Against a backdrop of one of the most painful recessions in history, a jittery recovery, permanent reductions in current spending and continued uncertainty in the Eurozone area, the Chancellor of the Exchequer recently delivered his 2012 Autumn Statement to Government. There were three main themes to this year’s Autumn Statement, namely: protecting the economy, growth and fairness, but was the property industry going to get the early Christmas presents it was hoping for?
Property featured much within the first two themes of protecting the economy and growth. This was to be expected as major infrastructure works often come to the fore during or post recessions, as a key economy kick-starter. However, to the relief of many, particularly to those in the City and South East, no "mansion tax", as had been mooted, will be introduced.
Much of the 2012 Autumn Statement summarised progress of previously implemented legislation and reiterated support for those goals, although a few new points were raised.
Road infrastructure will receive £1.5billion of investment and some £42million will be spent on cycling infrastructure. Tied in with planning reforms (see below) the Chancellor hopes to halve the time to plan and deliver new roads.
Via the UK Guarantees scheme, public transport will be given a boost. For example, the scheme will allow the Mayor of London to borrow £1billion for the Northern Line spur to Battersea.
Energy infrastructure investment, required for the long term certainty of energy needs, was given a boost and the Chancellor highlighted that development consents had been granted for new power stations and wind farms (onshore and offshore). Furthermore, new guidance for major infrastructure project development costs is to be introduced.
There is to be a £120million boost to flood defences investment, which it is hoped will both improve flood defences and realise development land.
Heavy investment in broadband infrastructure continues.
£50million of funding is to be made available for the construction costs of the Open Institute, which is part of the Old Street Roundabout Tech City revitalisation.
£60million is to be made available to support infrastructure projects in some Enterprise Zones.
The second generation of the Private Finance Initiative (PF2) has been released alongside the 2012 Autumn Statement (see PF2 and NPD – the future of Private Finance. It remains to be seen if the proposed power shift from private to public sector will be commercially palatable to the private sector, but it is clear that the bumper years of the original PFI contracts are unlikely to return.
The 2012 Autumn Statement contained a rundown of on-going matters including that the recommendations of the Penfold Review, which concerned the non-planning consents regime, are being implemented through the Growth and Infrastructure Bill 2012 and should (subject to its passage through parliament) cut red tape significantly for the planning system and go a long way to reducing developer time and costs associated with the planning regime. The Chancellor reiterated Government’s support for the 2011 Autumn Statement’s commitment to a new presumption in favour of sustainable development.
A further review of the planning practice guidance (which supports national planning policy implementation) will take place, which follows the National Planning Policy Framework featuring heavily in the 2011 Autumn Statement.
Environmental impact assessment guidance will be updated by the 2013 Budget.
Local development orders and Enterprise Zones will continue to receive government support.
Following Lord Heseltine’s "No stone unturned in pursuit of growth" investigation, the government will consult on the creating of an electronic database of all surplus and derelict public land, with a view to releasing it for development.
Following intense industry lobbying and the ensuing review conducted by Julian Sturdy MP, (as reported on in Business rates for empty property – can these be legitimately avoided?) the Chancellor admitted that the empty rates tax had "blighted development" and announced that, following further consultation, all newly built commercial property completed between 1 October 2012 and 30 September 2016 will be exempt from empty property rates for up to 18 months from completion, up to the limits for state aid.
While this is something for the property industry to be toasting this Christmas, many commentators will argue that this "gift" will not be substantial enough to really help a revival as existing buildings are not included. It had been hoped that the two year delay to the rating revaluation would be revisited, but this did not occur.
Carbon Reduction Commitment
CRC allowances for 2013-2014 and 2014-2015 are to be £12 and £16 per tonne of carbon dioxide respectively and the scheme itself is to be simplified with the removal of the performance league table. Government intend to review the impact of CRC in 2016 and we may see the reintroduction of a revised mechanism for recycling payments. It is hoped that the administrative burden for companies within the scheme will be significantly reduced.
Finance and Tax
While not of sole relevance to the property industry, the 2012 Autumn Statement reiterated Government support for improving business access to finance and support, in particular for SMEs, and reinforced Government’s commitment to tackling aggressive avoidance schemes (which arguably have been prevalent in some areas of the property market) and tax evasion generally.
VAT aspects for alterations to protected buildings, self-storage and holiday caravans have been clarified.
Boost to Residential Property
£280million of additional funding is to be made available for the First Buy scheme, which is on the back of a 13 per cent increase since July of mortgage products at or about 85 per cent loan-to-value.
There will be a £200million injection for the rented private sector market.
A £300million boost for the Affordable Homes programme is promised.
Continued Government support for local authorities means that Council Tax will be frozen or reduced in 2013/14.
Adjustment of Local Housing allowance in line with CPI index and extending the Support for Mortgage Interest scheme will be extended to March 2015.
It is clear that the 2012 Autumn Statement did not give the property industry all it was wishing for this Christmas. However, against the current economic and social backdrop, continued government attempts to reshape and streamline planning policy so that development is rekindled will take a long time, but the current efforts should be viewed favourably by the property industry. Furthermore, the Empty Rates new development exemption is a step in the right direction and the reinforced commitment to major infrastructure projects, particularly in roads and renewable power generation should go a long way in aiding the turnaround of the economy.