Coverage and analysis of all the announcements relevant to construction
That’s it from me for the moment - time to analyse the statement’s documents and many announcements in more detail, and check whether there are any other surprises in store in the small print. Check the website and email alerts for all the news and reaction as it comes in.
Autumn Statement summary:
It was a pretty low key affair with none of the theatrics we’ve come used to expect from former chancellor George Osborne. The principle headlines for the construction industry are:
- £23bn National Productivity Investment Fund (NPIF), which will fund housing, R&D and economic infrastructure
- A commitment to raise the amount invested annually in economic infrastructure to up to 1.2% of GDP, from 0.8% today
- £1.4bn for an affordable housing programme, and £2.7bn for infrastructure to support housebuilding schemes - all part of the NPIF
- £1.3bn for roads and £450m for rail projects to improve capacity, again part of NPIF
- Extension of UK Guarantees scheme until 2026
To the govt the JAMS [just about managing people] are just an electoral demographic - to us they are our friends and neighbours
“The long term economic plan has failed.” McDonnell said he had expected a reset in policy today - but hasn’t had it. “This is a new conservative leadership with no answers to the challenges facing our country following Brexit”. “The chancellor must insits on full tariff-free access to the single market” - McDonnell urge Hammond to stand up to the prime minister and Brexit fanatics in the government “If he does so he will have our support”
McDonnell says the statement “places on record the abject faiure of the last six years.” “Growth down, wage growth down, business investment down, their own deficit target failed, welfare cap failed.”
“We have made our choices - bold in aour vision, confidence in our strengths, and determined. I commend this statement to the house” Hammond sits down, and shadow chancellor John McDonnell steps up.
He’s abolishing the autumn statement! From next year there’ll be an autumn budget, and a spring statement - provoking widespread hilarity in the commons. It is to allow greater parliamentary srcutiny of budget measures before the start of the tax year “A long overdue change,” he says. Hammond winding up now - he has avoided any tampering with Stamp duty.
Cancelling expected fuel duty rise for the 7th successive year - a tax cut worth £850m. Only one further announcement to make, he says.
Expected announcement banning lettings fees for tenants: “we will ban lettings fees for tenants as soon as possible,” Hammond says. “It is wrong.”
Now he’s talking about Universal Credit - changes to the tapers as expected. There’s no sign yet, as had been trailed, of this speech being much shorter than Osborne’s were - already 45 minutes and still going strong
National living wage will rise from £7.20 to £7.50 an hour
Capital funding for grammar schools - though he hasn’t said how much
The personal income tax allowance will be raised, as promised, to £12,500
Large businesses will always pay tax when they make profits - no more discounting against historic losses. This may worry some contractors, many of whom may have been hoping for big discounts following big loss announcements…
Hammond says “we must constantly be alert to tax loopholes”. Crackdown on the self employed. Cut down inapproriate use of the flat-rate VAT scheme. Tax avoidance measures will raise £2bn.
Tax breaks for benefits in kind to employees will be culled - except for a few exceptions, eg. the Cycle to Work scheme
Hammond confirm govt will stick to the Corporation tax roadmpa set out in MArch - reducing to 17%. But not 15% as Theresa May implied earlier this week - which will underline those who suspect she just hadn’t realised that committing to the lowest corporate tax in the G20 menat a move to 15% following the election of Trump. A rare joke, seemingly unscripted, when Hammond helpfully points out that a convoluted bit of detail on business tax reliefs was “complicated, but it’s good news believe me.”
However spending for the next parliament to be reviewed at “next spending review”
Hammond says “despite the fiscal pressures” govt will keep departmental spending commitments and pensions commitments
Departmental spending plans in general will remain in place - and efficiency savings will have to be delivered. The only exception is more money to help the prisons crisis.
Hammond talking about housing again - but one specific private house - Wentworth Wood House, which he is pledging public money to save. It’s not really clear why - though it allows him a rather convoluted jibe at Labour’s expense (they apparently authorised open cast coal minining up to the house’s door in 1946)
Reconfirm city deals scheme - and new one for Stirling. Devolution packages will have further powers
London to receive £3.15bn for housing
Now saying money for regional infrastructure - £1.4bn to regional growth funds, and more for LEPs, and more for northern road schemes.
Interesting that even though Hammond is now rolling out the announcements, there still seems little enthusiasm from MPs - on either side of the house. Partly because it’s a slightly downbeat overall tone - stressing the problems of poor UK productivity.
Now talks about privately-funded infrastructure - he is expanding the UK guarantees schemes which sits behind private investment until “at least 2026”
This is an interesting one - Hammond say he has written to the National Infrastructure Commission to plan on the basis the govt will invest 1-1.3% of GDP in economic infrastructure in future. This compares to 0.8% today so is a big increase. But the wording of this means it is not a concrete promise.
Now he lays out plans for 5G investment
Now it’s on to infrastructure - the £1.3bn road building fund, and money for rail network pinch points, and money for autonomous vehicles. He says the govt will continue to work to prioritise and develop funding for northern transport connectivity. That is code for saying that nothing is being announced today - which will disappoint many
Government will more than double investment in housing in the parliament, he says. I;m sure this claim will be much analysed.
The communities secretary will bring forward a white paper “in due course” - but today: government to focus infrastructure investment in areas for new housing, with £2.3bn housing infrastructure fund. Then there the previously trailed £1.4bn affordable housing fund, and relaxation of rules on what existing housing grant can be spent on.
Now he’s saying how it will be spent - firstly, on housing. “For too many the goal of home ownership remains out of reach”. Refers to October £3bn housing announcement “but we must go further still.”
Hammond has been setting out latest forecasts but here is his first announcement - a £23bn productivity fund to be spent on innovation and infrastructure - “investing today for the economy of the future,” he says.
In this environment, “we will prioritise high value investment in infrastructure and productivity,” he says. We can fund these measures through additional borrowing, he adds.
Hammond’s statement so far a muhc more low key affair than Osborne’s recent outings - both in terms of his delivery and in response from MPs, who are mostly listening in polite silence. Unusual
OBR forecasting higher borrowing and slower asset sales, meaning increased overall debt. It will peak at above 90% in 2017/18 - higher than markets were expecting. Much of this increase is down to additional measures announced by Bank of England in the summer in response to Brexit
The OBR is revising down forecasts for tax receipts, adding impacts of increasing self-employment. Borrowing this year £68bn, falling to £17bn by 2021-22. This will be deficit of 0.7% by 2021/22
Hammond introduces three new fiscal mandates. These will be very important to set policy against going forward. The first, though, is strangley vague - to get back in to the surplus “as soon as possible” in the next parliament
Confirming no intention to seek budget surplus in 2020. Remain committed to see public finances back in surplus “as soon as practicable” while retaining enough flexibility
OBR says Brexit will have 2.3% negative impact on growth of the economy “over the forecast period”. Muted response from MPs, most of which would have voted to stay in the Union.
Now for forecasts. 2.1% growth in 2016. Next year 1.4% because of lower investment. “Slower than we would wish, but higher than many of our European neighbours including France and Italy.” 1.7% 2018, then above 2% beyond that.
Hammond spending time now praising Osborne’s record “I’m sure our style will differ”. but “times move on”. “We will maintain commitment to fiscal discipline, while rescognising the need to invest in our economy.”
Hammond then identifies productivity and the housing shortage as two of the economy’s key weaknesses.
Philip Hammond stands up. He says: “It is a pleasure to speak about an economy that has bounded back from the depths of the labour - inspired recession.” He then praises the stability since the referendum
Theresa May asked about workers on boards: “We should see worker representation on boards. This government is going to deliver on that.”
PMQs is over-running - as is fairly traditional in these occasions. May currently taking a question on the cost of motoring - asks MP to wait for the Autumn Statement
In the build up to today’s speech, the normally conservative RICS has released a surprisingly political pre-autumn statement comment this morning, describing Philip Hammond as the “Listening chancellor”, praising him for consulting widely with industry and saying he “clearly understand the housing sector better than his predecessor”
Jeremy Blackburn, RICS head of policy said the Starter Homes policy had failed to get off the ground and the PRS sector had become a scapegoat.
Theresa May now asked about housebuilding “There is more for us to do, and that is what this government is working on”
Prime ministers’ questions now. Theresa May is asked about the £1.3bn spending pledge from the weekend to improve UK roads. She stresses the importance of infrastructure investment in improving productivity – which is about “about delivering jobs and economic growth” – she says our chancellor will be setting out more details in a few minutes’ time.
Good morning and welcome to Building’s Live autumn statement blog, on what could be an important day for the sector.
It is fair to say expectations of a Treasury spending spree have been seriously damped down since the jittery first month after the Brexit vote. With every positive economic indicator released since June 23rd, the likelihood of Hammond splurging on infrastructure has reduced – the thinking being that consumer demand is doing enough to keep the economy ticking along in the wake of the vote, making up for the expected reduction in business investment.
The reality for the chancellor is that if the economy has done better than expected since June, the public finances are in a considerably worse shape, notwithstanding Monday’s better than expected October borrowing figures. Whereas in March then chancellor George Osborne said the national debt would top out at around 83% of GDP next year, it is now expected that the government will run a deficit for another three years, taking debt to almost 90% of GDP, and opening up – according to some forecasts – a £100bn black hole in the government’s finances.
Alongside this, growth forecasts are expected to be downgraded compared to March, and inflation forecasts are expected to rise steeply as the impact of the fall in the value of the pound starts to be felt.
All of this gives Hammond very little room for manoeuvre, particularly given the political imperative from Theresa May of using the autumn statement to help out the so-called “Jams” – people who are just about managing. Widespread speculation suggest Hammond will have to spend billions in delivering more generous childcare subsidies, increasing the income tax personal allowance and reforming the Universal Credit taper rate.
So, given all that, what can construction expect? For a full run down, see Iain Withers’ round up this morning. Things we can reliably expect Hammond to do include:
- Find an extra £1.4bn for 40,000 affordable homes, to be spent on affordable rented, shared ownership and rent-to-buy homes. This is a big change from the previous government, which had targeted all affordable housing subsidy toward homes to buy. There may be more detail on the £5bn housing programme announced at the October Tory conference, which was directed at small builders and off-site manufacturers
- Give £1.3bn for road schemes, most of which will go toward improving local roads. Hammond has repeatedly stressed the need to use investment on projects which can be delivered quickly – and road repairs is the easiest way to do this. £27m will go toward a new “expressway” linking Oxford, Milton Keynes and Cambridge
- Produce a £5bn roads and railways investment package (of which the £1.3bn above is part)
- Ban estate agents from charging tenants letting fees
Other touted changes that are less certain to emerge are:
- A reform of Stamp Duty, either to limit big increases introduced by Osborne on high value homes, or remove surcharge for second homes owners, also introduced by Osborne
- Action on preventing housebuilders land banking. The government has signalled it is considering planning reforms in this area, but an announcement may well wait until publication of the housing white paper
- A further cut to Corporation Tax, beyond that already planned, to match President elect Donald Trump’s policy of a 15% corporate tax rate in the US. Prime minister Theresa May appeared to promise this during a speech to the CBI on Monday, where she pledged the most competitive corporate tax rate in the G20, but it has been played down since. The UK is already set to reduce Corporation Tax to 17%.