James Dickens is managing director of Birmingham-based regeneration specialist Wavensmere Homes
Chancellor Rachel Reeves will be delivering her maiden Budget speech after a rocky first four months since Labour came to power. Despite the welcome positivity about planning reform and boosting the housing market, businesses and property landlords are fearing the worst.
Reeves has made it clear she is looking to fill an apparent £40bn hole in the public finances, with the Office for Budget Responsibility predicting the Treasury will raise more than £1 trillion in taxes this year. Wednesday 30th is therefore likely to end up as the biggest tax-raising Budget in 30 years. Meanwhile, government departments are being warned of the need for significant spending restraint. Where’s the joy, and how does the Chancellor expect to improve GDP?
Freezing Income Tax thresholds for another two years will bring in £7bn in additional ‘stealth tax’ revenue. Employer National Insurance contributions are also likely to be targeted, in order to raise between £9bn – £12bn. Employers may also be required to pay tax on pension contributions, but the Treasury has been warned this could ultimately lead to lower wages and fewer jobs.
The feared significant hike in Capital Gains Tax – to bring it more in line with Income Tax thresholds – is likely to be applied to the sale of shares and businesses, but mercifully not second homes or buy to lets. The number of homes up for sale last month that had previously been available to rent hit a record high of 18%, in response to alarms of an increasingly aggressive tax environment being imposed by Labour. Having far less rental properties – when the demand is so high – could have caused yet another housing headache for both the government and tomorrow’s prospective homeowners.
Adding to the woe, consumers will be hit by increased fuel duty rates from April 2025. Private school fees will be subjected to 20% VAT from January 2025, which is likely to increase the demand for already oversubscribed state schools.
Angela Rayner’s ‘£1bn council housing revolution’ could play into the hands of the increasingly powerful land-rich PLC housebuilders. Meanwhile, planning and pre-construction issues continue to negatively affect the supply of new homes, with as few as 135,000 expected to be built this year. Constructing 300,000 new homes per year is a pipedream! The Deputy Prime Minister should be finding ways to assist housebuilders with delivering the Future Homes Standard and Biodiversity Net Gain legislation, to counteract the cost burden being passed onto the consumer.
The only real help first time buyers currently have to access the housing ladder is the Stamp Duty exemption for homes valued up to £425,000, but this temporary threshold change will end in March 2025.
The much-needed welcome news is that UK inflation fell to 1.7% last month. This must be followed at the 7th November MPC meeting with a meaningful Base Rate cut to stimulate the economy and reduce the cost of servicing a mortgage. A quarter point drop wont do enough to provide the market visibility and confidence that is required across all industries.
I am yet to hear of any proposed fiscal change that could improve GDP. Why isn’t Cutting Business Rates a top priority? By doing this, the government would signal that it is indeed backing the dynamic firms that possess the potential to expand and drive the growth of the UK’s economy.
