Dear Chancellor: 10 property demands for the Budget

Speculation around whether the autumn Budget will contain some bold announcements on tax, housing and devolution is growing. Following a policy-lite party conference, chancellor Philip Hammond could be preparing some surprises in a bid to win back public support and offer a lifeline to businesses impacted by stifled investment demand caused by Brexit. Here are 10 industry demands and forecasts for the big speech on November 22: Business rates Another blow was dealt to ratepayers this week as the 3.9% RPI rate of inflation in September, announced on Tuesday, means an extra £1bn in business rates will be charged next year, according to Gerald Eve. The government has agreed to switch to the CPI figure by 2020, but that does not help UK retailers in line for the collective £280m rate hike next year forecast by the British Retail Consortium. Gerald Eve head of business rates Jerry Schurder says impacted ratepayers need to see changes brought in sooner. “The chancellor should use the autumn Budget to provide a lifeline for these businesses.” Housing A £10bn Help to Buy extension announced at the Conservative party conference appeared to mark the government’s headline housing policy plan for the autumn. However, a desire to attract younger voters and respond to public anger about the Grenfell Tower tragedy could lead to a last-minute fiscal stimulus plan for housing which the industry would like to see in the Budget. British Property Federation chief executive Melanie Leech says: “I think the government is wholly focused on housing, and any measures that we can successfully argue that will help to stimulate housing supply and enable more people to get decent quality housing, I think that there is a good chance that you might see something around those in the Budget.” Stamp duty Reports of a possible Budget announcement on stamp duty relief for first time buyers could be one route. However, the industry would like changes to the policy to go further, with a removal of the 3% stamp duty surcharge on buy-to-let properties for institutional investors. “With more and more young people renting, such a move would yield tangible benefits by encouraging the creation of more high-quality, professionally managed, purpose-built homes for rent, giving them a genuine alternative to the traditional PRS, where standards are variable to say the least,” says Jean-Marc Vandevivere, chief executive of Platform. Grant Lipton, director and co-founder of Great Marlborough Estates, says: “This is a step in the right direction. But a cut across the board would reduce transaction friction and incentivise downsizers to release equity, decreasing under-occupation and freeing up family-sized homes for the next generation.” VAT The BPF is calling for a simplification of the current “mismatch of taxes” on property which Leech says “no-one in government really understands the combined impact, and the impact that then has on investment decisions and capital flow into housebuilding and commercial development”. One to pick out in the context of Brexit could be VAT and how it can be used to drive investment into housing. As an incentive to promote more investment into build to rent, the BPF is suggesting a zero-rating for the rental income on build-to-rent developments, so investors would be able to reclaim VAT on development costs, maintenance and repairs. BEPS The industry wants to see a delay of the implementation of OECD rules on base erosion and profit shifting, which would limit tax deductibility of debt. Due to come into effect in April, there are concerns the agreement will deter investors hit by an unintended tax hike. “We think it’s all coming in far too quickly,” Leech says. “April is way too soon because the guidance hasn’t been invoked, businesses don’t really understand it, it’s very complicated.” The BPF is also calling for a post-implementation review period so HMRC and businesses can assess how it’s working in practice and develop a better regime. CIL The government is expected to respond to the community infrastructure levy review, which recommended replacing CIL with a hybrid system of a low-level tariff for all developments and section 106 for larger developments. The system put forward by the government-commissioned review chaired by Liz Peace would see all development face a low-level charge, the removal of the need for an examination process and a mandatory requirement placed on town halls to adopt the mechanism. Developers have said the complexity of CIL slows down delivery so a simplified version would be welcomed. Construction skills Construction firms are the least prepared for Brexit, according to a YouGov survey commissioned by tax and consulting firm RSM. More skills funding is hoped to be delivered for the sector in the Budget to help support the industry, which risks losing a significant proportion of its workforce without a good Brexit deal. In Manchester, for example, 40% of skilled labour working in construction is from the European Union, according to the Greater Manchester Combined Authority.  Adam Challis, head of residential research at JLL, says he’d like to see more government support for modular construction as part of the solution. “We could lead the way in Europe in terms of advanced technologies,” he says. Infrastructure investment The chancellor said at the Conservative Party conference that the only way we can invest more in infrastructure is to cut public consumption, as they have done in countries like China and Singapore. “But I don’t see a great appetite among the electorate to sacrifice a bit of consumption in order for there to be more investment,” he said. However, he is facing fierce campaigning from politicians and businesses in the regions for a Budget pledge to tackle the disparity of infrastructure investment between London and the South East and the rest of the country. Councillor Judith Blake, leader of Leeds City Council, says: “We’ve made our presence felt, I think it’s fair to say, and we are not prepared to lie down at all.” Devolution Business and industrial strategy secretary Greg Clark has pledged his commitment to more devolution deals although progress has inevitably been hampered by the snap general election and Brexit negotiations. The next one to watch could be a North of Tyne devolution deal, which was described as imminent in August. Tony Brooks, managing director at Moda Living, says: “Devolving spending and greater planning powers, combined with an ambitious programme of infrastructure investment, will unlock new development opportunities and help close the gap with London.” European Investment Bank funding Certainty around the future of European funding for areas including regeneration and tech start-ups is being sought by the industry. The Treasury has guaranteed to match any EIB investment lost for committed structural and investment fund projects already scheduled to continue after the UK leaves the EU in March 2019. Timothy Barnes, co-chair of the Tech Policy Working Group, says: “40% of our VC funds are cornerstoned by the European Investment Fund and it’s already going – we’ve seen a decline of money, a decline in new start-up applications and we’re already killing what was a brilliant new scheme.” To send feedback, e-mail Louisa.Clarence-Smith@egi.co.uk or tweet @LouisaClarence or @estatesgazette This article was first published on 19 October 2017 Click here for all the news, data and analysis affecting real estate in the Budget