Budget report 20th March 2014

Chancellor hails budget for backing a Britain that builds The UK Chancellor George Osborne today hailed an increased forecast for the economy to grow 2.7% this year and announced a new budget that claimed it was for 'makers, doers and savers.'



Propertymall breaks down the budget and how it affects property. The Help to Buy scheme will be extended till the end of the decade for an additional 120,000 new homes to be built, on top of the 74,000 due to be built by March 2016. The South East, who Mr Osborne said needs houses the most, will see new homes at Barking Riverside, a residential regeneration at Brent Cross and he confirmed the 15,000 new homes at Ebbsfleet garden city.



Osborne acknowledged claims the opposition announced it when in power but said since then they have only built 300 homes, calling it "more ebb than fleet." As a result of government reforms to date, planning approvals and housing starts are at 5 year highs, and housing activity recently expanded at its fastest rate for 10 years. There was no sign, indeed the opposite, of how the Government would wean the UK economy of its addiction to house prices. In an attempt to clamp down on stamp duty avoidance, from tonight, anyone buying a house over the £500,000 threshold through a corporate envelope will face a corporate tax of 15%. "We are expanding the new tax we introduced to stop people avoiding stamp duty by owning homes through a company," says the Chancellor.



There was no overhaul of the stamp duty system for regular private buyers, as expected. There will be £500 million in additional funding for housebuilders. The government estimates that 15,000 housing units are currently stalled due to difficulty in accessing finance, and this would help unlock these. For people who want to build their own home, £150m will be made available to help provide up to 10,000 serviced plots, as well as giving custom builders a right to a plot from councils.



Business rates will be extended for another three years in Enterprise Zones. The £1,000 off business rates in the high street will continue, but other than that there was no new policies or reductions, certainly no scrapping of the rates on empty buildings. The government makes around £27bn a year from business rates, or 4.2% of its total receipts, and it is not seen as a vote winner or loser, much to the frustration of the property industry. There will be some reform of the planning system in regards to warehouse to resi conversion, with the government reviewing the 'General Permitted Development Order'.



A new approached will be based on a three-tier system to decide the appropriate level of permission, using permitted development rights for small-scale changes, prior approval rights for development requiring consideration of specific issues, and planning permission for the largest scale development. As part of this, the government will consult on specific change of use measures, including greater flexibilities for change to residential use, noting for example from warehouses and light industry structures, and allowing businesses greater flexibilities to expand facilities such as car parks and loading bays within existing boundaries, 'where there is little impact on local communities', the Government added.



The government will also commit £100 million to Greater Cambridge until 2019-20 to support their transport and infrastructure proposals through a Gain Share mechanism. This agreement could be worth up to £500 million over 15 to 20 years, dependent on the economic impact of their investments and, in addition to Greater Cambridge's own plans, could deliver over £1 billion of infrastructure investment in the Greater Cambridge area. Elsewhere away from property, the biggest changes came in pensions, with the pension industry becoming the biggest losers in the budget as the Government targets its core pension voters. There will no longer be a requirement to take an annuity. For example, it is no longer required to have to live off the annuity interest with say, a 100k savings. Instead of living off the 2-3%, or £2,000-£3,000 per year, one can simply take the cash and use it as they like. This will actually make the government money by those taking the money out paying a basic rate of tax of 25% (over £10,000).



Though of course if people spend it and blow it they will rely on government more, especially as people live longer. The annual ISA limit will increase to £15,000 from July, and significantly allow merging cash and shares, making the system much more flexible. Further, the 10% savings tax rate will be abolished. And to make pension savings more attractive, the pensioners bond, a government bond, will pay 4% over three years. Bingo halls and beers were the other great winners, with Mr Osborne saying the number of bingo halls has "plummeted" by three quarters over the last 30 years and so bingo duty will be halved to 10%. Beer tax will drop by another 1 pence per pint this year, and frozen on other alcohol, but increase tobacco 2% above inflation. Petrol duty was frozen. Apart from that there was a £7bn package to cut energy costs for manufactures, and a cut in air passenger duty for long haul flights, and of course the well expected increase to £10,500 of tax-free income.



There is an extra £140m for repairs and maintenance to flood defenses and £200m for potholes. The comical highlight was the witty reference George Osborne made when announcing a grant to the Magna Carta Trust, referring to Ed Miliband and saying "a weak leader who got to the top by betraying his brother, leading a gang of unruely barons." When it was Miliband's turn, he pointed to Education Secretary Michael Gove who was in a small chair in a far corner. He questioned whether he may be banished, "hiding" on the "naughty step", after Mr Gove highlighted in an interview on the weekend the number of Etonians in the PM's close circle. There are more Etonians than woman in the cabinet, he remarked.