On Wednesday 27 October 2021, Chancellor Rishi Sunak delivered his third budget. As the Chancellor set out the UK Government’s priorities, Sunak said his third budget “begin[s] the work of preparing for a new economy post-Covid.” The Chancellor said this would be a UK economy of “higher wages, higher skills and rising productivity.”
Sunak announced a range of measures affecting the built environment. These included a £1.8 billion investment in developing homes on brownfield land, a 4 per cent ‘cladding tax’ for developers who earn over £25 million and a £65 million investment in digitising planning.
However, the Chancellor omitted any mention of net zero or the climate emergency, just days ahead of COP26 in Glasgow (you can find out more about the RIBA’s work at COP here). The budget was seen as an opportunity for the government to lay out how it plans to fund the goal of achieving net zero greenhouse gas emissions by 2050.
Although the government published its long-delayed Net Zero and Heat and Buildings Strategies last week, it lacked detail on funding despite a pledge from ministers to embed the 2050 target in spending decisions. Sunak made no mention to how it would fund its net zero carbon target and lacked green spending commitments. RIBA President, Simon Allford, questioned the government’s choice to cut air passenger duty on domestic flights if it is serious about the environment.
There were several other announcements that will have an impact on members, which are explained in more detail below. The RIBA will continue to call on the government to prioritise the climate emergency:
Residential Property Developer Tax
Yesterday Chancellor Rishi Sunak confirmed a 4 per cent property developer tax to fund its £5.1 billion package to replace unsafe cladding for leaseholders in high-rise buildings across England. The new tax, called the 'Building Safety Levy', will apply to firms earning more than £25 million a year. The legislation will be introduced in Finance Bill 2021-22 meaning that the tax will apply from 1 April 2022.
The tax, applied over a 10 year period starting next year, is expected to raise £2 billion over its lifetime to pay for removing unsafe cladding on high-rise buildings. In April, the government issued a consultation on the tax. It acknowledged the need to identify and track losses relating to residential property development activities from the 2022 commencement date.
Extension to the Recovery Loan Scheme
The scheme which was due to come to an end on 31 December will now be extended until June 2022 to support businesses affected by the pandemic.
First launched back in March 2021 in order to “help businesses rebuild after the pandemic,” the programme allows firms to borrow as much as £10m, with the state backing 80% of the lending.
The extension of the recovery loan scheme will provide small and medium-sized enterprises (SMEs) with the funds they need to recover from the pandemic. However, the government’s loan guarantee will soon be reduced from 80% to 70% to encourage the lending market to move towards normality.
Reformation of Research and Development
Chancellor Rishi Sunak used Wednesday’s budget to attempt to shift R&D funding towards supporting technological advances in the UK amid concerns that taxpayer money is being used by British companies for breaks that help fund overseas workers and technology investment.
The chancellor set out a target of increasing spending on research and development in the UK to more than £22 billion. R&D in the UK is set to represent 1.1% of GDP by the end of the current parliament. Further details will be set out in a forthcoming report in the autumn. The changes will be legislated for in Finance Bill 2022-23 and will take effect from April 2023.
The UK government will reform the system of tax reliefs for investment on research and development in an effort to boost innovation in Britain, while “refocusing” breaks that domestic companies can claim when carrying out research overseas. A £1.4 billion British investment fund will also be established, and a ‘scale-up visa’ will be introduced to encourage overseas recruitment.
Levelling Up
Ministers have allocated £1.7 billion to more than 100 small-scale infrastructure projects across the UK as part of Prime Minister Boris Johnson’s pledge to ‘level up’ the UK and tackle regional inequality.
The levelling-up fund was announced by Chancellor Rishi Sunak in March’s budget to channel infrastructure funding into areas in need of an economic boost — including many that voted for Brexit and backed the Conservative party for the first time in the 2019 election.
The first 106 successful bids to the £4.8 billion fund, which covers all regions of the UK, were announced on Wednesday. The projects will be delivered over a four year period, according to officials.
Business Rate Relief
The government has cancelled a planned increase in business rates next year but ruled out any radical reform of the property tax.
In his budget on Wednesday, Chancellor Rishi Sunak said he would make another £7 billion of rates support available to businesses in England over the next five years, on top of the £16 billion provided during the pandemic.
Help will be given to property owners who carry out improvement works or install equipment to improve a building’s energy efficiency; they will see no increase in business rates for the following year.
Surface Water Flooding
The government has commissioned its infrastructure advisory body, the National Infrastructure Commission (NIC), to produce a study on "on the effective management of surface water flooding in England," looking at areas including "spatial and development planning."
The terms of reference say the NIC should deliver a final report setting out recommendations to the government by November 2022.
As part of the budget, the government has also revised the remit of the NIC to include a commitment to net zero carbon emissions by 2050, the Environment Bill's legal target to halt biodiversity loss by 2030, and "the effective implementation of biodiversity net gain."
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