Autumn Statement Roundup
So, It’s Phillip Hammond’s last Autumn Statement. In its place will be the Autumn budget and next year will be Hammond’s last Spring budget to be replaced in 2018, by a simplified Spring statement…All change.
So how’s it been received? Broadly, this is the paper’s take on it:
The independent: Tories borrow £122bn to fill Brexit black hole (and it may get worse)
The Times: We’re all paying for Brexit now
The Guardian: Labour pours scorn over autumn statement for ignoring sick and old
The Telegraph: Eurosceptics attack ‘doom and gloom’ Autumn Statement predictions from independent economic forecaster
The Financial Times: Hammond admits forecasts of Brexit impact ‘highly uncertain’
So in general, not particularly positive and the mood is rather gloomy.
Hammond has now abandoned George Osborne’s aim of achieving a budget surplus by 2019/20, saying he is committed to returning public finances to balance “as soon as practicable” and Public spending this year to be 40% of GDP – down from 45% in 2010.
The Office for Budget Responsibility (OBR) has cut GDP growth forecast for 2017 from 2.2% to 1.4%. the OBR also forecasts growth of 1.7% in 2018, 2.1% in 2019 and 2020 and 2% in 2021. The OBR’s view is that the effect of Brexit means potential growth over the period is 2.4 points lower.
The OBR forecast borrowing to reach £68.2 billion this year, £59 billion in 2017/18, then £46.5 billion, £21.9 billion, £20.7 billion in subsequent years, reaching £17.2 billion in 2021/22.
A Ban on Lettings Fees
There has, in recent times been a clamour for lettings agents to reduce or be more reasonable in the fees they charge tenants. Some, quite high profile agencies, seem to have a fee for every aspect of renting a property: registration fees, reference fees, check-in fees, inventory fees and fees for producing the letting agreement. Well, Hammond has put a stop to that and will introduce a ban on fees charged to tenants “as soon as possible”.
Industry experts are divided as to how this will affect landlords and tenants. Most believe charges will be passed on to landlords (although some agencies already charge both landlord and tenant fees), and many feel that this will be passed onto the tenant in the form of rent rises. This is possible. Although, generally speaking, market rent is market rent and an attempt to push it higher may not actually be possible.
In Scotland, lettings fees have been banned since 2012. There is conflicting evidence as to whether charges now absorbed by landlords are being passed onto tenants as rent increases. A review carried out by housing charity Shelter says not, whilst Scottish letting agents says rents were raised to compensate. A House of Commons Select Committee found the evidence to be inconclusive.
A total of £3.7 billion is to be spent on addressing Britain’s housing crisis. This is aimed at delivering 140,000 new homes by 2020-21. Much of this in London which is at breaking point. As Gavin Barwell, Minister of State for Housing and Planning, pointed out, some of this will go towards funding affordable homes for both rent and sale. This signals a divergent policy from that of Osbornes’ which focussed on homes for sale.
£2.3 billion is to be devoted to a new Housing Infrastructure Fund to help local authorities help “unlock new private housebuilding in the areas where housing need is greatest” It is hoped that 100,000 homes can be delivered in this way.
£1.4 billion is earmarked for delivery of ‘affordable’ homes and interestingly, but little commented on so far, is the relaxation of rules under which Housing Associations can use their grant in the hope that a greater number of housing types and units can be delivered. We’ll have to see the detail, but if unfettered, it could signal a substantial increase in affordable housing delivery at a time when it is urgently required.
London, given its rather unique status, was singled out for £3.15 billion as its share of national affordable housing funding to deliver over 90,000 homes. The GLA also benefits from the relaxation spending rules and a spokesman for London Mayor, Sadiq Khan, said of the monies the GLA gets that they can “now use it to build homes for low-cost rent, London Living Rent homes (our new model) and shared ownership homes.”
Mr Hammond also announced a large-scale regional pilot of ‘Right to Buy’ for Housing Association tenants. So, as one can see, the Government hasn’t lost sight of its core focus. There is also continued support for home ownership through the Help to Buy: Equity Loan scheme and the Help to Buy ISA.
Nothing. Not a sausage. At the very least, institutional PRS had hoped they would be exempted from the 3% surcharge but there was no mention of it. Pressure groups, most particularly London based estate agents had campaigned for a reduction of both the surcharge and the high level of SDLT at the upper end of the housing market. They argued that it has severely dented SDLT receipts to the chancellor by killing the market. But all were disappointed. Perhaps it’s in hand.
On specific new housebuilding and planning policies we will learn much more in the Housing White Paper in the next few weeks.
As far as SLC clients are concerned, there’s not much to say. It’s doubtful that any of the announcements will have much impact on their core business activities but, of course, we all welcome an increase in housebuilding.
Neil Shearing, Principal Solicitor at SLC said, “we are liaising with our PRS clients to establish the impact on their businesses that the abolition of lettings fees might have. Many in the institutional PRS have already established a ‘no-fee’ business model as part of their enhanced management systems and these systems do not seek to reclaim costs by pushing up rent to tenants. So, for them, it’s all about service and efficiencies. It is the way forward and it’s been coming for some time. Generally though, the Chancellor has signalled a holistic approach to generating more housing of all types and tenures and that has to be a good thing. Of course, we don’t have all the detail yet, but at SLC we’ll be analysing the small print when it becomes available and will advise our clients accordingly”