Autumn Budget 2017

[edit] The Chancellor's speech

Chancellor Philip Hammond's Autumn Budget 2017 was delivered on 22 November. The main focus of the budget as far as the construction industry is concerned was housing.

The Chancellor highlighted the fact that the number of 25-34 year olds owning their own home has dropped from 59% to 38% over the last thirteen years. The surprise announcement therefore, was that stamp duty has been abolished for first time buyers on properties up to £300,000, or on the first £300,000 of properties up to £500,000 in very high price areas like London. However, the Office for Budget Responsibility (OBR) suggested that such stamp duty cuts could increase house prices by 0.3%.

He also pledged £15.3 billion of new financial support for housing over the next five years, bringing the total support for housing to at least £44 billion over this period. Capital funding, loans and guarantees will support the housing market, boost the supply of skills, resources, and land, and create financial incentives to deliver 300,000 additional homes a year by the mid-2020s. This he suggested would represent the biggest annual increase in housing supply since 1970.

Announcements included:

New money for the Home Builders Fund to get SME housebuilders building.
A £630 million small sites fund to 'unstick' the delivery of 40,000 homes.
£2.7bn to more than double the Housing Infrastructure Fund.
£400 million for estate regeneration.
A £1.1 billion fund to unlock strategic sites, including new settlements and urban regeneration schemes.
Lifting Housing Revenue Account (HRA) caps for councils in high-demand areas to get them building.
£8 billion of new financial guarantees to support private housebuilding and the purpose-built private rented sector (PRS).
An additional £34m to develop construction skills across the country.
£204 million for innovation and skills in the construction sector, including to train a workforce to build new homes.
A further £28m to Kensington and Chelsea Council for help with the aftermath of the Grenfell Tower fire; particularly relating to mental health services, support for the surrounding areas and a new community space.

He committed to making the best use of urban land, whilst continuing strong protection of the green belt, by building high-density homes in city centres and around transport hubs. The government will ensure that councils in high-demand areas permit more homes for local first time buyers and affordable renters.

He then turned to planning, pointing to the fact that in London alone, there are 270,000 residential planning permissions unbuilt. The government will establish an urgent Review led by Oliver Letwin MP to look at the gap between planning permissions and housing starts. An interim report will be delivered in time for the Spring Statement 2018. He threatened to intervene to change incentives to ensure land is brought forward for development, and to use compulsory purchase powers if necessary.

He announced that the New Town Development Corporations will kick-start 5 new locally-agreed Garden Towns in areas of demand pressure and a housing deal with Oxfordshire to deliver 100,000 homes by 2031.

Local Authorities will be given the power to charge a 100% council tax premium on empty properties. This comes after pressure from several councils to increase the current cap of 50%. There will also be a consultation on barriers to longer tenancies in the private rented sector.

The Homes and Communities Agency will expand to become Homes England, bringing together money, expertise, planning and compulsory purchase powers, with a remit to facilitate the delivery of new homes, where they are most needed and deliver a sustained improvement in affordability.

The Chancellor also launched a partnership, between the government, the CBI and the TUC to set the strategic direction for a National Retraining Scheme, prioritised to boost digital skills and to support expansion of the construction sector. This will include £30 million to test the use of artificial intelligence (AI) and innovative EdTech in online digital skills courses. There will also be new employer-designed courses in construction and digital.

The government is working towards a Construction Sector Deal that will support innovation and skills in the sector, including £170 million of investment through the Industrial Strategy Challenge Fund to transform productivity in the construction sector. The Industrial Strategy White Paper will provide further detail on what this funding will support.

The government will use its purchasing power to drive adoption of modern methods of construction, such as offsite manufacturing, with a presumption in favour of offsite construction by 2019 across suitable capital programmes, where it represents best value for money.

Ref: https://www.gov.uk/government/publications/autumn-budget-2017-documents

[edit] Response

In his response to the Budget, the Opposition Leader Jeremy Corbyn said; “...we need a large-scale publicly funded housebuilding programme, not this government’s accounting tricks and empty promises.”

Clair Prosser, BSRIA press officer, said; “It is refreshing to see that The Chancellor, Philip Hammond, has delivered a comprehensive raft of policies that will boost house building which will support both members and the construction industry at large."

FMB chief executive Brian Berry said; "The chancellor appears to be putting his money where his mouth is with the announcement of £44 billion of capital funding... A second major challenge to getting new homes built is the skills crisis we face. In the long run, the only real solution to chronic skills shortages will be a major increase in the training of new entrants into our industry. We are therefore pleased to hear the chancellor has committed extra resourcing to training for construction skills."

Stewart Baseley, executive chairman of the Home Builders Federation said; “As has been proved by numerous independent investigations in the past, house builders do not land bank. House-builders have nothing to fear from a review of land banking and if it identifies non house-builders who are sitting on land and brings that forward for development it would be a positive move."

In relation to training, Liz Jenkins, partner at Clyde & Co, said; “A multi-million pound shot in the arm is of course very welcome but it’s going to take a lot more than retraining some adults to replace the potential outflow of migrant labour post-Brexit, particularly as there is also a question of where these adults are going to come from as unemployment is currently low.

Patrick McMahon, Senior Partner of Bidwells, said; “The support for the Cambridge-Milton Keynes-Oxford corridor will unlock further growth in a region that is already one of our most productive and make a major contribution to solving the housing crisis."

NB: The Autumn Budget was followed by further announcements: