Comment

Plan today, pay tomorrow?

The Summer Statement

The Chancellor delivered the Summer Statement this afternoon with a very clear 3 point “plan for jobs”. Significant spending was announced in pursuit of: supporting jobs, creating jobs and protecting jobs.

Full details are available here.

All of this arrives on the back of a raft of spending announcements over the last few months and unprecedented levels of intervention to steady the UK’s economy and shore up employment.

There were many worthy and ambitious announcements within the Summer Statement which are summarised in this piece.

We also highlight the areas which could have featured more prominently in the plan in relation to property and construction.

No such thing as a free meal

While this is undoubtedly and rightly a plan fit “for today”, it won’t have been lost on those who listened to the Chancellor’s speech that we will need to pay for the interventions at some point in the future. After all, the Chancellor and the Treasury know that you can only spend a pound once.

He stated that the objective in the medium term is to “put public finances on a firm footing”. This suggests a necessary tightening of spending post the current crisis and/or raising of public funds through taxation measures.

It is a sobering thought, but this may represent a high-point in public funding on infrastructure, housing and regeneration for years to come.

Main announcements and missed opportunities to leverage the contribution of the property sector

Point 1: Supporting jobs

The Government’s introduction of the Job Retention Bonus and Kickstart Scheme are aimed squarely at encouraging employers to retain staff and create new fully subsidised jobs for young people. Funding has also been identified to invest in scaling up employment support schemes, training and apprenticeships.

The construction and property sector is well-placed to provide significant opportunities for apprenticeships and traineeships, where this is already an integral part of its workforce. Its capacity to maximise its contribution, however, will be dependent on the extent to which it is supported in its efforts to ‘build, build, build’. Where a number of the announcements for creating and protecting jobs are aimed at this objective in our view, as we suggest below, more could have been leveraged from the property sector with the right support.

Point 2: Creating jobs

The Government has already made clear in previous announcements that it considers that the creation of new jobs will be led by investment in new infrastructure and the green economy. The acceleration of new development and the maintenance of outdated and unsustainable buildings represents a one off opportunity to deliver unprecedented physical changes to our urban areas. This also offers the chance to provide a long-standing sustainable legacy and contribute to a levelling up agenda.

New announcements include the £5.8 billion to be spent on shovel-ready construction projects and a £3 billion green investment package to be considered alongside existing commitments such as the £12.2 billion Affordable Homes Programme.

Smaller in scale but of notable importance to the housebuilding sector is the allocation of £400 million to the Brownfield Housing Fund, to be distributed to the seven Mayoral Combined Authorities to bring forward land for development and unlock 24,000 homes in England.

In our view, however, more could have been leveraged from construction and the property sector if the plan had:

• Extended the Green housing deal to cover new build homes and commercial property.
• Realised the benefits of investment in construction of energy networks – not just individual building efficiency measures.
• Provided gap funding support for the viable conversion of vacant buildings on the high street into homes.

Point 3: Protecting jobs

In its efforts to protect jobs the Government has chosen to target its attention on the tourism and hospitality and the house building and property sectors. It is clear that these are sectors which have been severely impacted and we support this focus. Furthermore, their future success is a critical factor to sustaining the vibrancy of the places we live, work and visit and in addressing long-standing challenges related to the national housing crisis.

The Government’s ‘Eat Out to Help Out’ scheme and the increase in the Nil Rate Band of Residential SDLT (Stamp Duty) are both aimed, quite rightly in our view, at stimulating and maintaining demand in these respective sectors over the short-term.

Whilst these announcements are strongly supported as being critical in overcoming immediate threats in our view, again, more could have been leveraged from construction and the property sector if the plan had:

• Given support for businesses in tourism and hospitality sectors for the cost of adapting premises, thereby creating employment in construction and skilled trades.
• Announced additional funding to build upon a commitment to accelerate the Towns Fund investment to ensure current momentum is maintained and the impact more pronounced.
• Provided more certainty over the future of Help to Buy funding which has acted as a stimulus for the housing market in all areas of the country and would provide further confidence to the house building industry to maintain previous rates of building.

What next?

While the plan for jobs is a well-targeted response to the immediate problems we face into, it is our view that the property sector can play a more prominent role in recovery with the right level of targeted support. The contribution of the sector will be critical in the Government’s rebuilding phase which it has confirmed will be the focus of the Budget and Spending Review in the autumn.

The Government’s confirmation that it will introduce new legislation to make it easier to build better homes in the places people want to live, and a policy paper setting out its plans for comprehensive reforms of England’s planning system, will be an early indication as to the role it sees planning having in providing the foundation for re-building.

Investing in energy efficiency for existing buildings is a triple win by creating jobs across the country more quickly than other forms of public investment, increasing household spending and economic productivity through reduced energy bills, and reducing this major emissions source towards our zero carbon target.

In relation to climate leadership, the Chancellor’s announcements are welcomed as a “down payment” for the short term. However these measures will need to be maintained and enhanced each and every year to ensure the UK meets its climate change objectives and associated opportunities such as employment and innovation are supported.

We look to the forthcoming Budget to offer support for the property sector which in turn can help the Government to level up, deliver a low carbon future and to sustain the economies of places across the UK.

8 July 2020