This was positioned as the Budget for ‘long term growth’.
There were plenty of rumours swirling in the week leading up to the election ranging from “how far would Jeremy Hunt look to cut taxes?” to “would Rishi Sunak use the Budget to call a snap election?” It was certainly so well documented in advance that the Chancellor had little room for manoueuvre in terms of the fiscal headroom – and if recent history of budgets (or specifically, mini-budgets) has taught us anything is that Jeremy’s Hunt conservative approach – and commitment to bringing down borrowing - is preferred to the alternative.
Nevertheless, with an election looming, the Government would have seen this budget as very much an opportunity to bolster support, or ‘save seats’ – understandably putting much of the focus on electorally popular tax cuts from a highly burdened consumer. With a focus on bringing inflation further down to the target 2% levels, there was also the need not to fuel inflation – although the timescales in question made this an easier job for the Chancellor than in his previous statements. In all, the tax burden increases as a result of this Budget, with major tax increases outpacing major tax cuts.
The OBR Forecasts for the year ahead were slightly more positive than they were for the Autumn Statement, with GDP expected to increase by 0.8% (compared to 0.7% in November). Forecasts for inflation by the end of 2024 were much more optimistic, with the OBR forecasting CPI finishing the year at 2.2%. This left headroom of £9 billion, compared to £13 billion in the last statement – albeit many commentators had been suggesting that the headroom may have been less. To contextualise the fiscal challenge - of the £1.23 Trillion of Government Total Managed Expenditure for 2024/25, debt interest accounts for £109 billion (circa 9%), which is £10 billion more than is spent on Housing and Environment, and Transport combined, Real Estate & Infrastructure.
Overall, not too much on real estate, with the highlights arguably being changes to Capital Gains tax and removal of Multiple Dwellings and Furnished Holiday Lettings Reliefs, where does this actually leave us as we position for long term growth?
Here’s what the Budget means for…
Real Estate
One element that didn’t get too much attention was the announcement of the Office for Investment launching a pilot programme to explore creation of new government asset-backed opportunities, with the aim of improving usage and likely repurposing under-used government assets. More detail on the scale of this will be good to see.In addition to mentions for Canary Wharf, the government is committed to delivering a privately financed HS2 Euston Station – with a Ministerial taskforce to be set up to oversee next steps, as well as a Euston Housing Delivery Group.
Housing
The tax reliefs for furnished holiday lettings and multiple dwellings reliefs were both abolished – saving approximately £600 million a year, with the latter likely to negatively impact BTR and PBSA investment.On the flip side, the reduction in Capital Gains Tax (at the top end from 28% to 24%) supports the buy-to-let market by reducing exit costs – although in a market where the landlord base is diminishing, this could further reduce the supply of rented stock – or consolidate holdings further.
As of immediate effect, Social Housing RPs will not be liable for SDLT when purchasing with a public subsidy. Clarity may be needed on whether this incorporates For-profit providers.
The floated 99% mortgage scheme was unsurprisingly dropped from the Budget.
The Consumer
The Chancellor repeated his trick of another cut to National Insurance, with a 2p cut – saving 27 million workers on average ~£450. There had been plenty of conversation in advance of a cut to income tax – which was likely more desirable – but will likely be a major part of the Conservative manifesto.It is worth mentioning that the National Living Wage increase to £11.44, equating to just under 10% increase and a pay rise of c.£1,800 for almost 3 million workers – with the scheme expanding out to 21- and 22-year-olds is due to come into effect in April.
The Chancellor announced a new British ISA, providing tax-free allowance for savings into specifically UK equities. This is likely focused on encouraging investment into UK firms, although in reality, the variety of ISAs already on offer mean there is no discernible reason as to why the British ISA would be more attractive than others.
Business
A number of incentives were aimed at SMEs including an extension of business rate support, a £200 million Growth Guarantee Fund and an increase in the VAT Threshold from £85-90,000 – albeit one must question whether that stymies growth rather than encourages it?The only other additional business rates elements were a reset period extension from 6 to 13 weeks which will negatively impact landlords and a very focused 40% business rates relief for media companies until 2034 – likely aimed as an offset to the revaluation of film studios in the revaluation.
Not a whisper on reforming the Business Rates System, with proposals from earlier years firmly immersed in the long grass.
Innovation
There was the announcement of AstraZeneca’s £650 million investment into the UK in order to expand its space in Cambridge and fund the building of a vaccine manufacturing hub in Liverpool. Linked to this, was an extra £10 million earmarked for investment into Cambridge to support and deliver transport and infrastructure.£360 million was announced for investment into manufacturing and R&D across life sciences, automotive and aerospace - £200 million of which was investment into zero-carbon aircraft technology. Investment specifically went to two companies – Ortho Clinical Diagnostics and Almac received £7.5 million in response to their investment in the UK and specifically their bases in Wales and Northern Ireland respectively.
Nuclear energy featured prominently, with the Chancellor buying in two reactor sites at Wylfa and Gloucestershire.
Levelling up, Devolution and Investment Zones
Canary Wharf was an unlikely recipient of Levelling up funds – with £242 million of funding allocated in supporting 8,000 homes there and on Barking Riverside. Other recipients include a North East Trailblazer devolution deal and increased devolution of powers over adult education and infrastructure to Buckinghamshire, Warwickshire and Surrey – Level Two devolution powers.20 more towns including Sutton Coldfield, Darlington, Harlow, Rhyl and Eastbourne join the long-term plans for towns programme – averaging £20 million each but with a distribution some way from the average based on past awards – this is in addition to the original 55.
