Stamp duty reform may be welcome, but we need more action to fill the skills gap
As Autumn Statements go, last week’s mini budget was not especially memorable for the construction sector as most of the news that might affect our industry had been pre-leaked. The infrastructure spending, the decision by government to step in and build houses via the Homes and Communities Agency, announcements on HS2 plus HS3, plus development of “Northern Powerhouses”. All of this was not so much a fiscal tour de force as a re-heating of old press releases.
However, to borrow a line from the famous advert for Marks and Spencer’s food: “This was not an ordinary Autumn Statement, this was a pre-election Autumn Statement”. The headline grabber was craftily poised to make greatest impact at the end of the chancellor’s 45 minute speech. Just when the commentators were all going yada! yada!…like a magician from an old time music hall “The Great Marvo” revealed his slickest illusion yet - the abolition of stamp duty as we know it (something almost certainly suggested by his sidekick Danny Alexander).
Apparently it’s a catch-all measure that will impact 98% of house purchasers positively and effect those termed “the rich” negatively. This seemed good news for most house-owners and sellers on the surface and it probably is for those living outside of the South-east. However following the announcement, the Office for Budget Responsibility said that house prices were expected to rise by 31.4% on average by the first quarter of 2020. This would mean that over the course of the next Parliament far more homeowners will pay more stamp duty undermining the predictions of a windfall for the many.
Where are the real tax incentives to train and be trained? When will apprentices and tradespeople be granted the same status as their counterparts heading for Fresher’s week and a three year degree?
This is significant for construction at a time when recent statistics would indicate that we are not moving forward at the end of 2014 with the same degree of gusto that was evident at the start of the year. Many factors are blamed: the housing industry adversely affected by new rules on obtaining mortgages, fears over the state of the European economy and our possible withdrawal from the EU, or perhaps inflationary pressures brought on by a lack of key members of the supply chain. Whatever the causes, it could be argued that our mini boom was first initiated by the coalition’s actions to prop up the residential housing sector through the ‘Help to Buy’ scheme. Maybe this new stamp duty news will be the fresh injection needed to breathe confidence back into the market.
Key to the success of the house building programme however is the creation of the skilled labour force required to build. The 300,000 new homes target, the Garden Cities, the regeneration of the North through road building and new arts projects - they are all going to need people build them. The idea that we are going to re-energise the “lost generation” of skilled craftspeople by abolishing national insurance contributions for companies that employ the under 25s is founded on the right principles. However they are an Elastoplast solution for a haemorrhaging of talent that has taken place over the past 10 years.
Where are the real tax incentives to train and be trained? When will apprentices and tradespeople be granted the same status as their counterparts heading for fresher’s week and a three year degree? In other words, when will a completed apprenticeship be given the same prestige and worth as a university degree - like they do in Germany, South Korea and Switzerland? What will the government do to ensure that formal and audited skills training is regarded as a mandatory obligation and not a choice? When will those at the sharp end of the construction process have their voice heard? It is fundamentally the economics of supply and demand. The fewer people there are available to build, the higher premium they will charge for their time. This will affect the cost of a new road, house or power station - and you are looking at a potentially harsh impact on inflation.
At the end of the day nearlyseven days on since the speech I suppose we should be asking ourselves how important it was, which parts of Autumn Statement will be agreed to be pushed through by the whips and will it all just get lost pre-election and bearing in mind the date of the election even if passed into legislation how long will it last?
Richard Steer is Chairman of Gleeds Worldwide