What to look out for in the Autumn Budget 2024

While construction will be hoping to see a few attractive-looking rabbits pulled out of Rachel Reeves’ hat tomorrow, it seems unlikely to be a particularly surprising Budget for the sector, with so many of its key issues of interest being trailed or pre-announced.

The extent of the chancellor’s pre-Budget announcements were such that she received a telling off from the speaker of the House of Commons, who specifically criticised her decision to announce a change to the government’s fiscal rules to the media before parliament.

Reeves confirmed last week that she would change the way debt is measured in order to allow the government to bankroll extra investment, which is expected to unlock up to £50bn more borrowing to invest in big building projects, such as roads, railways or hospitals.

Sir Lindsay Hoyle said the manner of the announcement was “totally unacceptable” and breached the ministerial code.

The debt rule announcement, details of which will be set out in full tomorrow, are just one of the major announcements made in the past week.

On Monday, the Treasury said that funding for the school rebuilding programme will be £550m higher than last year.

Housing, health and schools funding

Funding in the coming year for the existing School Rebuilding Programme, which aims to deliver 50 rebuilds a year, will be £1.4bn.

Meanwhile, there will be an extra £1.57bn of capital investment for NHS equipment and buildings across the next financial year.

It came after the announcement of plans for a new financial settlement with the social housing sector aimed at giving landlords more long-term certainty. This, it is hoped, will enable them to more easily fund new developments and retrofit work.

The government has proposed a five-year rent settlement for social landlords, with the intention to increase rents in line with the consumer price index measure of inflation plus 1%, as is the case under the existing settlement that expires in April 2026. It will also consult on other options, including a 10-year rent settlement, which is popular among social housing sector bodies including the G15, the National Housing Federation, the Local Government Association and the Chartered Institute of Housing.

Jonathan Cox, partner and head of social housing at law firm, Anthony Collins, said the long-term deal as “welcome” but that the annual rent increases proposed were “not going to make much difference” given “all of the different demands placed on housing associations”.

The Ministry for Housing, Communities and Local Government also announced a £500m top-up for the 2021-26 Affordable Homes Programme (AHP), bringing the total value of the programme to £12bn.

The extra cash is expected to deliver an additional 5,000 affordable homes.

Plans for grant funding beyond the end of the current AHP in 2026 are to come in the Spring spending review.

Manish Gudka, chief executive at real estate firm Aprirose, said the government “would do well to bring in incentives such as tax cuts for investors looking to actively put capital” into social housing, saying that there was “appetite” for stable long-term income. 

Housebuilders will be hoping for some kind of support for first-time buyers, although there has been little suggestion that any such measure is under consideration.

The Home Builders Federation published research earlier this week which claimed that the Help to Buy scheme, a policy of the 2010-2015 Coalition government, will return £2bn to the exchequer once all loans are repaid.

Perhaps the most consequential rumoured change for the housebuilding sector is that Rachel Reeves is expected to allow more generous thresholds for home buyers to lapse at the end of March next year, meaning people would pay a higher level of stamp duty.

William Marriott, partner at lawyers Charles Russell Speechlys, said this would “likely lead to a rush to push through applicable purchases ahead of March” but that falling inflation and interest rates “could help to counteract any depressing effect” at the lower end of the market. 

“For higher earning employees and SME owners particularly, a tough budget may yet weaken confidence in the domestic prime market, with the most at risk being luxury lifestyle purchases such as prime residential property, including country houses,” he added.

More clarity around transport projects?

The Budget may also include some clarity on funding for major transport schemes, including HS2. The transport secretary appeared to indicate that HS2 will run to Euston, although the most recent comments from the government appeared to rule out any resurrection of the scheme beyond that, with the return of phase two seemingly off the table. 

No doubt, the infrastructure side of the industry will be praying for a miraculous u-turn on this matter.

The High Speed Rail Group urged the government earlier this month to explore various investment avenues for public transport growth, including greater involvement of private finance.

In the capital, hopes for a long-term funding deal for Transport for London have been dampened, with transport secretary Louise Haigh indicating that these would be put in plan in the Spring spending review.

But there are nonetheless hopes that specific schemes, such as the DLR extension to Thamesmead and the Bakerloo line extension, could receive central government backing. 

There is no indication that the government will publish its response to its consultation on planning guidance changes tomorrow, although it has pledged to do so by the end of the year. With the consulation on the changes, which include the re-introduction of mandatory local housing targets, only closing on 24 September it may be too soon to announce the outcome on this. 

Closing the ‘black hole’

The major open questions remaining around the Budget are less directly related to the built environment, but will affect it nonetheless.

They relate to how the chancellor will close the £22bn “black hole” in the public finances that she has been complaining of since Labour was elected in July.

Labour’s election commitments not to increase income tax, national insurance or VAT have painted the party into a corner as far as tax rises go, but there has been plenty of speculation about how they might attempt to raise revenue.

Where’s the joy, and how does the Chancellor expect to improve GDP?

James Dickens, managing director, Wavensmere Homes

Many expect that employers will be required to pay higher National Insurance contributions, with prime minister Keir Starmer suggesting he did not consider such a tax rise to be an increase in tax “on working people”.

Inheritance tax and capital gains tax could also be candidates for increases. 

Cuts to certain spending are also expected, with the cut to winter fuel payments the most well-publicised.

The overall mood around the Budget is hardly posititve, with many fearing the impact of tax rises and cuts in the short-term.

James Dickens, managing director of Birmingham-based regeneration specialist Wavensmere Homes, said that “despite the welcome positivity about planning reform and boosting the housing market, businesses and property landlords are fearing the worst” from the Budget.

He said Wednesday would be “likely to end up as the biggest tax-raising Budget in 30 years”, while seeing many government departments asked to cut back.

“Where’s the joy, and how does the chancellor expect to improve GDP?” says Dickens.

Hopefully the sector, and the country, will find out tomorrow.