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Briefings

Member Briefing: Chancellor delivers Budget ‘for the next generation’

Date: 16/03/16

Chancellor delivers Budget ‘for the next generation’

Apologies to anyone who already received this briefing earlier, we had faults with the links in the last copy sent.

The Chancellor of the Exchequer, George Osborne, has used todays Budget to claim the Government is ‘putting the next generation first’ with headline announcements around support for savers, higher income tax thresholds and lower business taxes.

The Budget documents published alongside the Chancellor’s statement include significant announcements on planning, Starter Homes, the creation of garden villages and Stamp Duty reforms.

Please see below for summaries of the announcements on:

  • Planning
  • Garden towns, cities and villages
  • Public land
  • Starter Homes
  • Help for savers
  • Apprenticeship Levy
  • Failed housing transactions
  • Home Building Fund
  • Stamp Duty on additional properties
  • Stamp Duty on commercial property
  • Capital Gains Tax
  • Corporation Tax
  • Landfill Tax 

There are areas on which we are still seeking more information from officials and on those items we will issue further updates in the coming days.

Planning

Zonal and red line planning

In a further move towards a more streamlined planning system, the Chancellor announced plans to ‘zone housing development’. This is backed up by the Budget Red Book which confirms the intention to ‘move towards a more zonal and ‘red line’ planning approach. This will be achieved through local authorities using local plans to signal development priorities to make maximum use of the new Permission in Principle currently being legislated for via the Housing and Planning Bill.

HBF has proposed this simplification of the planning system for several years in order to de-risk development and support smaller developers.

Speeding up the planning system

The Government has also acknowledged the need to go further in accelerating the end-to-end planning process, as has been frequently put forward by HBF. As well as ensuring delivery of Local Plans by 2017, the Budget announces an intention on the part of Government to address delays caused by planning conditions.

Land options

The Government has announced that it will shortly bring forward a consultation on ‘options for increasing transparency in the property market, including by increasing the visibility of information relating to options to purchase or lease land’.

Increasing densities on brownfield land

Following the consultation on ‘building up’ in London, the Government will look to provide similar powers elsewhere through devolution deals.

Garden Towns, Cities and Villages

Garden towns and cities

To support the long-held ambition to unleash ‘a new wave of garden towns and cities’, the Budget announced that the Government will legislate to make it easier for local authorities to create new garden towns and consult on further reforms to the Compulsory Purchase Order (CPO) regime to make the process fairer, quicker and clearer.

The Government is also inviting local authorities to make expressions of interest on a rolling basis for new garden towns and cities of more than 10,000 homes. The financial and planning flexibilities required to make new garden cities and towns a reality are to be subject of negotiation between local authorities and Government.

Garden villages

Confirming media reports over the weekend, the Budget announced that the Government will offer technical and financial support to areas that want to establish garden villages and market towns of between 1,500 and 10,000 homes. This builds on the suggestions made by Lord Taylor in a Policy Exchange paper in 2015.

The Department for Communities and Local Government has today published a policy paper and intends to support 12 new garden villages. Expressions of interest are invited from local authorities before the end of July 2016.

Garden villages will be local authority-led free-standing settlements with particular encouragement for locations that make good use of public sector and brownfield land. As with the garden cities, Government is keen to develop bespoke offers with distinct planning freedoms and other flexibilities tailored to the particular garden village proposal.

More information on the proposals for new garden cities, towns and villages is available here.

Public land

Local Government

Building on announcements made at the Autumn Statement in November, the Budget announces a collaboration with local authorities on a ‘local government land ambition’. The aim is to release land with the capacity for at least 160,000 homes, helping to support government policy on estates regeneration.

Land around stations

Working with Network Rail and local authorities, the HCA will to provide land for residential and commercial development. This follows on from a recent consultation on the subject and further details of which locations will be part of the scheme will be published shortly.

Starter Homes

The much awaited consultation on the operation of the Starter Homes requirement on all reasonably sized sites has still not materialised with officials still stating that this will be forthcoming shortly. There is, however, more information on other aspects of the initiative.

Starter Homes Land Fund

The Government has published a prospectus for local authorities to bid on £1.2bn of funding for the remediation of brownfield land for housing, to support the delivery of at least 30,000 new Starter Homes. This is the same financial package as that announced by the Prime Minister in early January.

The majority of the funding is to be managed by the Homes and Communities Agency (HCA) and will operate similarly to the existing £36m fund announced last year most of which is already being used by HCA to acquire sites suitable for Starter Homes and by local authorities to remediate land. The exact split of the £1.2bn between HCA funding to purchase new sites and local authority land remediation support is not clear from the Budget Red Book or supporting documentation.

Because the HCA’s functions are devolved to the Greater London Authority (GLA), the Government is working with the GLA and Boroughs to develop a complementary programme.

Details of the prospectus can be found here.

Direct support for Starter Homes

In November’s Spending Review, the Chancellor announced a further £1.1bn in 2019/20 for additional Starter Homes delivery. Details remain sketchy but this could involve directly subsidising discounts on Starter Homes. Today, the Chancellor announced that £250m of this funding will be brought forward for use in 2017/18 and 2018/19. 

Help for savers

In order to promote a savings culture, and building on the success of the Help to Buy: ISA, the Chancellor announced the creation of a new Lifetime ISA. From April 2017, adults under 40 will be able to open a new Lifetime ISA allowing them to save up to £4,000 per year and receive a 25% government bonus on every pound saved. Contributions will qualify for the bonus up to the point at which the saver reaches 50 years of age. Funds can be withdrawn with the bonus either at the point of purchasing one’s first home, or when turning 60 for use in retirement. The price limit for properties purchased using Lifetime ISA funds will be set at £450,000.

Those with an existing Help to Buy: ISA will be free to transfer their savings and the government bonuses already accrued into a Lifetime ISA after April 2017, or save into both. However, a property purchase will only attract a government bonus from one of the accounts.

A factsheet on the Lifetime ISA is available here.

The Budget also sees the raising of the maximum annual allowance for regular ISA products from £15,240 per year to £20,000 per year in April 2017. 

Apprenticeship Levy

The Budget Red Book states that from April 2017, employers will receive a 10% top-up to their monthly levy contributions in England and this will be available for them to spend on apprenticeship training through their digital account.

This means that a company with a payroll of £5m for example would pay a levy of £10k (0.5% on their pay bill above £3m) and have £11,000 to spend – which includes £1,000 top up of their digital voucher. This is additional money that will come from the overall Apprenticeships Levy pot. It will be available to those who are training apprentices and using their vouchers, so it’s the mechanism by which employers can ‘get out more than they put in’.

Any funding additional to this amount would have to be through a co-investment mechanism on which the government will release more details shortly.  The Government will set out further details on the operating model in April and draft funding rates will be published in June. 

Failed housing transactions

The Budget Red Book references a Call for Evidence which will be published shortly regarding the home purchase process and in particular how to make the process better value for money and more consumer-friendly. It quotes a Department for Business, Innovation and Skills study, to be published alongside the Call for Evidence, which estimates that £270m is spent by consumers each year on failed housing transactions. 

Home Building Fund

A new Home Building Fund will receive £2bn in funding from the Local Growth Fund. The programme will provide finance to developers to unlock housing sites and bring forward necessary infrastructure. 

Stamp Duty on additional properties

Following the initial announcement at the Autumn Statement and the subsequent consultation on the policy design, the Government has decided against introducing any large-scale investor exemption in relation to the new higher rates of Stamp Duty on additional properties. When making the announcement in November, the Treasury made clear that it favoured an exemption from the higher rate for investors with a portfolio of at least 15 properties. By the time the consultation document was published at the end of December, the favoured approach had shifted to defining large-scale investors as those making bulk purchases of 15 properties or more. Today the Chancellor stated that the Treasury is not convinced by the evidence that blanket coverage of all investor buyers would supress housing supply and, in the interests of simplicity, has opted not to introduce a large-scale investor exemption.

The timeframe for relief for purchasers who are delayed in selling their previous main residence and subsequently own two properties for a period has been extended from the previous proposal for 18 months to 36 months. Purchasers will therefore be able to claim a refund if their previous main residence is sold within three years.

We are still trying to ascertain from Treasury officials how developers purchasing properties as part of land assembly will be treated. This was a key focus for HBF in its consultation response.

Details of the new SDLT system are available here

Stamp Duty on commercial property

In line with the recent changes to the Stamp Duty Land Tax (SDLT) regime for residential property, the Chancellor announced plans to reform the system for SDLT on commercial property.

The current SDLT rates on freehold and lease premium transactions which operate on a slab system will be reformed and a new ‘slice’ system will be introduced. Freehold or leasehold premium transactions below £1.05m will pay the same or less SDLT.

More on the new system of SDLT on commercial property which will take effect at midnight tonight is available here

Capital Gains Tax (CGT)

The Chancellor announced a significant 8 percentage point cut in the rate of Capital Gains Tax but there will be an 8 percentage point surcharge for gains on residential property, ensuring that the existing regime will effectively remain in place for property investors. The new rates (for non-property gains) will be 10% for the basic rate and 20% at the higher rate. 

Private Residence Relief will continue to ensure that a main residence is not subject to CGT.

Corporation Tax

As well as a cut in Business Rates for small firms, the Chancellor announced a reduction in Corporation Tax, taking the rate to 17% by 2020. This is an extension to the previous announcement that the rate would be cut to 18% in 2020, ensuring that the UK has the lowest Corporation Tax rate in the G20.

Landfill Tax

Standard and lower rates of Landfill Tax will increase in line with Retail Price Inflation, rounded to the nearest five pence in April 2017 and again in April 2018.

 

David O’Leary

Policy Director