2014 Autumn Statement: key construction announcements | Practical Law

2014 Autumn Statement: key construction announcements | Practical Law

On 3 December 2014, the Chancellor of the Exchequer, George Osborne, gave his Autumn Statement, setting out the government's economic and fiscal plans to build a stronger economy.

2014 Autumn Statement: key construction announcements

Practical Law UK Legal Update 9-590-4536 (Approx. 8 pages)

2014 Autumn Statement: key construction announcements

by Practical Law Construction
Published on 03 Dec 2014 • England, Wales
On 3 December 2014, the Chancellor of the Exchequer, George Osborne, gave his Autumn Statement, setting out the government's economic and fiscal plans to build a stronger economy.
Speedread

Speedread

On 3 December 2014, the Chancellor of the Exchequer, George Osborne, gave his Autumn Statement (2014 Autumn Statement).
The Chancellor started his speech by referring to his first Autumn Statement, which he said was presented when the economy was in crisis. In contrast, he said that today, the UK is the fastest growing of any major advanced economy in the world and the deficit is half what the current government inherited. This was evidence that the government's economic plan was working:
"...we set a course to restore stability, get on top of our debts and show Britain was not going to be counted out. Through the storm we have stayed the course."
However, there is still work to do. For example, the Chancellor identified a need to boost skills, exports, science and infrastructure. The government's aim is to move further towards full employment by supporting the businesses that create jobs and apprenticeships. It also aims to address the imbalances in the economy by building a "northern powerhouse".
As the National Infrastructure Plan 2014 (NIP 2014) and the Road Investment Strategy were published in advance, much of the news directly relevant to the construction industry was already in the public domain. The "radical reform" of stamp duty is the headline grabbing story of the day. While the government estimates this will help 98% of home buyers, it is probably too early to tell whether it will provide a boost to the house building sector (or damage work prospects at the luxury end).
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Defined terms

2014 Autumn Statement

On 3 December 2014, the Chancellor of the Exchequer, George Osborne, gave his Autumn Statement (2014 Autumn Statement).
The Chancellor started his speech by referring to his first Autumn Statement, which he said was presented when the economy was in crisis. In contrast, he said that today, the UK is the fastest growing of any major advanced economy in the world and the deficit is half what the current government inherited. This was evidence that the government's economic plan was working:
"...we set a course to restore stability, get on top of our debts and show Britain was not going to be counted out. Through the storm we have stayed the course."
However, there is still work to do. For example, the Chancellor identified a need to boost skills, exports, science and infrastructure. The government's aim is to move further towards full employment by supporting the businesses that create jobs and apprenticeships. It also aims to address the imbalances in the economy by building a "Northern Powerhouse".
As the National Infrastructure Plan 2014 (NIP 2014) and the Road Investment Strategy were published in advance, much of the news directly relevant to the construction industry was already in the public domain. The "radical reform" of stamp duty is the headline grabbing story of the day. While the government estimates this will help 98% of home buyers, it is probably too early to tell whether it will provide a boost to the house building sector (or damage work prospects at the luxury end).

Construction Industry Scheme

Between June and September 2014, HMRC consulted on a number of improvements to the Construction Industry Scheme (CIS). The proposals aimed to make the gross payment scheme available to more businesses, reduce compliance costs and reduce the risk of penalties and of loss of gross payment status. For information on the key proposals in the consultation, see Legal update, Construction Industry Scheme: consultation on improvements.
The 2014 Autumn Statement confirms that the government aims to implement a "package of improvements to the CIS to reduce administrative burdens on construction businesses". It says that a summary of responses will be published shortly.
(Autumn Statement 2014, paragraph 2.140.)

Crossrail 2

The 2014 Autumn Statement states that the government will provide £2 million between 2014-15 and 2015-16 to support the development of a comprehensive business case for Crossrail 2, produced jointly by DfT and Transport for London, to complete ahead of the next Spending Review. This will be combined with a full options appraisal of all potential major transport projects in London, including an extension of the Bakerloo Line to improve connectivity in south-east London, and the devolution of South Eastern rail services to London.
(Autumn Statement 2014, paragraph 2.197.)

Green investment bank

The 2014 Autumn Statement states that the government is working to bring private capital into the Green Investment Bank (UK GIB) through a new fund for private investment in operational offshore wind assets, together with wider options. It will report on progress at Budget 2015. (UK GIB opened for business in November 2012, see Legal update, UK Green Investment Bank is open for business: environmental implications.)
(Autumn Statement 2014, paragraph 2.218.)

Housing and planning

The 2013 Autumn Statement made a number of announcements on housing and planning, and the 2014 Autumn Statement continues the government's commitment to boost housing supply and reform the planning system. For example, table 1.6 shows that more than 66,000 households have bought a home through the Help to Buy scheme (see also paragraph 1.137), levels of planning approvals and housing starts are at six-year highs, more than 506,000 new homes have been built over this parliament and £2.9 billion has been invested in more than 400 Regional Growth Fund projects.
Measures announced in the 2014 Autumn Statement include:
  • Releasing public sector land for up to 150,000 homes between 2015-20 and supporting Bicester to provide up to 13,000 new homes (Autumn Statement 2014, paragraphs 1.72 and 1.135).
  • Loaning £55 million to support extending the London Overground to Barking Riverside, to deliver 11,000 homes (Autumn Statement 2014, paragraph 1.131).
  • Supporting the London Borough of Barnet and Greater London Authority plans for the regeneration of Brent Cross, which could deliver 7,500 homes (subject to a full business case) (Autumn Statement 2014, paragraph 1.131).
  • Building the first new garden city for almost 100 years at Ebbsfleet, which will deliver up to 15,000 new homes. The government is making the first £100 million available to fund infrastructure and land remediation (Autumn Statement 2014, paragraphs 1.132 and 2.33).
  • Investing £141 million to support the London Legacy Development Corporation and Mayor of London’s Olympicopolis project to redevelop the Queen Elizabeth Olympic Park, including a new higher education and cultural quarter carried out in partnership with University College London, the Victoria and Albert museum, University of the Arts London and Sadler's Wells (Autumn Statement 2014, paragraph 1.133).
  • Extending affordable housing capital investment to 2018-19 and 2019-20, to ensure that 55,000 new affordable homes per year continue to be delivered (Autumn Statement 2014, paragraph 1.138).
  • Continuing to speed up the end-to-end planning process for major and minor applications, and to support small and medium-sized enterprises (SMEs) (Autumn Statement 2014, paragraph 1.141).
For more information, see Legal update, 2014 Autumn Statement: key property announcements.

National Infrastructure Plan 2014

Ahead of the Autumn Statement, on 2 December 2014, the government published its NIP 2014. The NIP 2014 is a detailed overview, tracking infrastructure investment since 2010 and setting out the government's long-term infrastructure plans for the UK.
The NIP 2014 is supplemented by the National Infrastructure Pipeline 2014, which sets out potential infrastructure investment to 2020 and beyond. It includes projects with a capital value of £50 million or more, together with programmes of investment (where smaller projects are grouped together) worth £50 million or more. Altogether, it refers to 551 projects with a value of £466 billion (in 2011-12 prices).
Schemes outlined in NIP 2014 include:
  • 1,400 flood defence projects, which will protect 300,000 homes. Although the £2.3 billion investment is not new money (it was provided at the 2013 Spending Round (see Legal update, 2013 Spending Round: environmental implications)), it should help prevent £30 billion of damage in areas including the Somerset Levels and the Thames and Humber Estuaries.
  • A £1 billion project to build the world's first power-generating tidal lagoon in Swansea Bay as part of the government's commitment to low carbon energy.
  • The financing of a new nuclear power plant at Moorside, which is situated at Sellafield in Cumbria. (For more information, see Practice note, Proposals for new nuclear power stations.)
  • £15 billion for roads (see Road investment strategy).
  • £100 million to fund infrastructure and land remediation at Ebbsfleet. It will be the first new garden city built for almost 100 years and will deliver up to 15,000 new homes.
For more information, see Legal updates:
For information on previous NIPs, see Practice note, National Infrastructure Plans: construction, environment and property implications.
The Welsh government has also published its latest National Infrastructure Plan 2014 (see Legal update, Welsh Government updates Infrastructure Investment Plan Project Pipeline).
The 2014 Autumn Statement confirms the government's commitment to NIP 2014, but does not contain any additional announcements (Autumn Statement 2014, paragraph 1.116).

Northern powerhouse

The government has announced £7 billion to build a "northern powerhouse" to complement the strength of the capital. A powerhouse will be created through:
  • Investing £6 billion on the northern road network to reduce jams. Sheffield, Newcastle, Hull, Sunderland, Leeds, Manchester and Liverpool will benefit, including through a £640 million investment in the A1 north and west of Newcastle and a £170 million of improvements to trans-Pennine roads.
  • Introducing new modern trains and 20% more capacity to end overcrowding on the Northern and trans-Pennine routes.
  • Developing HS3 to make east-west travel faster.
  • £250 million invested in a new Sir Henry Royce Institute for advanced material science in Manchester, with branches in Leeds, Liverpool and Sheffield.
  • Doubling the number of northern cities to benefit from the government's superfast broadband programme, with up to £40 million invested.
  • Boosting cultural life through a major new theatre space in Manchester, "The Factory Manchester".
(Autumn Statement 2014, paragraphs 1.185-1.203.)

Road investment strategy

Ahead of the Autumn Statement, on 1 December 2014, the government launched its first Road investment strategy, which is an ambitious, long-term programme for investment in the country's motorways and major roads. The strategy comprises:
  • A long-term vision for the strategic road network, which outlines how the government "will create smooth, smart and sustainable roads".
  • A multi-year investment plan that will be used to improve the road network and create better roads in the period 2015-21.
The strategy is worth £15 billion and it identifies five main challenges:
  • The condition of the network, which needs to be maintained and improved. For example, a large percentage of the strategic road network's surface will come to the end of its natural life in the next five years.
  • Inadequate capacity of many of the roads. By 2040, traffic will be between 27% and 57% higher than it was in 2013. This means that by 2040, around 25% of the entire strategic road network and 32% of the motorway network will experience severe congestion at peak times.
  • The connectivity of the road network is inconsistent. The strategy suggests that the "geography of the road network reflects the economy of the past, neglecting many of our fastest growing cities" and east-west routes are often poorly served.
  • Certainty of investment, which has been stop-start for generations.
  • These poor transport connections have held back the construction of housing and creation of jobs. For example, bottlenecks on the strategic road network, at places like the A1 around Newcastle, have limited or even blocked local developments from taking place. Lack of certainty in investment has hampered the expansion and upskilling of the construction sector.
As part of the strategy, the government plans to turn the Highways Agency (HA) into a government-owned strategic highways company.
The precursor to this strategy was announced in Investing in Britain's future, which was published on 27 June 2013 (see Legal update, Investing in Britain's future: property and construction implications: Roads).
The 2014 Autumn Statement states that this investment will include £6 billion to resurface 80% of the national network, over £9 billion to add 1,300 extra lane miles and over 60 junction improvements to the national road network. The government has also committed to invest almost £6 billion to improve the condition of local roads. (Autumn Statement 2014, paragraph 1.115.)

SMEs

As long ago as the 2012 Autumn Statement, the government announced a number of measures aimed at SMEs and mid-sized businesses, to help build strong supply chains. This included a Business Bank (with £1 billion of funding) to ensure businesses, particularly small businesses, could access finance and support. The 2013 Autumn Statement confirmed that the Business Bank had launched and was deploying its funding. It also set out a range of other measures to ensure improved access to finance for SMEs.
The 2014 Autumn Statement:
  • Confirms that, as over 5,000 SMEs across 22 cities have benefitted from the government's broadband connection voucher scheme, with new broadband connections on average six times faster than before, a further £40 million is being allocated to extend the scheme to March 2016 and to more cities (Autumn Statement 2014, paragraphs 1.118 and 2.235).
  • Announces changes in business tax rates that should benefit small businesses (Autumn Statement 2014, paragraph 1.160).
  • Provides further funding for the Enterprise Finance Guarantee scheme, facilitating up to £500 million of new lending to small businesses in 2015-16 (Autumn Statement 2014, paragraph 1.165).
  • Suggests that a number of Enterprise Zones may be extended (Autumn Statement 2014, paragraph 1.183).
  • Sets out plans that will require a number of banks (Royal Bank of Scotland, Barclays, Lloyds Banking Group, HSBC, Santander, Clydesdale and Yorkshire Banks, Bank of Ireland, Allied Irish Bank, and Danske Bank) to share credit data with other lenders through credit reference agencies and share information on SMEs that have been declined for finance. The proposals are contained in the Small Business, Enterprise and Employment Bill. These banks will be required to share SME credit data (Autumn Statement 2014, paragraph 2.180).
In addition, the 2014 Autumn Statement sets out measures aimed at supporting mid-sized businesses. This includes a new mid-size business unit that will provide a gateway to the specialist tax help needed by mid-size businesses. HMRC is also piloting a new model to support the fastest growing businesses (Autumn Statement 2014, paragraph 2.170).
For more information, see Legal update, 2014 Autumn Statement: key tax implications.

Comment

Just like in 2013, the 2014 Autumn Statement makes little direct reference to the construction industry. However, if the investment initiatives that it does contain are implemented (such as NIP 2014 and the Road Investment Strategy), those will impact on the construction and engineering sectors.

Further reading

For more information on the:

Sources