The housing sector has responded to Chancellor Jeremy Hunt’s first Autumn Statement, in which he outlined a series of measures designed to protect the UK against global economic forces, but also provided some relief to businesses expecting more hardship, and less cuts in expenditure than many had foreseen.
Chancellor Hunt left Labour somewhat disarmed as he announced protections for the poorest in the cost of living crisis, for example in announcing that social rent would be capped in 2023, and a total of £2.8bn spending on social care. He also recommitted to the UK’s COP26 climate goals, and announced a further £6bn would be spent on achieving the targets in 2025. He also announced a target of a 15% “reduction in energy consumption by businesses and industry” by 2030, but it was unclear how this relates to previously announced goals.
Countering rumours that government infrastructure spending would be a casualty, Hunt recommitted to £600bn of spending over the next five years, including HS2 to Manchester, and nuclear plant Sizewell C’s construction. There was however no mention of precedessor Kwasi Kwarteng’s 138 prioritised infrastructure projects prioritised, suggesting these have been shelved.
Hunt promised a £14bn “tax cut” in business rates, particularly targeted at helping smaller firms, but an increase in the energy profits levy for large energy firms from 25% to 35%. There would also be a new “temporary” 45% tax on electricity generators from 1 January 2023.
To assist with inflationary pressures, interest rate rises and the downturn in house prices, Hunt gave homebuyers a stay of execution on the stamp duty cut, until March 2025. He also announced that tax perks would be restricted to clamp down on “fraudulent R&D” in SME businesses.
Following the Statement, Jeremy Raj, National Head of Residential Property at Irwin Mitchell commented: “It appears that once again the Chancellor of the day has been unable to resist tinkering with SDLT. However, there will be relief within the industry and for many buyers that all he has done is to stretch out the September ‘cuts’ until the end of March 2025, and there is nothing new or more complex to contend with. The industry will this time round be much more focused on how the markets react, and – ultimately – whether the cranking up of interest rates will continue apace. Frankly, given the ups and downs of recent times, many will question this Government’s ability to say what will be happening in March 2023, let alone in 2025, but there will be some sighs of relief from those currently mid-transaction that they will still be paying what they expected in SDLT.”
Consider the impact on taxes, he continued: “The hefty increase of 10.1% for the 2023-24 charging period was of course a choice, and represents a continuation of the Government’s antipathy towards corporate structures and landlords in general. Coupled with the new (returning) Secretary of State’s pronouncements regarding housebuilders, it seems that the industry continues to find itself out of favour at a time when it’s energy and enthusiasm is most needed. This is a dangerous path to continue down when we desperately need to build more, facilitate all tenures and ensure funds are available for the proper greening of our housing stock.”
When it came to council tax, he believes that “freeing Councils to increase rates by 3%, with an additional 2% social care precept from next April, will bring much-needed additional revenue to cash-strapped Local Authorities.”
“It will though come with its own pain points, particularly for the asset-rich/low income sector of homeowners – frequently the elderly, who despite the Cost of Living payments will still be struggling with generally increased costs. The lack of suitable alternative accommodation for such homeowners has long been a deterrent for them to move from the housing stock they occupy and it will be interesting to see whether these rises translate into additional movement in the market. It is also to be strongly hoped that Council Tax banding will not prove to be the outdated blunt instrument it has been in recent years. Councils will need to take care not to tip struggling families and others into further financial hardship in these difficult times. Unfortunately the market remains slow and cumbersome for a variety of reasons, so the ability to downsize to avoid such tax increases or free up equity – and bedrooms – is limited.”
According to St Arthur Homes, Hunt’s ‘balanced plan for stability’ is a positive move for the housing industry. Richard Cohen, CEO of shared ownership provider St Arthur Homes, said: “The fact that Jeremy Hunt has retained the stamp duty cuts outlined in the mini-budget earlier this year shows how important a thriving housing market is to the wider UK economy.
“First-time buyers will particularly benefit from the stamp duty cuts, which are clearly designed to create momentum on the first rungs of the property ladder. For a shared ownership provider such as ourselves, this spells good news.
“Not only will first-time buyers benefit from the cuts, they can also save more money by choosing a home using a shared ownership scheme. New homes also tend to be more energy efficient than older properties, meaning that it’s a good long-term investment too.
“It will also be very interesting to see what incentive Jeremy Hunt plans to unveil after the stamp duty cuts are reversed. We watch with interest to see what is announced in the years to come.”
Cllr James Jamieson, Chairman of the Local Government Association, also commented: “Local government is the fabric of the country, as has been proved in the challenging years we have faced as a nation. It is good that the Chancellor has used the Autumn Statement to act on the LGA’s call to save local services from spiralling inflation, demand, and cost pressures.
“While the financial outlook for councils is not as bad as feared next year, councils recognise it will be residents and businesses who will be asked to pay more. We have been clear that council tax has never been the solution to meeting the long-term pressures facing services – particularly high-demand services like adult social care, child protection and homelessness prevention. It also raises different amounts of money in different parts of the country unrelated to need and adding to the financial burden facing households.”
He continued: “Councils have always supported the principle of adult social care reforms and want to deliver them effectively but have warned that underfunded reforms would have exacerbated significant ongoing financial and workforce pressures. The Government needs to use the delay announced today to ensure that funding and support is in place for councils and providers so they can be implemented successfully. We are pleased that government will provide extra funding for adult social care and accepted our ask for funding allocated towards reforms to still be available to address inflationary pressures for both councils and social care providers.
“The revised social rent cap for next year is higher than anticipated and councils will still have to cope with the additional financial burden as a result of lost income. Councils support moves to keep social rents as low as possible but this will have an impact on councils’ ability to build the homes our communities desperately need – which is one of the best ways to boost growth – and retrofit existing housing stock to help the Government meet net zero goals.
“Financial turbulence is as damaging to local government as it is for our businesses and financial markets and all councils and vital services, such as social care, planning and waste and recycling collection, and leisure centres, continue to face an uncertain future. Councils want to work with central government to develop a long-term strategy to deliver critical local services and growth more effectively. Alongside certainty of funding and greater investment, this also needs wider devolution where local leaders have greater freedom from central government to take decisions on how to provide vital services in their communities.”