Avison Young’s review.

The Chancellor of the Exchequer today delivered his 2021 Budget Speech and Spending Review, against a backdrop of significant uncertainty on the outlook for growth, inflation, and interest rates. This possibly explains why the Chancellor chose not to take advantage of all the spending headroom created by a more upbeat assessment of the economy by the Office for Budget Responsibility. Whilst there were headline-grabbing changes to alcohol and fuel duty, and a reannouncement of spending commitments from earlier in the year, there was little in the speech about long-term investment strategy.

Business rates reform was announced, with a very large amount of material released today, and more to follow in the coming days. As such, it will take time to examine the documents and draw conclusions. However, the key points were as follows:

• Reviews to occur every three years (currently five).
• Business rates multiplier frozen for a second year to March 2023.
• Relief of 50% for retail, hospitality, and leisure up to £110,000 in fiscal 2022-2023.
• Investment relief for those adding green improvements to their business premises, such as solar panels.
• 100% business rates improvement relief for one year. To be introduced in 2023 and reviewed in 2028.

While the Chancellor made no mention in his speech of REITs, the accompanying Budget report stated: “Targeted changes are also being made to the tax rules for REITs. These tax changes, which will take effect from April 2022, will support activity and jobs across the UK.”

On housing, the only major new announcement was the £1.8 billion to open up 1,500 hectares of brownfield land for residential development. The mention of an £11.5 billion scheme to build 180,000 affordable homes was in fact a re-announcement. Given the housing market faces major obstacles on affordability and supply, not to mention a rising interest rate outlook, it remains to be seen how effectively this funding will translate into a material increase in affordable homes in the areas that need them most.

The Budget did contain some measures that will have an indirect impact on property markets as they lift the economy and business activity. Around £5.7 billion of transport spending will now be allocated in “London-style transport settlements” to seven English regions, including the West Midlands, Greater Manchester, and West Yorkshire. Government departmental spending is to rise by 3.8% pa in real terms over the course of this Parliament. These measures will help advance the government’s levelling up agenda and encourage the next economic cycle to have more of a ‘national’ character. Moreover, the National Living Wage rising by 6% to £9.50 per hour should help support the consumer side of the economy.

Perhaps surprisingly given the imminent opening of the COP26 Conference, the section of the speech on climate change contained few new announcements or initiatives. Indeed, some of the Budget measures (like dropping the planned increase in fuel duty and introducing lower Air Passenger Duty for internal flights) appear to run contrary to the government’s commitments towards carbon neutrality.

Overall, the Budget followed a familiar pattern of well-trailed pre-announcements and some re-announcements of existing pledges. For property, it was disappointing there was not more done for the housing market, particularly regarding the thorny issue of affordability. For commercial property, some movement is welcome on reforming business rates, although we need to see the full detail before a verdict can be given.