The Spring Budget, the last before a General Election, is usually full of incentives and tax cuts to try and please the public before an election. However, given the already high levels of Government debt and taxation, Jeremy Hunt had little room to provide the sort of relief that many people want.

Contributors: Emma Waterfall and Reece Pugh

Key announcements at a glance:

  • 2p cut in the basic rate of National Insurance contributions
  • Freeze on alcohol duty
  • Continuation of fuel duty freeze, after a 5p cut in last year’s budget
  • Tax relief for holiday lets scrapped
  • £362m investment for manufacturing
  • Windfall tax on oil and gas extended
  • Abolishing stamp duty relief for the purchase of multiple properties
  • Scrapping non-dom status
  • Property Capital Gains Tax to reduce from 28% to 24%
  • Child benefit threshold to increase from £50,000 to £60,000

What, if any, implications are there for housing and development?

The crisis in housing and homeownership, particularly first-time buyers, is well established and accepted by all main political parties. For aspiring homeowners, the cut to National Insurance is perhaps their main hope, however the Budget lacked any further substantive changes that will encourage and make homeownership more affordable.

The Chancellor had proposed to introduce 99% mortgages but due to a backlash from lenders who were concerned about the increased risk of taking on more risky borrowers and the realisation that borrowers would incur higher interest rates than those who can stump up a deposit, this resulted in the Chancellor scrapping the idea.

The Chancellor admitted the thinking behind the reduction in Property Capital Gains Tax and, to an extent, abolishing stamp duty relief for the purchasing of multiple properties is designed to stimulate the market, thereby increasing overall tax revenue for the Treasury. It will be interesting to see whether this really does result in a rush of landlords releasing properties back into the market or dissuades investors.

Levelling Up – investment announced for London

The announcement of £242 million to support the redevelopment of Barking Riverside and sections of Canary Wharf to provide 8,000 much needed new homes will be welcome news; however, is it really enough? The ambition to transform Canary Wharf into a hub for life science companies will certainly help to alleviate the high vacancy rates in office space that has persisted since the Covid pandemic. It’s certainly an interesting announcement, allocating Levelling Up funding to London, the UK’s economic powerhouse, which seems to fly against the premise of the Government’s original thinking behind Levelling Up. Is it a coincidence that there are Mayoral Elections in London this May?

Cambridge – Scientific Powerhouse?

The announcement that a long-term funding settlement will be agreed for the Cambridge Development Corporation, with £10million promised for the next financial year alone, will help to accelerate the delivery of new homes around Cambridge, a key promise from DLUHC Secretary of State Michael Gove.

The ambition to promote Cambridge as a scientific powerhouse is encouraging for growth with the likes of AstraZeneca increasing their presence in the region. Yet this ambition relies upon a streamlined planning process and adequate investment in infrastructure. The challenge for the Cambridge Development Corporation is how to unlock both housing and the infrastructure to support this ambitious growth.

Peril in Local Government

With most of the announcements in this Budget leaked well in advance, it’s important to note what is missing. Local Government finances are under immense pressure, with authorities such as Birmingham City, Thurrock and Nottingham City Council issuing Section 114 notices, meaning there is a risk their expenditure will exceed their income. Although local authorities cannot technically go “bankrupt”, there have been more issued in the last five years, ten notices from seven local authorities, than all previous years since the Local Government Finance Act in 1988.

Local Authorities are at breaking point, and many have made it clear to the Government that the pressures they are facing will not go away anytime soon without their support. The Chancellor has announced a clampdown on public sector waste, attacking Local Authorities for spending too much on diversity schemes, for example. Given the percentage spend on such schemes in the context of the overall budget of any local authority, this seems to be a deflection on the key issues Councils are facing to balance their books.

Similarly, we know that Councils are under-resourced with regards to planning, which in turn delays or discourages meaningful investment in development yet such matters are a drop in the ocean of a Council’s overall budget. Birmingham City Council, which has an annual budget of circa £2 billion and is the largest local authority in Europe, will soon be increasing council tax by 21%.

The Chancellor’s announcement of a new devolution deal for the North East is encouraging but it is clear that more significant reform to local government is needed, whether that be a move towards more unitary authorities or simply an overhaul of how local government is funded.

Sadly, it seems by not addressing local government funding, the Chancellor and Prime Minister are likely to have underestimated the important role they play in people’s day to day lives – bin collection, street cleaning, local roads, education. In a General Election year, where the majority of local authorities are forced to increase their council tax, this may be a significant oversight.

Does this point towards an early election?

Whilst the Prime Minister has previously stated that his ‘working assumption’ is that a General Election will be held in the second half of the year, speculation had been rife about a snap poll on 2nd May. Yesterday’s Budget attempted to paint an economy that is turning a corner, it is unlikely to move the dial in favour of the Conservatives, who are trailing in the polls. There was no ‘rabbit out of the hat’ moment and this did not feel like a pre-election tax cutting budget – although there were a notable number of references to MPs in marginal seats. It feels now more likely that the Autumn Statement ahead of a General Election will feature some bigger giveaways. After all, the Prime Minister has previously promised to cut income tax by 1p this term, a promise that he has not yet fulfilled.

Cascade is well placed to help our clients to navigate what is already a very interesting election year and so if you have any questions, please get in touch.