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2016 Autumn Statement: key property announcements
Practical Law UK Legal Update w-004-6674 (Approx. 10 pages)
2016 Autumn Statement: key property announcements
by Practical Law Property
| Published on 23 Nov 2016 • England, Wales |
On 23 November 2016, the Chancellor of the Exchequer, Philip Hammond, delivered his last Autumn Statement. This update summarises the key property implications.
Speedread
On 23 November 2016, the Chancellor of the Exchequer, Philip Hammond, delivered his last Autumn Statement; signalling not his resignation but a move to an Autumn Budget and a Spring Statement.
In this Autumn Statement, which focused on infrastructure and housing, the following measures will be of most interest to property practitioners:
- The ban on upfront fees imposed on tenants by letting agents in England and Wales. Scotland has already banned these fees.
- The announcement that the Land Registry is to remain in the public sector.
- The announcement that the government is to publish a Housing White Paper setting out its plans for reforms to increase housing supply and halt the decline in housing affordability.
- £1.4 billion to assist delivery of 40,000 new affordable homes in England and Wales and a further £3.15 million to the Greater London Authority to deliver 90,000 affordable homes in London.
- £2.3 billion for a housing infrastructure fund to support the building of 100,000 new homes in high demand areas.
- The creation of a National Productivity Investment Fund to provide major investment in, amongst other things, transport and housing.
The announcement of the ban on fees charged by letting agents in England and Wales is seen by many as another blow to estate agents and landlords. Whilst making landlords responsible for such fees may improve competition, there is concern that it will merely result in a rent increase for tenants as landlords seek to recover the cost.
Finally, for Jane Austen fans, a £7.6 million grant was announced to save "Pemberley" (Wentworth Woodhouse) near Rotherham.
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2016 Autumn Statement
On 23 November 2016, the Chancellor of the Exchequer, Philip Hammond, delivered the Autumn Statement.
This update analyses the key implications for the property industry. For an analysis of other aspects of the 2016 Autumn Statement, see box, Further reading.
Defined terms
The following defined terms are used in this update:
- 2016 Autumn Statement: HM Treasury: Autumn Statement 2016 (23 November 2016).
- Policy Costings: HM Treasury: Autumn Statement 2016: policy costings (23 November 2016).
Letting agents fees
The government has announced that it intends to ban letting agents from charging upfront fees to tenants on residential lettings. The aim is to stimulate competition in the private rental market and provide clarity on tenant costs.
The Department for Communities and Local Government (DCLG) will issue a consultation ahead of bringing in legislation, which it hopes to do as soon as possible.
(2016 Autumn Statement, paragraph 3.41.)
Land Registry
The government has confirmed that the Land Registry will remain in the public sector. The announcement comes after a consultation on whether the Land Registry should be privatised, which took place following the 2015 Autumn Statement and Spending Review.
The aim is to allow the Land Registry to modernise and become a more digital data-driven registration business. The government does not expect modernisation to require significant investment.
(2016 Autumn Statement, paragraph 1.66.)
Housing
House building
Investment in housing
Housing is one of four areas targeted by the new National Productivity Investment Fund (NPIF). The aim of the government's spending is to accelerate new housing supply.
The government has also confirmed that the Greater London Authority (GLA) will receive £3.15 billion to deliver 90,000 affordable homes by 2020-21.
(2016 Autumn Statement, paragraph 3.50.)
Housing White Paper
The government announced that it will publish a Housing White Paper, setting out a comprehensive package of reform to increase housing supply and halt the decline in housing affordability.
Measures announced to support this include:
- Housing Infrastructure Fund. A new Housing Infrastructure Fund of £2.3 billion by 2020-21, funded by the NPIF and allocated to local government on a competitive basis. This will provide infrastructure targeted at unlocking new private house building in areas where housing need is greatest. This will deliver up to 100,000 new homes. The government will also examine options to ensure that other government transport funding better supports housing growth.
- Affordable homes. The government will relax restrictions on grant funding to allow providers to deliver a mixture of homes for affordable rent and low cost ownership, to meet the housing needs of people in different circumstances and at different stages of their lives. The NPIF will provide £1.4 billion to deliver an additional 40,000 affordable homes by 2020-21.
- Accelerated construction. The government will invest £1.7 billion by 2020-21 through the NPIF to speed up house building on public sector land in England through partnerships with private sector developers.
(2016 Autumn Statement, paragraph 3.11.)
Right to Buy
The government has been piloting the Right to Buy with five housing associations. It now intends to fund a large-scale regional pilot of the Right to Buy for housing association tenants in 2017-18. Under the pilot over 3,000 tenants will be able to buy their own home with Right to Buy discounts.
(2016 Autumn Statement, paragraph 3.13.)
Business rates
Business rate relief
As part of the government's commitment to the digital economy, it has announced a new 100% business rate relief for new full-fibre infrastructure, to support the provision of fibre-optic broadband to more homes and businesses. This relief will be available for a five year period from 1 April 2017.
(2016 Autumn Statement, paragraph 3.20.)
The government has also announced its intention to reduce the burden of business rates by £6.7 billion over the next five years.
(2016 Autumn Statement, Executive Summary.)
Rural rate relief
Currently, rural rate relief is available for qualifying business properties in rural areas with a population below 3,000. The current minimum level of relief is 50%, although local authorities have powers to increase this up to 100%. The relief applies to a business property which comprises:
- The only village shop or post office, with a rateable value of up to £8,500.
- The only public house or petrol station, with a rateable value of up to £12,500.
Local authorities have the power to give up to 100% rate relief to other rural business properties with a rateable value under £16,500. To remove inconsistency with small business rate relief, the government has announced it will increase rural rate relief from 50% to 100% from 1 April 2017.
(2016 Autumn Statement, paragraph 4.33.)
Annual tax on enveloped dwellings (ATED)
The annual tax on enveloped dwellings (ATED) was introduced by the Finance Act 2013. It forms part of a package of measures designed to dissuade individuals from acquiring and holding high-value residential property in the UK through, principally, companies. For more information, see Practice note, Annual tax on enveloped dwellings (ATED).
The government has announced that the annual charges for ATED will rise in line with inflation for the 2017 to 2018 chargeable period.
(2016 Autumn Statement: tax updates and technical changes, paragraph 2.6.)
Insurance Premium Tax (IPT)
In order to help fund various measures, insurance premium tax (IPT) will rise from 10% to 12% on 1 June 2017.
(2016 Autumn Statement, Executive Summary and paragraph 4.40.)
Infrastructure
Northern Powerhouse
The government has today published the Northern Powerhouse Strategy (see HM Treasury: Autumn Statement 2016: Northern Powerhouse strategy (23 November 2016)).
(2016 Autumn Statement, paragraph 3.51.)
The Northern Powerhouse Strategy sets out the next steps the government intends to take to address the key barriers to productivity faced by the region. These include:
- Investing in the North’s transport infrastructure to improve connections between and within the North’s towns and cities (see Transport for the North).
- Improving the skills system at all ages.
- Building on the North’s existing science strengths.
- Continuing to promote the North to foreign markets and investors.
(Northern Powerhouse Strategy, paragraph 1.8.)
In particular, in the Northern Powerhouse Strategy, the government confirmed:
- Arrangements for the £400 million Northern Powerhouse Investment Fund which, in collaboration with the local enterprise partnerships (LEPs) in the region and the British Business Bank, will invest in local smaller businesses. This will be supported by funding from the European Regional Development Fund and the European Investment Bank. The government confirmed that the Fund will make its first investments by early next year.(2016 Autumn Statement, paragraph 3.52 and Northern Powerhouse Strategy, paragraph 4.4.)
- That it is in discussions with Liverpool City Region and Greater Manchester to pilot approaches to them retaining 100% of business rates from 2017.(Northern Powerhouse Strategy, paragraph 4.6.)
- That it intends to engage with local authorities, LEPs, businesses and others across the North to consider what more can be done to support the delivery of the Northern Powerhouse.(Northern Powerhouse Strategy, paragraph 6.2.)
Regional devolution
The government has announced that it will:
- Award £1.8 billion to LEPs across England through a third round of Growth Deals. This funding of local infrastructure aims to improve transport connections, unlock house building, boost skills and enhance digital connectivity.
- Give mayoral combined authorities powers to borrow for their new functions. This aims to enable them to invest in economically productive infrastructure but is subject to agreeing a borrowing cap with HM Treasury.
- Consult on lending local authorities up to £1 billion at a new local infrastructure rate of gilts + 60 basis points for three years to support infrastructure projects that are high value for money.(2016 Autumn Statement, paragraph 3.49.)
The government will also:
- Continue to work towards a second devolution deal with the West Midlands Combined Authority.
- Start talks on future transport funding with Greater Manchester.
- Transfer the budget for the Work and Health Programme to London and to Greater Manchester (subject to certain conditions being met).
- Devolve the adult education budget to London from 2019-20 (subject to readiness conditions).
- Continue to work with London to explore further devolution of powers over the coming months.(2016 Autumn Statement, paragraph 3.50.)
The government will also publish a Midlands Engine strategy shortly and has confirmed the arrangements for the Midlands Engine Investment Fund.
(2016 Autumn Statement, paragraphs 3.51 and 3.52.)
Transport
Roads
Transport is one of the four areas targeted by the NPIF. It will provide:
- £1.1 billion by 2020-21 to relieve congestion and upgrade local roads and public transport networks.
- £220 million to address traffic pinch points on strategic roads.
- £27 million to develop an expressway connecting Oxford and Cambridge. This is in addition to the provision of £110 million of funding for East West Rail, following the government’s announcement that it is backing the National Infrastructure Commission’s interim recommendations on the Oxford/Milton Keynes/Cambridge growth corridor (see Legal update, National Infrastructure Commission: interim report on the Cambridge/Milton Keynes/Oxford corridor).
The government has confirmed its continued commitment to the National Roads Fund announced in the July 2015 Budget (see Legal update, July 2015 Budget: key property announcements: Transport: Roads).
(2016 Autumn Statement, paragraphs 3.16 and 3.17.)
Railways
The government has announced:
- £450 million will be spent trialling digital signalling technology, which will expand capacity and improve reliability.
- Around £80 million will be allocated to accelerate the roll out of smart ticketing, including season tickets for commuters in the UK’s major cities.
- £5 million will be invested in development funding for the Midlands Rail Hub, a programme of rail upgrades in and around central Birmingham.
- £110 million of funding will be provided for East West Rail. This is in addition to £27 million to develop an expressway connecting Oxford and Cambridge (see Roads).
The government has confirmed that:
- Construction of Phase 1 of High Speed 2 (HS2) will start next year.
- It has announced its preferred route for Phase 2b of HS2 (see Legal update, Government's preferred route for Phase 2b of HS2 and proposed compensation measures).
- It is looking forward to receiving a business case for Crossrail 2. For more information on Crossrail 2, see Legal update, 2016 Budget: key property announcements Crossrail.
(2016 Autumn Statement, paragraphs 3.16 and 3.19.)
Transport for the North
The government has today published the Northern Powerhouse Strategy (2016 Autumn Statement, paragraph 3.51). For more information, see Northern Powerhouse.
The Northern Powerhouse Strategy sets out the next steps the government intends to take to invest in the North’s transport infrastructure to improve connections between and within the North’s towns and cities. These include:
- Improvements to strategic road routes. The Manchester M60 North West Quadrant and the Pennines A66 improvements will be included as part of the next Road Investment Strategy. The government will also consider other routes across the Pennines and will use the pinch point fund to upgrade two junctions on the A69(Northern Powerhouse Strategy, paragraph 2.6.)
- £60 million of government funding has previously been provided to develop options for Northern Powerhouse Rail. The government will work with Transport for the North to consider these options in the coming months. The government will announce the next steps in 2017(Northern Powerhouse Strategy, paragraph 2.7.)
- The Local Growth Fund was created to support local areas to invest in local infrastructure. The government will provide a further £556 million to northern Local Enterprise Partnerships (LEPs) through a third round of Growth Deals(Northern Powerhouse Strategy, paragraph 2.8.)
- The following four new projects have successfully bid for business case development funding within the Local Majors Fund:
- the A1079/A164 Jocks Lodge Junction (East Riding);
- Tees Valley East-West connections;
- Sheffield Supertram renewal; and
- the Warrington Waterfront Western Link.
(Northern Powerhouse Strategy, paragraph 2.9.)
Flooding
The government has announced that £170 million will be invested in flood defence and resilience measures. This sum comprises:
- £20 million for new flood defence schemes.
- £50 million for rail resilience projects.
- £100 million to improve the resilience of roads to flooding.
(2016 Autumn Statement, paragraph 3.25.)
It is not clear to what extent this expenditure forms part of the spending on flood defences and resilience announced in the 2016 Budget (see Legal update, 2016 Budget: key property announcements: Flood defences).
New Budget timetable from autumn 2017
With effect from autumn 2017, the government will move to a single major fiscal event, which will be the annual Budget. Accordingly, the annual Autumn Statement will be dropped, but the annual Budget will be held in the autumn rather than the spring. For 2017, which will be a transitional year, there will be a spring budget and an autumn Budget.
This change is being made to limit the announcement of major tax changes to once a year. If this results in less frequent tax changes and a more stable tax system, taxpayers will welcome this.
The change will alter the tax policy cycle and the legislative timetable for the Finance Bill. In 2017, there will, as usual, be a Finance Bill (draft clauses for which will be published on 5 December 2016: see Legal update: Draft Finance Bill 2017 clauses will be published on 5 December 2016) introduced in the spring with Royal Assent expected in the summer. From winter 2017, the Finance Bill will be introduced into Parliament following the autumn Budget, with Royal Assent expected in spring 2018.
Accordingly, after the transition to an autumn Budget, typically, new tax policy will be announced in the autumn Budget and consulted on in the spring, with a view to draft legislation being issued (for consultation) in the summer after the Budget. Those policy measures will then be included in the Finance Bill introduced after the following Budget.
Transitioning to the new timetable (in 2017) will require adjustments to the normal tax policy making process because of the shorter interval between the two 2017 Budgets. How this is done will be decided on policy-by-policy and involve, where possible, consultation on both policy proposals and draft legislation.
The Chancellor will make a Spring Statement responding to the updated Office for Budget Responsibility forecast for the economy and the public finances. However, the Chancellor has said that the government will reserve the right to make fiscal policy changes at the Spring Statement if the economic circumstances require it.
(2016 Autumn Statement paragraphs 4.1-4.3 and HM Treasury: 7 things you need to know about the new Budget timetable.)