RICS Responds to 2023 Autumn Statement

The 2023 Autumn Statement was always expected to be one tax cuts and positive news as the government rallies for support ahead of entering the long-expected General Election year.

With inflation falling, albeit slowly, it has presented Chancellor Jeremy Hunt MP with the opportunity to create a fiscal package to appeal to voters. The Autumn Statement has always been one of the most interesting periods of the year for the built environment, with the government often choosing to put housing, businesses and energy at the centre of its announcements, and this year was no different.

Commitments made by the Chancellor include:

• Speeding up planning - The Chancellor announced reforms to allow for higher fees for local authorities to speed up application processing, and help to unlock growth in housing and infrastructure needs. A further £32 million is being set aside to help resource and unlock the planning system that will help create more homes.
• Nutrient neutrality investment - RICS welcomes the commitment from the government to invest £110 million in nutrient pollution treatment and mitigation works - something we have called for to help unlock the more than 140,000 homes stuck in the planning system.
• Investment in more housing - £450 million has been set aside in the Local Authority Housing Fund to deliver more housing, however within the detail, this funding is designed for 2,400 homes for Afghan refugees which will free up further stock for those most in need.
• Permitted Development Right (PDR) - The Chancellor committed to consulting on expanding PDR to enable the creation of two flat units within one property, so long as the outside of the house isn't changed. Whilst creating more housing and flats should be welcomed, RICS is concerned that without strict standards in PDR, quality, safety, and sustainability could be compromised.
• Business Rates - We welcome the support that the Chancellor has offered by freezing the small businesses multiplier for an additional year, alongside the extension of the 75% retail, hospitality and leisure relief. While these measures represent a positive step, it is clear that long-term reforms are still required to create a fairer, consistent business rate system.
• Full expensing changes- the announcement of a permanent extension of 'full expensing' for businesses to have expenditure on IT, plant and machinery from taxable profits will provide a welcomed boost to businesses to help modernise and become greener. This builds on the government's 110 measures to help grow UK businesses.
• National Insurance - Large-scale personal and business tax cuts had been expected in this Autumn Statement as the Chancellor benefited from more leverage than in previous years for such announcements. It is no surprise such cuts are being made, especially as businesses and consumers will benefit from such relief as many still struggle in a cost-of-living crisis.
• Local Housing Allowance - RICS recently joined calls with organisations, including Shelter, for the Government to unfreeze and expand the Local Housing Allowance to help address the housing supply crisis for those most in need, and we welcome the Chancellor's announcement of its expansion to 30% of the local market rent.
• Freeport and Investment Zone tax relief - Expanding from five years to ten years for tax relief is a key part of the government's levelling-up plan and will be an appeal to help regenerate communities and create high-quality jobs.
• Self-employed taxes - With thousands of self-employed RICS members across the UK, the abolition of Class 2 National Insurance abolition, and further small cuts, it is estimated those self-employed will save an average of £350 a year - a small, but no doubt be a welcomed saving for businesses.

Commenting on the announcements, Emma Causer, RICS Interim UK & I Market Director said:

"The Autumn Statement was always going to be one to appeal to voters and businesses as the government gears up for an election.

"Tax cuts for businesses and employees are welcomed, as are the announcements to help stimulate housing and high streets. Investments in housing, through greater funding for local authorities and raising the Local Housing Allowance will help address housing needs, but we still need to build more green, affordable homes.

"Investment and reform to planning is very much welcomed, and we are glad to see the government listen to our calls to invest in nutrient pollution treatment and mitigation works.

"The proposal to cut red tape on the conversion of homes into multiple flats is one that RICS urge caution for - history has taught us that such measures, while creating more homes, have come at the detriment of quality. We look forward to responding to the government's consultation on the changes.

"Our recently launched manifesto for the built environment also called for a temporary higher-rate Stamp Duty holiday for landlords to introduce much-needed private rental homes to the market to address the growing crisis for private renters facing fewer choices and higher rents. It is noticeable that despite rumours, there was no mention of Stamp Duty changes for homeowners.

"Furthermore, whilst we welcome investment in energy infrastructure and security, we are disappointed to see no new announcements made on the expansion of funding to create more energy-efficient homes and businesses - which would help reduce our dependence on fossil fuels and imports."

Tarrant Parsons, RICS Senior Economist added:

"The economic backdrop to today's Autumn Statement is somewhat more favourable than at the time of the Spring Budget, with lower inflation (albeit this remains well above target) and stronger than anticipated wage growth easing some of the pressure on household finances.

"Moreover, whereas GDP was expected to have fallen slightly through to this point of the year, overall output has instead risen modestly. That said, despite improving to a certain extent, the near-term economic outlook remains relatively subdued, with the Office for Budget Responsibility now pencilling in a 0.7% expansion in GDP during 2024, following an estimated 0.6% pick-up this year.

"Perhaps the most eye-catching announcement this afternoon was the reduction in employee's National Insurance Contributions from 12% to 10% (coming into effect on January 6th). This, in the OBR's view, has the potential to both boost near-term demand and benefit the supply side of the economy. Indeed, the cut in National Insurance Contribution rates is projected to increase employment by 28,000 and boost the total number of hours worked by 94,000 as a result of greater take-home pay.

"It is however worth noting that even with the personal and business tax cuts announced today, the tax burden is still set to rise in each of the next five years to a post-war high of 38 per cent of GDP.

"With inflation likely to remain above target until well into 2025, hopes for base rates cuts seem premature, a point recently highlighted by Andrew Bailey. Against this background, it is likely that activity in both the residential and commercial real estate markets will remain relatively subdued as foreshadowed in recent RICS surveys, even if prices now begin to stabilise."

Public link

Please use the above public link if you want to share this noodl on another website.