Budget analysis: Thumbs down from the NFB
The National Federation of Builders (NFB) has welcomed some of the positive measures for business in the chancellor’s Budget Statement, but expressed serious concerns about the missed opportunities for using housing and construction to stimulate growth, particularly around stamp duty relief, the Get Britain Building scheme, VAT on domestic energy efficient installations and lending to construction SMEs.
Stamp Duty: Stamp duty relief, introduced in the 2010 Budget to give first-time buyers a step onto the property ladder, is being allowed to lapse. Julia Evans, chief executive of the National Federation of Builders, said: “By refusing to renew this relief, at a time when many are struggling to get on the housing ladder, the chancellor has effectively knocked out a step from beneath them. It is of no comfort for first time buyers that the chancellor is getting tougher on stamp duty avoidance among top earners, when for average earners stamp duty forms yet another barrier to buying their own home. A recent upturn in sales has been partly driven by people looking to take advantage of the concession and there is a fear that its abolition will lead to a slump in sales in an already fragile market. Given this risk and the fact that any increase in revenues to the Treasury is likely to be very modest, it is disappointing that the chancellor has chosen not to renew this relief.”
Get Britain Building: The chancellor repeated the government’s £420 million investment to keep the big builders building, adding £150 million to the fund. Julia Evans commented: “The Get Britain Building scheme, which was designed to help unlock stalled sites of all sizes, has directed 40% of the fund to the large housebuilders which, judging from the financial results of some of the volume builders, are much less in need of funding than the smaller, lower-volume builders. The government’s focus on SMEs as a driver for economic growth does not appear to extend to housebuilding where schemes from the Homes and Communities Agency, which administers public money, favour the larger players.”
VAT: Currently, a reduced rate of 5% VAT applies to the installation of some energy saving materials and micro-generation systems which will be eligible for Green Deal financing, but not to others, leading to unnecessary complexity and perverse incentives. Julia Evans commented: “It is particularly disappointing that an opportunity was missed to harmonise VAT rates on the domestic energy efficiency installation, ahead of the Green Deal launch later this year. Reducing all energy efficiency measures to the lower rate of 5% would have been consistent with the government’s drive towards harmonising and simplifying the tax system, while at the same time acting to stimulate the market ahead of the Green Deal’s introduction later this year. Moves to simplify and harmonise our hugely complex tax system are to be welcomed, but harmonisation that only ever goes one way, is just another word for a tax rise.”
Regulation and tax: The NFB did however welcome reductions in unnecessary administration and regulation which benefit smaller firms that are disproportionately affected by the associated costs. The simplified payroll system, proposed cash accounting system and reduced rate of corporation tax will reduce costs and the tax burden for smaller businesses.
Lending: The real question on the £20 billion National Loan Guarantee Scheme fund is whether it will simply enable SMEs already at the front of the queue to get cheaper loans (welcome as this is), or whether it will also support otherwise perfectly viable SMEs in sectors like construction, deemed toxic by the banks. “Lending to the construction sector remains depressed and construction SMEs find themselves at the back even of the SME queue. We hope that the scheme succeeds in its aims, but see no indication that it will. It also amounts to a significant admission of failure on the government’s part as it has already introduced mechanisms such as Project Merlin and the Enterprise Finance Guarantee scheme, designed to encourage the banks to lend to viable businesses. These schemes should have met the needs of businesses had the banks delivered on them, but they failed.”
Julia Evans concluded: “With growth forecast at just 0.8%, the measures announced today fall short of allowing the construction industry to play its full part in economic growth, and severely undermine its ability to maintain its traditional 8% contribution to GDP.”