It may look like fiddling while Rome burns but the tax measures in last month’s Budget may actually get our industry to become a bit more eco-conscious
While many of us were in Mipim last month, in the UK a quietly spoken Scottish politician with a red briefcase and grey demeanour was trying to fulfil what he described as “our greatest obligation to future generations”. Sadly, eco-experts predict that the measures to tackle climate change in chancellor Alistair Darling’s Budget speech stand as much chance of preventing catastrophe as there is of the Dalai Lama carrying the Olympic torch into Beijing.
The speech did, however, contain some ideas that may prompt our industry to be more eco-conscious. For instance, the proposal to establish what “zero carbon” actually means is welcome. As is the commitment to build all properties on public land to level three of the Code for Sustainable Homes.
Now we’ve had time to review the speech, let’s look at what it will actually mean.
With the introduction of energy performance certificates (EPCs) imminent it was not surprising that the 2008 Budget was peppered with incentives to encourage commercial property investors and occupiers to invest in green technologies. But how far do these measures go and what returns will they generate?
Tax deductions on capital expenditure are not new, but the Budget increased the scope and scale of legislation surrounding them. Energy-efficient lighting has been available as a tax deduction since 2001, but now the level of capital allowance relief that can be claimed has risen. The rationale is that for people to invest in eco-friendly buildings, there has to be more on offer than simply lower running costs.
As such, lighting, air-conditioning and the use of facades, external solar shading and thermal insulation were pointed to as areas where substantial energy cuts could be made. From this month, improvements in these areas will bring 10% writing down allowances. As a result, on a commercial office one can expect to claim an extra 30% of capital allowances, compared with existing legislation.
This may not excite eco-gurus such as Al Gore and Leonardo Di Caprio, but lighting and heating, ventilation and air-conditioning systems can account for 40% of a building’s energy use. The Carbon Trust estimates that 66% of a building’s heat is lost through its fabric and the expense of generating this heat can account for 15% of a building’s energy costs.
This may not excite eco-gurus like Al Gore and Leonardo Di Caprio, but lighting and heating can account for 40% of a
building’s energy use.
Another proposal is for the meaning of “insulation against loss of heat” to be extended. This would mean that if a roof cladding system were replaced entirely with insulted roof panelling, the entire roof could be claimed as thermal insulation.
In contrast to these wise moves, we have Darling’s reform of the tax system for empty properties, which has understandably raised the ire of most of the property industry. Under the new rules there will be no charge for the first three months a commercial property remains empty, but after that full rates must be paid even if a tenant has not been found. This will apply to factories and warehouses after six months. Furthermore, properties that have been vacant for the three or six months on 1 April 2008 will have to pay the full rate. This is clearly a vapid measure to attract revenue. The terms “punitive” and “stealth tax” spring to mind.
Nevertheless, we should not forget that this is the same government that set the tone by promoting the sustainability agenda and it is the chancellor’s yearly statement that conducts the nation.
I recently attended a presentation at the RIBA Trust by journalist and climatologist Mark Lynas, who contributed to the movie “Six Degrees”. Mark took us on a jolly journey through what will happen if the world continues to heat up at the current rate.
The film was hardly from the Meet The Fockers school of comedy. In fact, the vision presented was more a cross between Armageddon and The Day After Tomorrow. Apparently, the disappearance of polar bears is the least of our worries – indeed, where we might source food and water from is of greater concern.
The UK’s construction industry’s contribution may not be the all-deciding factor in whether we reach our global emission targets, but those that shape the built environment can have a role to play in determining the future of our planet by managing design, implementation and costs.
Eco-experts may be sceptical, but Darling’s measures are are not entirely academic. His proposals on their own may not save the planet, but it seems he has got one thing right – the availability of capital allowances relief will be the real incentive for investors and occupiers to reduce energy use by investing in environmentally beneficial technologies. On their own they will go some way towards improving energy ratings, but combined they could generate significant results.
Richard Steer is senior partner at Gleeds