Better late than never - getting Great Britain building again
It could be the BPF’s next General Election manifesto strapline but is in fact the Government’s latest plan to kickstart the economy by making it easier, quicker and cheaper to get infrastructure projects out of (and under) the ground. And it comes none too soon.
The property sector knows well the important economic benefits that flow from development and regeneration, having made a capital investment of around £73bn in 2022, which supported 454,000 jobs. Property folks also know that those figures could be considerably higher if it were quicker to secure electricity grid connections and if infrastructure projects (which by and large support commercial development) were delivered more speedily.
Oh, and if the planning system were better resourced, easier to navigate and generally less risky.
For years we have been making the case for action on these fronts and that message is finally starting to get through to policymakers. Earlier this year the Labour Party called planning “a dead hand on the tiller of Britain’s ambition” and then today – despite the Conservative Party’s longstanding love-hate relationship with planning – the Chancellor announced a raft of changes designed to speed up development projects.
- A Star Chamber reporting to the Prime Minister or Chancellor to strengthen co-ordination of infrastructure delivery across Government;
- Updated National Policy Statements for major infrastructure by March 2024 and a simplified and standardised process for updating these in future;
- Reform of the grid connection process to reduce overall connection delays from five years to six months;
- Guaranteed accelerated planning decisions for major property developments in England in exchange for a fee, with refunds given to applicants where agreed timeframes aren’t met; and
- A £5m investment to incentivise greater use of Local Development Orders (LDOs).
This is all good stuff, though easier said than done. For instance, many local authorities currently refuse to enter into planning performance agreements not because of a lack of money but because they simply don’t have the right skills to stick to the deadlines and they can’t recruit the right people. So for guaranteed accelerated planning decisions to work there will need to be a mix of upskilling and additional funding (which property developers are generally happy to pay in return for a more reliable service).
It's such a shame that it has taken the Government so long to make this sort of commitment to speeding up infrastructure and development activity, but it’s better late than never. It also involves measures that should command cross-party support, so hopefully not particularly affected by a potential change in Government next year.
Another positive coming out of the Autumn Statement was a commitment to follow through with the pension-related measures the Chancellor announced at his Mansion House speech. Greater consolidation of defined contribution (DC) pension schemes and a move towards collective DC schemes would make it easier for the rapidly increasing pot of DC money to flow not only into tech businesses and scale-ups, but also into long term illiquid assets like property, supporting the renewal of our towns and cities.
Probably the biggest single measure impacting on the residential private rented sector (PRS) is the increase in the Local Housing Allowance to 30% of market rents from April 2024. It’s unlikely to have much of an impact on Build-to-Rent’s customer base, but is important in supporting the health of the wider PRS.
Full expensing of capital investment - the “biggest business tax cut in modern British history” – is another welcome development, albeit one that’s unlikely to have much of an impact on property development. This is because the development and construction phases of a project typically involve little or no taxable profit and so a tax deduction doesn’t change the economics. We would have liked to see an “above the line” tax credit (along the lines of R&D tax credits) for “green” capital expenditure.
Continued disappointment on the business rates front, where the Chancellor acknowledged the burden imposed by “the tax you pay before making a penny of profit”, but then offered respite from inflationary increases only to those paying rates at the small business multiplier, which will exclude many high street stalwarts feeling the pain of inflation and squeezed consumer spending. It’s good that the retail, leisure and hospitality relief has been extended for another year, but again this relief is capped at a level where you don’t have to be a particularly big pub chain before you start paying business rates at full whack.
All in all, lots to get our heads around and plenty of detail to scrutinise over the coming days and weeks. And remember that the pre-election fiscal show is a drama in two parts, with a sequel to come in March! Who said politics was boring?