While the political consensus seems to be that Philip Hammond’s first Autumn Budget was functional but “underwhelming”, the reality is that like any Budget it will have an impact on both business and household finances, no matter how minor. Here we’ll look at what the November 2017 Budget might mean for homes and businesses in East Anglia.
The Budget contained a number of measures which could be positive for small and medium-sized businesses in the region – good news in the current challenging trading climate. With the national living wage increasing from £7.50 to £7.83 next April, any concessions that might boost the profitability of businesses will be welcomed … and the Budget promised to deliver a number of such measures that should help businesses in the East of England.
From April 2018 the annual uprating of business rates will be based on the Consumer Price Index rather than the Retail Prices Index; a change that was originally stated to take effect from 2020, and which is estimated to save businesses £2.3 billion over the next five years. The Budget also heralded an end to the so-called “staircase tax”, which currently penalises companies that operate on multiple floors of a mixed-use building by assessing separate business rates for each occupied floor.
These Budget measures – alongside a promised consultation on tax changes which could benefit oil and gas businesses operating in East Anglia – could have a positive effect on businesses in the region during what might otherwise be considered challenging and unstable times. The regional branch of the Federation of Small Businesses praised the Chancellor’s “business-friendly Budget”, saying that it will “boost confidence across the small business community here in East Anglia”.
Boosting Home Building in East Anglia
Other Budget headlines included two measures aimed at stimulating the property market and, more specifically, helping first-time buyers get onto the property ladder. The first was a commitment to £44 billion of capital funding, loans and guarantees to support meeting a target of building 300,000 new homes a year by the middle of the next decade. This commitment is designed to tackle one of the major problems in the housing market at the moment: the demand for housing far outstripping the supply of available homes. This is particularly problematic in the East of England; a study in February revealed that only 72.1% of the homes needed to meet demand have been built over the past six years.
The other move designed to help more first-time buyers purchase a new home was the scrapping of stamp duty for starter homes priced at up to £300,000 – an effective increase from the current level of £125,000 at which stamp duty becomes payable. The current average house price in the East of England standing at £339,716, and a first-time buyer purchasing a property at that price would save a total of £5,000 on stamp duty.
Will these measures really make a difference in East Anglia and allow more young people to buy their first home? We believe these changes will help to stimulate the housing market, but probably not to any groundbreaking extent. For one thing, the commitment to building 300,000 new homes doesn’t relate to direct investment in building public housing, but rather represents a raft of measures intended to encourage private developers to build more homes; it remains to be seen how many of those homes actually will be built.
The change to stamp duty certainly sounds like good news for would-be first-time buyers in the region, but with the caveat that it is likely to drive up house prices across the board – according to analysis by the Office for Budget Responsibility, the change will result in an additional 3,500 first-time buyers purchasing homes per year, but at the cost of an average 0.3% house price increase across all market segments, therefore potentially disadvantaging home movers who will still have to pay full stamp duty at current rates.