July 2015 Budget: key construction announcements | Practical Law

July 2015 Budget: key construction announcements | Practical Law

The implications of the government's July 2015 Budget for the construction and engineering industry.

July 2015 Budget: key construction announcements

Practical Law UK Legal Update 6-616-6388 (Approx. 7 pages)

July 2015 Budget: key construction announcements

by Practical Law Construction
Published on 08 Jul 2015 • England, Wales
The implications of the government's July 2015 Budget for the construction and engineering industry.
Speedread

Speedread

On 8 July 2015, the Chancellor of the Exchequer, George Osborne, gave the first Conservative budget for 18 years, which he described as a "budget for working people" from a "one nation government" that is following a "sensible path for the benefit of the whole of the United Kingdom". Music lovers may have missed the Chancellor's AC/DC reference to the country being "Back in Black" by 2020.
While there is little new in the budget for construction practitioners, the headlines are likely to centre on the government's alleged boldness in "delivering infrastructure" and "building the Northern Powerhouse". Quite what this actually means remains to be seen but it could be that the government simply plans to "fix the roof while the sun is shining" (as it indicated it wanted to do in the March 2015 Budget).
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Defined terms

The July 2015 Budget

On 8 July 2015, the Chancellor of the Exchequer, George Osborne, gave the first Conservative budget for 18 years, which he described as a "budget for working people" from a "one nation government" that is following a "sensible path for the benefit of the whole of the United Kingdom". Music lovers may have missed the Chancellor's AC/DC reference to the country being "Back in Black" by 2020.
While there is little new in the budget for construction practitioners, the headlines are likely to centre on the government's alleged boldness in "delivering infrastructure" and "building the Northern Powerhouse". Quite what this actually means remains to be seen but it could be that the government simply plans to "fix the roof while the sun is shining" (as it indicated it wanted to do in the March 2015 Budget).

Housing and planning

Help to Buy: ISA

Help to Buy was launched in the 2013 Budget (see Legal update, 2013 Budget: construction industry implications: Help to buy). The March 2015 Budget announced a new Help to Buy: ISA scheme to support those saving to buy their first home, with a maximum government bonus of £3,000 for those who save £12,000 (Legal update, March 2015 Budget: key construction announcements: Help to Buy: ISA).
The July 2015 Budget announced that the new Help to Buy: ISA will be introduced from 1 December 2015 (July Budget Report, paragraph 1.231).

Social housing rents

The July 2015 Budget announced the introduction of "Pay to Stay", whereby social housing tenants with household incomes over £40,000 in London, and over £30,000 in the rest of England, will be required to pay a market or near market rent for their accommodation.
Housing Associations will be able to use the rent subsidy that they recover to reinvest in new housing. The July 2015 Budget suggests this could raise up to hundreds of millions of pounds in additional rental income for Housing Associations. The government will consult and set out the detail of this reform in due course (July Budget Report, paragraph 1.154).

Infrastructure: roads and railways

The government believes that "a modern infrastructure network is vital". The July 2015 Budget explains that by 2020-21, the government will have invested over £28 billion in enhancements and maintenance of national and local roads. Future roads investment will be funded by a reform to vehicle excise duty (VED) to create a new Roads Fund that, ultimately, will lead to "every single penny raised in vehicle excise duty" going to the new roads fund (July Budget Report, paragraphs 1.250-51, 2.145-146 and 2.187).
In addition, the government will publish a second Road Investment Strategy by the end of this Parliament, building on the first strategy, which was published in December 2014 (see Legal update, 2014 Autumn Statement: key construction announcements: Road investment strategy) (July Budget Report, paragraphs 1.252 and 2.188).
The July 2015 Budget explains that by 2019, the government will have invested over £38 billion in the railways. However, there are problems at Network Rail and the July 2015 Budget sets out a number of ways the government plans to tackle this, including asking Nicola Shaw, chief executive of High Speed 1 (HS1), to advise the government on how it should approach the longer-term future shape and financing of Network Rail (July Budget Report, paragraphs 1.253-56, 1.296-298 and 2.190-193).
In addition, a list of:
  • Regional transport measures, which are said to be "a range of interventions to support the rebalancing of the economy across the UK", is set out at paragraphs 2.31 of the July Budget Report.
  • Funding for local transport projects amounting to £17.8 million is set out at paragraph 2.32 of the July Budget Report.
  • Other measures are set out at paragraphs 2.33-36 of the July Budget Report.

Regional investment

Northern powerhouse

Although the Chancellor explained that it is "to our nation's great advantage that we have one of the world's great capitals", he also suggested that there is too much economic strength concentrated in the capital. To balance this, other parts of the UK need to be built up. Part of this is planned further devolution within England to build the northern powerhouse.
"The government has a comprehensive plan to rebalance the economy and strengthen every part of the UK, bringing together the great cities and counties of the north of England, and supporting other vital regional economies such as the Midlands and South West." (July Budget Report, paragraph 1.12.)
The July 2015 Budget announced that this will be achieved in part by:
  • Strengthening the northern powerhouse through further devolution to cities such as Manchester, Sheffield, Liverpool and Leeds (July Budget Report, paragraphs 1.283-287).
  • Putting Transport for the North on a statutory footing and investing £30 million to enable it to connect northern England together, with seamless oyster-style ticketing across the region (July Budget Report, paragraphs 1.301 and 2.40).
  • A new round of Enterprise Zones for smaller towns (July Budget Report, paragraphs 1.288 and 2.29).
Further details of the northern powerhouse are set out at paragraphs 1.299-304 and 2.37-40 of the July Budget Report. These include further improvement to the M1/A1 route between Newcastle and London to motorway and considering whether to rename that part of the A1(M) north of Leeds as the M1 (July Budget Report, paragraphs 1.302 and 2.39).

Devolution

The July 2015 Budget announces that the government will deliver on its commitment to devolve further powers to Scotland, Wales and Northern Ireland, introducing the Scotland Bill, and commencing discussions on a revised Scottish fiscal framework (July Budget Report, paragraphs 1.273-280).

"Engine for growth"

The July 2015 Budget refers to the Midlands as "Britain's engine for growth". Details of the government's commitment to ensure it remains such an engine are set out at paragraphs 1.305-311 of the July Budget Report. These include committing £5 million of additional funding for Midlands Connect to help develop transport connectivity across the region (July Budget Report, paragraph 1.306) and extending the Birmingham Enterprise Zone to support HS2 (July Budget Report, paragraphs 1.310 and 2.41).

Other regions

Details of projects in other regions are set out in paragraphs 1.312-1.328 and 2.41-43 of the July Budget Report.

Supporting growth in other ways

Apprenticeships

The July 2015 Budget announced the government's commitment to significantly increase the quantity and quality of apprenticeships in England to 3 million. It will achieve this by introducing a levy on large UK employers to fund these new apprenticeships. In addition, businesses will be consulted about the interaction with existing levy boards. Further details will be set out in the forthcoming Spending Review (July Budget Report, paragraphs 1.269-271 and 2.201). Although it is not expressly referred to, this consultation may include the Construction Industry Training Board (CITB) Levy (see Blog post, CITB Levy changes ahead).
An increase in apprenticeships also featured in the March 2015 Budget (see Legal update, March 2015 Budget: key construction announcements: Supporting growth in other ways).

Compulsory living wage

The July 2015 Budget announced a new compulsory national living wage (NLW) to come into force in April 2016, starting at £7.20 and rising to over £9.00 by 2020 and a tax-free national minimum wage (NMW) (July Budget Report, paragraphs 1.114, 1.120-126 and 2.94-97).
In addition, National Insurance contributions (NICs) are being cut for smaller businesses (SMEs) so that they can employ four workers full-time on the new NLW without paying any NICs (July Budget Report, paragraphs 1.127, 1.241 and 2.61).

Green Investment Bank

The Green Investment Bank (GIB) was announced in the Comprehensive Spending Review 2010 (SR 2010) (see Legal update, Spending Review 2010: construction industry implications: Low carbon economy and Green Investment Bank).
The July 2015 Budget announced that the government is exploring options to move the GIB into private ownership. This will ensure the future sustainability of the bank as well as increasing its impact by freeing it from the constraints of state aid and competition for public funding (July Budget Report, paragraphs 1.100 and 2.13).

Industrial injuries in the workplace

The July 2015 Budget announced that the government will consider whether employers and insurers should play a greater role in providing support for those who suffer from industrial injuries in the workplace. The government will report at the forthcoming Spending Review (July Budget Report, paragraph 1.161).

Comment

While there is little new in the budget for construction practitioners, the headlines are likely to centre on the government's alleged boldness in "delivering infrastructure" and "building the Northern Powerhouse". Quite what this actually means remains to be seen but it could be that the government simply plans to "fix the roof while the sun is shining" (as it indicated it wanted to do in the March 2015 Budget).

Sources

  • HM Treasury: Summer Budget 2015 (8 July 2015).
  • HMRC: Summer Budget 2015 HMRC overview (8 July 2015).
  • HM Treasury: Chancellor George Osborne's Summer Budget 2015 speech (8 July 2015).

Further information

For more information on the July 2015 Budget, see Legal updates:

Further reading

For more information on the: