RICS responds to 2024 Autumn Budget

This 2024 Autumn Budget is the first of the new Labour Government in the UK and – notably – the first ever to have been delivered by a female chancellor, Rachel Reeves MP.  The budget announced £40bn in tax rises to fund a range of priorities for the Government.

Seven pillars were set out as part of the Government’s growth mission including economic and fiscal stability; investment, infrastructure and planning; place with a focus on regional growth; people including good jobs and skills; industrial strategy and trade; supporting innovation; and delivering net zero.

How will the Budget impact RICS members and firms?

Overall, the impact of the budget on RICS members and firms will create winners and losers.  The investment in housing and unlocking development will generate substantial opportunities for the profession, while some of the taxation changes will impact RICS member firms with employer NICs rising and changes to the National Living Wage.

There will be new opportunities as the government commits to GB Energy and a range of energy infrastructure investments including hydrogen and carbon capture – which will drive demand for surveying services, especially those working in land, natural resources and project management. Furthermore, investment in retrofitting and energy efficiency improvements including the Warm Homes Programme will increase the need for surveyor advice, which RICS can support with its recent RICS Residential Retrofit Standard.

Below is an analysis of some of the key announcements made by the Chancellor in the House of Commons today:

Housing

There was plenty of good news for housing and construction, particularly for the social housing sector. Housing associations and registered providers are experiencing a significant rise in maintenance and repair costs (the 204 largest providers spent £7.7bn on repairs and maintenance in 2022-23) as providers struggle with inflationary pressures and an ageing housing stock - meaning less capital is available to deliver new-builds. Today’s package of funding, including a £500mn increase to the Affordable Homes Programme, should help funnel more money into development.

Rumoured changes to Stamp Duty for first-time-buyers and the majority homeowners never transpired, however second-home owners and landlords will see an increase in the Stamp Duty Land Tax Surcharge – disincentivising landlords from investment in the much-needed supply of PRS homes that the monthly RICS Residential Market Survey consistently shows is needed to tackle rising rents.

With our latest Residential Survey reporting house prices are on the rise again, and over 1.3mn households on waiting lists, the need for more affordable housing is urgently important.

Commitments made by the Chancellor include:

• Boosting housing supply – The Deputy Prime Minister is leading this work across government and the Chancellor announced over £5bn in government investment to deliver on housing plans next year.  The Chancellor also announced £3bn in guarantees to small housebuilders.
• Affordable Homes Programme – Increase funding of Affordable Homes Programme to £3.1bn to deliver thousands of new homes.
• Social housing providers – The government committed to providing stability to social housing providers by uplifting the rate of support by CPI+1% for the next five years.
• Warm Homes Plan – As part of plans to improve the energy efficiency of homes and tackle fuel poverty, £3.4bn will support the improvement of 350,000 homes through the Government’s Warm Homes Plan over the next three years.
• Stamp Duty Land Tax (SDLT) – The Chancellor has announced a Stamp Duty rise for second-home buyers and landlords - the additional Stamp Duty rate will rise from 3% to 5%.

Infrastructure & Construction

Much needed new investment will give confidence to others, but the changes to fiscal rules to unlock up to £57bn of infrastructure spending, must be supported by changes to how infrastructure is planned and delivered. Nailing the delivery, and continuing to address planning issues, would accelerate the delivery of Britain’s £800bn infrastructure pipeline and could see delivering of £800bn of works - all of which could help create hundreds of thousands of jobs and boost GDP.  We welcome the Government’s commitment to seek international investment, and changes in rules to attract it will help boost confidence and encourage other players to seek opportunities.

Our professionals, working to standards and experienced in project delivery, are integral to this work.

• Rebuilding schools – The Chancellor outlined additional funding of £6.7bn for the Department for Education, which includes over £1.4bn to rebuild more than 500 schools and increased funding for school maintenance to include RAAC affected schools.
• Planning system – The commitment to hiring “hundreds” more planning officers was repeated – a major priority set out in the Labour manifesto.  This is in the context of over 1000 long-term vacancies in the planning system, which is in need of wider reform and RICS has responded to the consultation on the National Planning Policy Framework.
• Building safety – The Chancellor announced £1bn to support the faster remediation of homes following the publication of the Phase 2 Grenfell Tower Inquiry report in September.
• Green hydrogen and carbon capture – The Chancellor announced funding for 11 new green hydrogen projects across England, Scotland and Wales.

Taxation

The new Government had pledged not to raise income tax, national insurance or VAT on “working people”, which reduced opportunities for substantial revenue raising. Most of the tax measures announced by the Chancellor had previously been reported in the press but ones of key interest to RICS professionals in the built and natural environment will be:

• Employer National Insurance contributions (NICs) - Employer NICs will rise by 1.2% to 15% from April 2025. The secondary threshold will also be reduced from £9,100 to £5,000. The Employment Allowance, however, will rise from £5,000 to £10,500.  It is estimated that over 800,000 businesses will pay no NIC next year and over 1m businesses will pay the same or less than previously.
• Business rates - The Chancellor has confirmed extended relief for the retail, hospitality and leisure sectors to support our high streets.  For 2025/26, relief will be set at 40% up to a cap of £110,000 per business. The small business tax multiplier will also be frozen next year. This follows representations from the retail industry for a Retail Rates Corrector amid concerns about the end to the 75% discount in April 2025.  The government intends to introduce permanently lower multipliers for Retail, Hospitality and Leisure (RHL) properties from 2026-27, paid for by a higher multiplier for properties with Rateable Values above £500,000.
• Corporation Tax – The Chancellor outlined the importance of business certainty and committed to maintaining the 25% rate for the duration of this parliament. Full expensing will be maintained as well as the annual investment allowance also retained at £1 million.
• Capital Gains Tax (CGT) – an increase in both rates will be made – the lower rate will rise from 10% to 18% and the higher rate will increase from 20% – 24% while rates on residential property will remain the same.
• Business Asset Disposal Relief – The Chancellor set out the Government’s commitment to encouraging entrepreneurship. The lifetime limit for Business Asset Disposal Relief is to remain at £1mn and stay at 10% this year, rising to 14% in April 2025 and then 18% for the 2026/27 financial year.
• Inheritance Tax (IHT) – Existing IHT thresholds will be frozen until 2030. From April 2027, the Government will bring inherited pensions into IHT. Agricultural property and business property relief will be reformed with an effective rate of 20% with 50% relief on combined assets over £1 million.

The Government has also published a discussion paper as part of its plans to reform the business rates system. Transforming Business Rates is intended to kickstart a conversation between the Government, businesses and key stakeholders to fix the system.

A key focus is protecting the high street and ensuring that property-intensive sectors are not unfairly burdened. We will engage RICS members as we develop our response to the Treasury.

Skills

The Chancellor spoke of rebuilding Britain, and that there should not be a ceiling on the ambition of women and girls.  Our profession holds many opportunities, and we need to improve access and opportunities for ambitious talent from all backgrounds, if we are to build what this country needs, and to boost the economy.  RICS will work with Skills England to shape and develop the much-needed pipeline of talent we need to deliver the government’s infrastructure aims, and this includes a holistic and innovative approach to education including new GCSE and vocational courses to inspire the next generation into the built environment.

Devolution

A range of measures were announced to support the devolution settlement, including greater certainty and visibility on funding for metro mayors.  In addition, a number of local city and growth deals were confirmed in Scotland, Wales and Northern Ireland and the Barnett consequentials were announced for devolved administrations.

RICS Chief Economist, Simon Rubinsohn commented:

“The shift in fiscal rules announced today by the Chancellor makes sense and has helped facilitate the large increase in planned infrastructure spending outlined in the Budget statement. That said, the projections for GDP growth from the OBR are modest to say the least with business investment viewed as likely to remain subdued in the wake of some of the proposed tax changes.

“Although improvements to the public estate are much needed, improving trend growth in the medium term is absolutely critical and will ultimately require a greater contribution from the private sector. Rachel Reeves spun a good story about businesses buying into the strategy but it remains to be seen as to whether the actions will match the rhetoric.

“Similarly as far as housing is concerned, the increased commitment to the affordable homes programme is to be welcomed but the OBR rightly is unconvinced as things stand that the government’s objective of delivering 1.5 million new homes can be met over the course of the parliament even with the reform of the planning regime. Meanwhile it is hard not to see the increase in stamp duty on the purchase of second homes resulting in a further widening in the gap between demand and supply in the private rental market as has been regularly highlighted in the RICS Residential Market Survey.”