By Neil Turner, Director, Howarth Litchfield.
We are all waiting with excitement (or is that trepidation?) for the budget on 26th of November when Chancellor, Rachel Reeves will make a series of decisions on the economy and changes to taxation.
So, what will she do? Well, there has been much guessing and commentary so I thought I would add my thoughts from a building and architecture perspective. I will start by saying I don’t envy her and her team as they attempt to balance the books!
Within the North East, construction remains a key element of the regional economy and it is vital that we encourage this sector to prosper and grow.
My suggestions, if asked, would be that the Government does not add any further financial burden to the challenges of building. Throughout my career I have seen enough alterations to the planning systems, building control and ever demanding environmental and sustainability requirements. Worthy as they all are, they simply add time, cost and pressure to the process of designing, procuring and building any project.
I would also incentivise environmental design, so that energy performance is rewarded, not sneered at. Carbon zero has become a negative among many current politicians. We clearly need a balance of fossil and renewable energy generation. Let’s offer incentives, such as reduced taxation to clients who invest in buildings that use less energy. Many of my clients want to reduce energy but the investment is high due to upfront capital expenditure, so let’s provide a financial incentive for them to do so.
At the other end of the scale many listed buildings are older and use more energy, so help for this area of business should be different. Owners of these buildings face higher costs with specialist contractors and limited specific (often expensive) materials, so a 20% VAT bill only penalises owners that try to do the right thing. A reduction in VAT would help on repairs, maintenance and re-adaptation.
Our tax laws are now so complicated and cumbersome if you consider that a new build is zero rated whilst someone renovating must pay 20%, with sliding scales of 5% for certain renewables. A simplification would assist, but I can’t see this coming along.
Build costs rose after the pandemic and although they have stabilised, the plateau is at a higher level. The increased cost of construction projects including recent NI increases for staff only add to the pressures on tender prices. Most clients need to be philosophical, brave and committed when they receive their contracting tender prices, which are often more than they envisaged.
I am still busy with some great, committed clients, but we are having to work harder than ever to drive down the cost whilst achieving the brief.
I have read that Stamp Duty Land Tax (stamp duty) may be altered – the cost increases over recent years have certainly affected the ability of people to move up (and down) the housing ladder. More movement means more work for architects, surveyors and builders at the smaller end of the build chain. Rumours persist of a replacement stamp duty in the form of a wealth tax for properties over £500k value – less significant perhaps here in the north east than the south. I cannot see how this will help the housing market and doesn’t encourage aspiration or desire to build great architecture.
Lastly, but by no means least, I would like to see a reduction in VAT on domestic energy bills from 5% to zero, as this would help everyone. The lowest income houses in the country spend a larger proportion on energy – so this measure would help those the greatest.
So, we will wait and see what happens. This budget looks set to shape our immediate future in the construction sector and wider society – for better or worse.
Neil Turner, Director, Howarth Litchfield can be contacted on 0191 384 9470 or email n.turner@hlpuk.com
www.howarthlitchfield.com