First Budget of Boris Johnson's Government Promises Big Spending On Infrastructure
Chancellor Rishi Sunak delivered his first Budget today (11 March 2020) announcing spending plans for the year ahead.
Our experts summarise some of the key points…
Infrastructure and Housing
Expert Opinion"Given the number of traditionally Labour constituencies that lent the Conservatives their votes at the last election, it is not surprising that additional money has been found to support Johnson’s ‘levelling up’ agenda, with pledges made to invest heavily in strategic infrastructure projects, such as road and rail improvements, delivering affordable housing and improving the UK’s broadband capability.
"The Government has also promised to invest in the green economy and improve our environmental credentials.
Balancing large scale infrastructure projects with the shift to a zero-carbon economy is going to be a challenge, particularly in the wake of the recent Court of Appeal ruling over the lawfulness of the Heathrow expansion. The pledge to leave our environment in a better state than we found it does not sit easily alongside a pledge to get Britain building.
"More funding for developing innovative, environmentally friendly methods of construction is going to be needed to help the sector meet the Government’s obligations on climate change and carbon reduction. We need the government to take a holistic approach to development, infrastructure and the environment, if we are to find a sustainable way to deliver the housing and infrastructure that the country desperately needs.
"Whilst the increased investment in affordable housing and the pledge to fund the removal of unsafe cladding from high rise buildings is be welcomed, we will have to wait until tomorrow to find out what changes are proposed to the planning system. With a bit of luck we might see a commitment to greenbelt review, support for older people looking to ‘right size’, and changes to the residential use classes to make them more representative of an increasingly specialised and diverse housing market.” Claire Petricca-Riding - Partner
Statutory Sick Pay - Coronavirus
Expert Opinion“Many businesses have been worried about how they’ll cope with meeting the costs of statutory sick pay if many staff members become ill or are advised to self-isolate. Reimbursing small employers for these costs will certainly help but the budget does nothing to assist businesses employing more than 250 staff. If predictions are correct, up to a fifth of the workforce may be affected – that’s a huge cost for businesses, many of whom may also have to engage agency or bank staff to cover staff absence which will also add to their costs. Those businesses that rely on foot fall may already have seen a drop in demand and will be less able to cope with large sick pay costs.
“There was some suggestion that the government might temporarily increase the amount of SSP to encourage more people to stay at home if they have minor symptoms or are asked to self-isolate because, for many, being paid £94.25 per week, is a drop in the ocean compared to their actual lost income. There’s nothing in the budget about this. Some employers are paying staff full pay, but this may not be sustainable in the long run, if significant numbers of people are affected.” Glenn Hayes - Partner
Affordable Housing and Stamp Duty
Expert Opinion“Clearly the announcement of significant additional funding for affordable housing is to be welcomed, and can benefit the country in a multitude of ways. However, such pledges have historically proved difficult if not impossible to turn into reality and we will wait to see whether the necessary bricks, construction workers and planning permissions also materialise over the coming years. It is to be hoped that the further announcements from the Housing Minister tomorrow will back up these aspirations with practical measures that actually enable more affordable homes to be built sooner rather than later.
“The additional 2% SDLT announced for foreign buyers from April 2021 is a watering down of the Conservative manifesto pledge but could still prove to be damaging to parts of the market that are already struggling. It may be the intention to scare off foreign investment but money to keep the market afloat needs to come from somewhere and unless we are open to all sources there will be a block on further developments.
“Applause will be ringing out for the announcement that the Government intends to address the issue of removal of dangerous cladding from tall buildings with additional funding. That money must be released quickly and in targeted fashion so that the many homeowners and businesses that have been living in horrible limbo since Grenfell will be able to move on and live without the stress, fear and financial uncertainty that has blighted their lives ever since.” Jeremy Raj - Partner
Expert Opinion“It’s encouraging to hear more about the government’s planned investment in infrastructure and devolution. A significant increase in investment is long overdue and as our recent economic analysis shows, the league table of the top 10 fastest growing city economies is dominated by the South East. Announcements today are a step in the right direction, but they will need to be sustained and arguably more ambitious if they are to have an impact in the next five years.” Victoria Brackett - Group Chief Commercial Officer
Expert Opinion“It is wholly unsurprising to see that other fiscal measures have been prioritised instead of the incoming tidal wave of care crisis issues we are going to be facing.
Our own research has shown by 2029 the elderly care crisis will be past the point of return. The Chancellor had the opportunity to address this immediately and head on with bold plans and announcements, but instead has adopted the status quo from the previous Government.
Furthermore the sheer amount of spending announced on other measures such as rail and infrastructure, while of course worthwhile, begs the question of how exactly the Government plans to address the enormous and pressing issue of social care in the coming decade.” Kelly Greig - Partner
Expert Opinion“The tapered annual allowance rules are being relaxed so individuals with a threshold income of between £110,000 and £200,000 and adjusted income between £150,000 and £240,000 will no longer be impacted by the tapered annual allowance. However, individuals who continue to be affected by the tapered annual allowance will see their minimum tapered annual allowance reduced from £10,000 to £4,000.
“Overall this is a wider change than expected. It does not solely apply to NHS workers but it has been carefully calibrated so the most highly paid will see their overall annual allowance being reduced to £4,000. This change cleverly reduces the need for the Government to tackle the more difficult question of what tax relief higher rate tax payers should receive on their pension contributions.
“Scheme administrators of registered pension schemes will need to modify their systems to accommodate for these changes from April 2020 onwards which does not give them much time to prepare for this.” Penny Cogher - Partner
Expert Opinion“The announcement from the Chancellor that Entrepreneurs Relief will be changed to a maximum of £1m is restricted as predicted, but perhaps in simpler terms than it might have been.
The Government’s objective is clear that they are investing in growth and supporting businesses in this cycle rather than giving big tax breaks, supporting the economy as well as research and development.
“However, a 90% cut is a big loss to those entrepreneurs who will see their rate of Capital Gains Tax double from 10% to 20%. Many serial entrepreneurs will already have used their £1m allowance, and so will be most impacted by this change.” Helen Clarke - Partner