speed, certainty, simplicity and delivery, it offers a route map to achieve results, starting with a table of actions for the next 12 months. A Star Chamber is to be created – a ‘ministerially led forum’ – tasked with driving infrastructure delivery, which will not be easy given the complexity of accomplishing goals such as energy security (completion of building the electricity network to be achieved in 7 not 14 years) and transitioning to net zero carbon. A crucial factor will be the leadership of that team, which must engage with diverse interested parties in the public and private sectors, to promote business cases which will attract investment. Expectations have been raised; the hope is for co-ordinated action, not words.
Better news too for investment zones (designated areas, supported by fiscal and regulatory rules aimed at achieving economic growth). There are to be more investment zones – Greater Manchester, the West Midlands and the East Midlands have been added. Funding and tax reliefs for all zones will be £160m (previously £80m), with the tax benefits now extended from five to ten years plus a £150m Investment Opportunity Fund to ensure investment zones and freeports respond quickly to new initiatives. Levelling up is to be implemented with funding for devolution deals in Scotland and Wales and local authorities in England.
There were some technical changes to the Construction Industry Scheme to reduce fraud when gross payments are made; VAT will be part of the Gross Payment Status compliance test. Changes set out in draft legislation in July 2023, for Real Estate Investment Trusts, aimed at improving competitiveness, will become law.
The Chancellor produced a set of aspirational measures for growth but there has to be evidence, for the electorate, that it will deliver on these commitments. Tax cuts will not be enough.
*The views expressed are the author's and not ICAEW's.