Billed as “a stronger economy for the British people”, today’s Budget referenced an age of “post-covid optimism”. With the Office of Budget Responsibility (OBR) revising its prospects for a growing economy upwards and scarring on the economy downwards, this was a Budget that looked to a post-pandemic future.
Having already announced the biggest tax rise in 25 years last month with the planned increase to national insurance, the improved forecasts left the chancellor, Rishi Sunak, some headroom to boost spending in today’s Budget.
The Treasury made £150bn of spending announcements across the health service, housebuilding, transport and skills. These include an increase in the national living wage to £9.50 an hour, an end to the public sector pay freeze, £5.9bn for the NHS and a £6.9bn investment in transport infrastructure for towns and cities outside London. A new temporary business rate relief for retail, hospitality and leisure properties will be welcome news to support local high streets as they adapt and recover from the pandemic. And a £1.7bn investment in the Levelling Up Fund will support 105 projects across the country.
While this year’s Budget was light on housing policy, there were a few announcements for the sector to consider. £1.8bn has been earmarked to deliver housing on brownfield sites and the previously announced £11.5bn should help build 180,000 new affordable homes. To tackle cladding issues, £5bn is to be made available to remove unsafe cladding from the highest risk buildings, which will be partly funded by the Residential Property Developer Tax. This will be levied on developers with profits over £25m at a rate of 4% and is expected to raise £200m-£250m annually.
As far as big policy changes in the housing market are concerned, no news could be construed as good news. Following a review by the Office for Tax Simplification (OTS) in May, it is anticipated that capital gains tax rates are likely to be moved in line with income tax rates at some point. While homeowners selling their main residence do not pay capital gains tax, this change would hit most higher-rate taxpaying landlords if brought into play. And so, silence on the topic today is likely to be welcomed by investors.
And of course, there was no overhaul of the stamp duty system either. Rumours continue to circulate about replacing stamp duty with an annual land tax, but these proposals are likely to stay on the back burner for now. But with the threat of rising inflation and looming interest rate hikes putting a dampener on affordability, there were no announcements to help first-time buyers. While there are still a range of affordable housing options available to new homeowners, the ending of Help to Buy in 2023 without a replacement will reduce opportunities for those looking to buy their first home with a small deposit.