UK economic package 'lacks long-term vision' on infrastructure and housing

Out-Law News | 09 Jul 2020 | 9:17 am | 3 min. read

Measures announced by the UK chancellor to support jobs and boost the economy lack the long term policy planning needed in response to the coronavirus crisis, housing and infrastructure experts have warned.

The announcements include a temporary increase to the stamp duty land tax (SDLT) nil rate threshold in England and Northern Ireland; grants for homeowners seeking to invest in 'green' improvements; cutting the VAT rate for the hospitality sector; and a 'job retention bonus' for companies whose furloughed workers remain in employment on 31 January 2021. The government will also offer subsidies to encourage businesses to employ young people at risk of long-term unemployment.

Sunak's announcement, dubbed the 'plan for jobs', is the second of what the UK government has described as a three-phase coronavirus economic recovery plan. It follows the Coronavirus Jobs Retention Scheme (CJRS) and business support programmes announced in response to the immediate impact of the pandemic; and comes ahead of the Budget and spending review this autumn, which is expected to "focus on rebuilding".

Hart Jonathan

Jonathan Hart

Partner

Observers might have hoped for bigger, better and faster: this announcement has raised the stakes for what the chancellor might have to say in the budget proper this autumn.

Infrastructure law expert Jon Hart of Pinsent Masons, the law firm behind Out-Law, said that the industry would be disappointed by the contents of Sunak's speech, following last week's commitments to infrastructure investment by the prime minister.

"The chancellor had opportunity to put some flesh on the bones of the aspirational desire to 'build, build, build' but again this announcement, like last week's, appears to be disappointingly short on detail," he said.

"Last week, the prime minister announced new commitments to investing in infrastructure, to a relatively muted response from industry. Those hoping to get a clearer picture of the way ahead could be disappointed. It remains unclear what practical difference these measures might make for the hard-pressed sector, which 'shovel ready projects' might be involved and how that might fit with the nation's 'zero carbon' commitments," he said.

"Observers might have hoped for bigger, better and faster: this announcement has raised the stakes for what the chancellor might have to say in the budget proper this autumn. By then, hopefully, we will have seen the issue of the long-anticipated National Infrastructure Strategy and some of the first fruits of new thinking on speeding up the procurement and planning processes for the sector. For the time being, however, it would seem that we are going to have to wait," he said.

In his speech last week, Boris Johnson pledged that the UK would "build back better" and "finally tackle … the great unresolved challenges of the last three decades" in response to the crisis, by speeding up planning infrastructure investment and reforming the planning system. Sunak's announcements included £5.8 billion for "shovel-ready" construction projects throughout Britain focused on rebuilding hospitals, schools and courts in England, as well as the local roads network.

Sunak also announced a £3bn green investment package. This will be split into a £2bn grants package aimed at green improvements by homeowners and landlords; and £1bn worth of green improvements for public buildings including schools and hospitals. This funding will also support jobs for local tradespeople, Sunak said.

The chancellor has also increased the nil rate band on SDLT in England and Northern Ireland from £125,000 to £500,000, meaning that people purchasing a new home will pay no SDLT on the first £500,000 of the purchase price. This increase will remain in place until 31 March 2021.

Housing expert Kevin Boa of Pinsent Masons said that the increase "could turbo charge the residential property market and relieve pent up demand prompted by the pandemic". However, "more needs to be done to support the development of new build homes", he said.

"This is what the UK desperately needs," he said.

Boa Kevin

Kevin Boa

Partner

The temporary increase to the SDLT nil rate band is a positive step for many, but this measure is a fix for the 'here and now'.

"The temporary increase is a positive step for many, but this measure is a fix for the 'here and now'. What's lacking is long term policy decision making that will genuinely boost housing delivery on a mass scale alongside support for renters. As the furlough scheme ends and redundancies are likely to rise, those renting homes will need help," he said.

The government is currently covering 80% of the wages of furloughed workers through the CJRS, which is due to end in October. Employers will be required to pay National Insurance and pension contributions from next month, and to contribute a percentage of employee pay from September.

The new "job retention bonus" of £1,000 announced by the chancellor will be payable in respect of each furloughed employee who is brought back to work and continuously employed until the end of January 2021. To qualify, the employee must be paid an average of at least £520 per month between November and January.

A new 'kickstart scheme' will pay for six-month job placements for young people aged between 16 and 24 who are claiming Universal Credit and at risk of long-term unemployment, for 25 hours a week at 100% of National Minimum Wage. Employers will be able to top this wage up. Funding will also be provided for additional apprenticeships, training and work academy placements.