What a difference a year makes
The UK is now on course for the fastest growth since 2007 in the current quarter and no one can deny that George Osborne had a renewed spring in his step today – despite the usual cheers from Opposition benches. With revised growth and employment forecasts, slower rate of inflation increases expected and a small GDP surplus by 2018-19, the Chancellor was confident and forthright this morning.
#AS2012 brought us stalled growth and downgraded forecasts for five years. Some might say the Chancellor had not delivered the goods: elimination of the structural deficit by 2015/16 was going to elude him once again. What a difference a year makes.
A day ahead
A delayed Autumn Statement to allow the Prime Minister time to return from his trade trip to China, a lot of this year’s financial update to MPs was pushed out in Wednesday’s press.
Not least news from Danny Alexander, Chief Secretary to the Treasury, that six major insurers will invest £25bn in UK infrastructure over the next five years: “Underground, overground, onshore, offshore, wired or wireless, tarmac or train track. You name it, we’re building it right now.”
RICS has called for more investment in commercial and residential property and reiterated its support for HS2. Jeremy Blackburn, UK head of policy, told the BBC that government should priortise regional transport investment: “The better connected those areas are the easier it is to move passengers, freight, goods and services.”
Better than nothing?
The Chancellor made a raft of interesting announcements on planning and infrastructure, including £1bn to fund infrastructure to unlock new housing sites.
However, arguably, the most significant announcements today were about business rates. They affect every business, every retailer, every landlord, and every occupier.
Today the Chancellor confirmed that business rate rises will be capped at 2% in England and Wales from April 2014 until the next revaluation instead of being linked to inflation. This means the Exchequer will be something like £300m out of pocket next year.
For the most part British business, including retailers, welcomed this shot in the arm. But critics have been quick to jump in. Indeed, they have not been silent since the government’s decision to postpone the business rates revaluation. But surely a 2% rise is better than the RPI-linked 3.2% rise we otherwise would have had?
Alongside extension of Small Business Rate Relief (SBRR), there will be a new discount of £1,000 for retail premises with a rateable value of up to £50,000. Plus, a new “temporary reoccupation relief” which will grant a 50% discount from business rates for new occupants of previously empty retail premises. This has to be good news for town centres.
Only last week, the Distressed Town Centre Property Taskforce urged the government to re-think on rates and, indeed, the British Council of Shopping Centres has been pushing for a 2% cap for a number of years. Today, these measures on rates have to be seen as a shift in the right direction.
The great rate reform?
But, of course, what will warm everyone’s hearts is the news that government will discuss with business the options for “longer term administrative reform of business rates post-2017.” The current system is unfair and ill-equipped to react to pacey changes in economic conditions. Rates reform is required. The property industry will be looking forward to the proposed consultation on how rateable values are assessed and confidence in the system can be improved.
Today, the Chancellor was neither Santa nor Scrooge. His war chest remains light and there is precious little room for manoeuvre. Are the bulk of the economic improvements down to cyclical factors and a booming property sector or real improvements in the public finances?
What we do know is that the starting gun has now been fired for the general election in May 2015.
To download the Autumn Statement, please click here.
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