Industry picks out good from bad in Autumn Statement
By Paul Norman - Tuesday, November 29, 2011 15:15
The property industry has welcomed much of Chancellor George Osborne’s Autumn Statement today but there is a healthy degree of cynicism about how much of it will be funded or regulated and disappointment that more has not been done to limit the impact of business rate rises.
The Chancellor’s update on the state of the UK economy responded to downbeat economic forecasts from the Office for Budget Responsibility which revised GDP growth to 0.9% this year and 0.7% next year. It also introduced a series of measures that will impact the property industry.
Key were: a series of measures to further reform the planning process; further measures to ensure the introduction of Tax Increment Financing and utilise CIL to fund infrastructure; plans to reinvigorate the “right-to-buy”; commitments to 35 key infrastructure schemes across the UK; and a six-month extension of the holiday from business rates for small businesses.
On planning the government has committed to a series of measures aimed at "taking further" its reforms of the planning process in a bid to unblock development.
Among these it will ensure the key consenting and advisory agencies have a remit to promote sustainable development as soon as the National Planning Policy Framework is finalised. It will also introduce a 13-week maximum timescale for the majority of non-planning consents, to speed up the consenting process and give certainty to developers. This will take immediate effect for government agencies.
Richard Ford, head of planning at international law firm Pinsent Masons, said: "The Chancellor seems not for turning, despite the National Trust's concerns on the draft NPPF. It is a 'dash for growth' in the planning system."
Elsewhere the government said it was committed to backing 35 new road and rail schemes including the TransPennine Express, and the Atlantic Gateway in Merseyside, the Tyne & Wear Metro, the Bristol link Road, a new railway linking Oxford and Bedford, and in London a new river crossing at Silvertown and support for the northern line extension to Battersea.
Osborne also confirmed that government has signed an agreement with the UK’s largest pension funds which will see £30bn of investment in major domestic infrastructure projects over the next decade.
With regards to the northern line extension into Battersea the government called on "a developer" to commit to developing the site by April 2013: "The Government will consider creating a new Enterprise Zone at Battersea and allowing local borrowing against the Community Infrastructure Levy (CIL) to support this, subject to a commitment by April 2013 from a developer to contribute and develop the site."
John Fosbraey, head of planning at dohertybaines, said: “The Chancellor stated that, amongst the batch of transport infrastructure mentioned, the Government will “support” the extension of the Northern Line to Battersea. Government support for the scheme was always the easy part – the difficult bit is in the detail of what exactly their involvement is to be.
"Almost all knowledgeable parties want this to be an undertaking to underwrite a Tax Incremental Funding (TIF) scheme, which appears the only way that the new tube line, and a fully comprehensive scheme on the 480 acres at Nine Elms, will ever take place.
“It will be interesting to see how the Infrastructure Planning Committee (IPC) will react to the news of 35 new major road and rail projects across England, as its role of streamlining the process may be put under pressure as it tries to assist in their delivery.”
With regards to housing the government said it would reinvigorate right-to-buy schemes for council and housing association tenants who want to buy the homes they live in. He also said families in social housing will be able to buy their homes at discounts of up to 50%. There will also be mortgage indemnities to help 100,000 people buy new homes and a £400m fund to help construction firms build houses with planning permission.
However there was disappointment that the temporary tax relief for first-time buyers will end on 24 March 2012, as planned.
The BPF welcomed what it termed moves to kickstart stalled schemes and reinvigorate mortgage finance for families and first time buyers.
Elsewhere Osborne confirmed widely trailed plans for the one-year holiday on business rates for small businesses – due to expire in October 2012 – to be extended for a further six months at an estimated cost to the Treasury of £210m.
Osborne believes 500,000 companies will benefit from the tax break, with 330,000 not paying any business rates in 2012-13.
The holiday offers 100% relief on business rates up to £6,000, with progressively smaller rebates on amounts up to a cap of £12,000.
The Chancellor says that this will mean a third of all shops will have no business rates liability until April 2013.
A BPF spokesman said: "While it is very welcome that small businesses and particularly retailers can be helped in this way it is disappointing that this has not been extended to those retailers and landlords who own empty shops or indeed other properties."
The Chancellor also announced that businesses would be permitted to defer 60% of the inflation linked increase in rates due next year and repay the amounts over the following two years.
The British Council for Shopping Centres joined many experts in questioning how helpful the move was when what most wanted to see was a move to limit the 5.6% increase to the rate multiplier that is set to take effect from 1 April 2012 : "The Chancellor's intention to enable businesses to defer 60% of the increase in their 2012-2013 business rate bill is a tacit acknowledgement of the impact on the retail sector of this disastrous rates rise.
"Increasing rates by a staggering 5.6% in line with RPI - the highest in 20 years – will push some retailers into insolvency, leading to further job losses in an industry that employs 3m nationwide.
"The previous government introduced a similar scheme which was administratively complex for retailers and local government alike, and so largely ignored.
"Today's growth figures provide no reassurance that consumer spending will rise to support an embattled retail sector. Government therefore needs to take action on business rates increases on this scale, which create a real disincentive to investment.”
Jerry Schurder, head of rating at Gerald Eve, said: “Whilst business were seeking a freeze in business rates or an increase below the 5.6% September RPI limit, they had made it abundantly clear to government that the last thing they wanted was a repeat of the business rates deferral scheme which was introduced in 2009/10.
"The scheme was a calamity from day one. Firstly, in the worst possible example of red tape madness, each of the country’s 1.8 million businesses had to complete application forms seeking deferment, but the principal problem still being experienced today is that most local authorities simply failed to accurately calculate liability issuing erroneous demands.
"Tens of thousands of businesses were incorrectly summonsed for incorrect payment and the hidden costs in managing the deferral scheme greatly outweighed the modest cash flow benefits realised from deferring part of their rates bill. I have zero confidence that it will be managed any better next year.”
Tim Beattie, head of Jones Lang LaSalle's Rating team, added: “'The Chancellor’s statement that he will extend the current small business rate relief holiday for a further six months from 1 October 2012 is very welcome news for those businesses that qualify.
"However what all business desperately wanted in the current economic climate was for the Chancellor to limit the swinging 5.6% increase to the rate multiplier set to take effect from 1 April 2012 rather than just defer 60% of the increase equally over the following two years. This was a very complex system when used under the previous Labour administration in 2009.”
For full coverage of today's various announcements as well as industry reaction visit http://www.costar.co.uk/en/News-Subscription/
pnorman@costar.co.uk