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2016 Budget: key construction announcements
Practical Law UK Legal Update 5-624-5145 (Approx. 7 pages)
2016 Budget: key construction announcements
| Published on 16 Mar 2016 • England, Wales |
The implications of the government's 2016 Budget for the construction and engineering industry.
Speedread
On 16 March 2016, the Chancellor of the Exchequer, George Osborne, delivered his 2016 Budget. It is the Conservative government's second budget. Depending on the outcome of June's referendum on membership of the European Union (EU), it may also be the last while Britain is part of the EU. On that note, the Chancellor warned about economic uncertainty and the importance of being "among the best prepared [of the major economies] for whatever challenges may lie ahead", suggesting we face a "cocktail of global risks".
Building on last year's key improvements to productivity (such as the apprenticeship levy), the Chancellor referred to five "bold steps" that need to be taken, including making major commitments to national infrastructure projects. To this end, we have already seen three National Infrastructure Commission (NIC) reports published in the run-up to the 2016 Budget. One reported on London's future transport needs and focused on Crossrail 2, another looked further afield to the transport needs in northern England and focused on High Speed 3 (HS3) and the M62. The Chancellor confirmed there is a "green light" for these projects. There is also going to be a new tunnel between Sheffield and Manchester.
As we said at the time of the July 2015 Budget and the 2015 Autumn Statement, there is little direct news for construction practitioners. This time around, the headlines are likely to centre on the government's plans to turn schools into academies, to make changes to corporation tax and stamp duty on commercial property, to help people to save, and to reduce the amount of sugar in soft drinks. However, there was no news on how the new apprenticeship levy will interact with the Construction Industry Training Board (CITB) levy. As such, we are scratching our heads to find a sweetener for the construction industry.
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2016 Budget
On 16 March 2016, the Chancellor of the Exchequer, George Osborne, delivered his 2016 Budget. It is the Conservative government's second budget. Depending on the outcome of June's referendum on membership of the European Union (EU), it may also be the last while Britain is part of the EU. On that note, the Chancellor warned about economic uncertainty and the importance of being "among the best prepared [of the major economies] for whatever challenges may lie ahead", suggesting we face a "cocktail of global risks".
Building on last year's key improvements to productivity (such as the apprenticeship levy), the Chancellor referred to five "bold steps" that need to be taken, including making major commitments to national infrastructure projects. To this end, we have already seen three National Infrastructure Commission (NIC) reports published in the run-up to the 2016 Budget. One reported on London's future transport needs and focused on Crossrail 2, another looked further afield to the transport needs in northern England and focused on HS3 and the M62. The Chancellor confirmed there is a "green light" for these projects. There is also going to be a new tunnel between Sheffield and Manchester.
As we said at the time of the July 2015 Budget and the 2015 Autumn Statement, there is little direct news for construction practitioners. This time around, the headlines are likely to centre on the government's plans to turn schools into academies, to make changes to corporation tax and stamp duty on commercial property, to help people to save, and to reduce the amount of sugar in soft drinks. However, there was no news on how the new apprenticeship levy will interact with the Construction Industry Training Board (CITB) levy. As such, we are scratching our heads to find a sweetener for the construction industry.
This update analyses the key implications for the construction and engineering industry. For an analysis of other aspects of the 2016 Budget, see Further reading.
Defined terms
The following defined terms are used in this update:
- 2016 Budget Report: HM Treasury: Budget 2016 (16 March 2016).
- HMRC Overview: HMRC: Budget 2016 HMRC overview (16 March 2016).
- Policy Costings: HM Government: Budget 2016: Policy Costings (16 March 2016).
- 2015 Autumn Statement and Spending Review: HM Treasury: Spending Review and Autumn Statement 2015 (25 November 2015).
- July 2015 Budget: HM Treasury: Summer Budget 2015 (8 July 2015).
Apprenticeship levy
The July 2015 Budget announced the government's commitment to significantly increase the quantity and quality of apprenticeships in England to 3 million by introducing a levy on large UK employers to fund new apprenticeships (see Legal update, July 2015 Budget: key construction announcements: Apprenticeships).
The 2015 Autumn Statement announced the apprenticeship levy will come into effect in April 2017, at a rate of 0.5% of an employer's pay bill (see Legal update, 2015 Autumn Statement and Spending Review: key construction announcements: Apprenticeship Levy).
The 2016 Budget confirms that the apprenticeship levy will be introduced in April 2017 and from then, employers in England will receive a 10% top-up to their monthly levy contributions. This will be available for them to spend on apprenticeship training through their digital account. Further details on the operating model will be published in April 2016 and the draft funding rates will be published in June 2016. (Budget Report, paragraphs 1.99 and 2.243.)
The 2016 Budget does not mention how this levy will interact with the CITB levy. (When we reported on the 2015 Autumn Statement, we said that "the government is working with the CITB to decide how the CITB's existing arrangements will be affected by the new levy".)
Building information modelling (BIM)
The 2016 Budget reports that the government will develop building information modelling (BIM) level 3 for the construction industry, which will "save owners of built assets billions of pounds a year in unnecessary costs, and maintain the UK's global leadership in digital construction" (Budget Report, paragraph 2.322).
For more information on BIM, see Building information modelling (BIM) toolkit and Practice note, Building information modelling: BIM level 3.
Housing and planning
The 2015 Autumn Statement set out the government's commitment to home ownership, with a number of measures including delivering 400,000 affordable new homes by the end of the decade (see Legal update, 2015 Autumn Statement and Spending Review: key construction announcements: Home ownership and housing).
The 2016 Budget builds on this, with:
- The launch of the Starter Homes Land Fund prospectus, which will invite Local Authorities to access £1.2 billion of funding to remediate brownfield land to be used for housing, to deliver at least 30,000 Starter Homes.
- The delivery of 13,000 affordable homes two years early by bringing forward £250 million of capital spending to 2017-18 and 2018-19.
- Reforms to the planning system.
- The release of more public sector land for housing, including land around railway stations.
- Legislation to deliver a number of garden towns.
(Budget Report, paragraphs 1.118-1.124.)
Infrastructure, including the Northern Powerhouse
In advance of the 2016 Budget, the NIC published:
- Transport for a world city: A National Infrastructure Commission report, which reported on London's future transport needs and focused on Crossrail 2 (see Legal update, National Infrastructure Commission: transport for a world city).
- High Speed North: A National Infrastructure Commission Report, which reported on the transport needs in northern England and focused on High Speed 3 (HS3) and the M62. The aim is to deliver improvements in east-west links, including across the Pennines (see Legal update, National Infrastructure Commission: High speed north).
(It also published a report that looked at the UK's electricity market, Smart power: A National Infrastructure Commission Report.)
The 2016 Budget confirms these infrastructure projects will go ahead, with continued investment in the Northern Powerhouse. This includes:
- Investing £300 million in transport, including £60 million for HS3 between Leeds and Manchester.
- Improving the M62, A66 and A69.
- Providing £80 million to develop Crossrail 2, with the aim of bringing forward a hybrid Bill this Parliament.
- Launching a second roads investment strategy, which will determine the investment plans for the period from 2020-21 to 2024-25.
- An additional £700 million by 2020-21 to spend on flood defences.
- Funding for pot hole repairs.
(Budget Report, paragraphs 1.230-1.242, 1.288-1.292 and 1.301-1.302, 2.262-2.301 and figures 3 and 4.)
The 2016 Budget also sets out the government's "vision" for a "Midlands Engine for Growth", with funding for smaller businesses and to boost transport (Budget Report, paragraphs 1.305-1.316.) Other regions are also covered, including the south west, the south east and London (see Budget Report, paragraphs 1.317-1.345).
Alongside the 2016 Budget, the government also published:
- A Joint Statement on Northern Powerhouse phase two, which sets out how the government and the largest northern cities will work together to deliver "our vision for the Northern Powerhouse".
- National Infrastructure Commission: Chancellor's letter to Lord Adonis and terms of reference, which sets out the details of two more studies that NIC will undertake, one to develop proposals for housing and jobs in the Cambridge-Milton Keynes-Oxford corridor, the other to look at 5G deployment.
Landfill tax and aggregates levy
The 2016 Budget announced:
- The standard and lower rates of landfill tax will increase in line with the Retail Price Index (RPI), rounded to the nearest five pence, from 1 April 2017 and then again from 1 April 2018 (Budget Report, paragraph 2.177). (For more information, see Practice note, Landfill tax.)
- The rate of aggregates levy will remain at £2 per tonne in 2016-17 (Budget Report, paragraph 2.175). This is said to support the construction industry. (For more information, see Practice note, Aggregates levy.)
Comment
As we said at the time of the July 2015 Budget and the 2015 Autumn Statement, there is little direct news for construction practitioners. This time around, the headlines are likely to centre on the government's plans to turn schools into academies, to make changes to corporation tax and stamp duty on commercial property, to help people to save, and to reduce the amount of sugar in soft drinks. However, there was no news on how the new apprenticeship levy will interact with the Construction Industry Training Board (CITB) levy. As such, we are scratching our heads to find a sweetener for the construction industry.