It is one of the iconic events on the British political calendar.
On 23 March, chancellor of the Exchequer George Osborne will travel the short distance from the Treasury to the House of Commons clutching the famous red dispatch box inside which will be the coalition’s second Budget.
In recent weeks, Osborne and prime minister David Cameron have said that this Budget will create “the most pro-enterprise, business-friendly environment that Britain has ever had”.
Details have already emerged of plans to introduce 10 enterprise zones – complete with tax exemptions and simpler planning rules – in a scaled-down revival of the Thatcher government’s urban renewal scheme.
The chancellor is also expected to invite a small number of local authorities to participate in land auction pilots.
Land auctions
Under the proposed system, councils will ask landowners to submit binding prices at which they would be willing to sell sites. Local authorities would then grant planning permission for selected sites and auction them to developers, taking for themselves any uplift above the amount at which landowners agreed to sell.
But Gilbert Green, a partner at law firm Thomson Snell & Passmore, believes that the auction system may only lead to a delay in the normal planning process by tying up more planning officer time.
“It is almost certain there will be a flood of offers to sell land, which does not in any way comply with planning policy,” he says.
Stamp duty rebates are also expected for homeowners who carry out a minimum level of energy efficiency improvement to their houses, a move that the UK Green Building Council’s director of policy John Alker says will be one of the “biggest ever green fiscal policy announcements” for the property industry.
However, Alker says it is likely that stamp duty will increase for other asset classes to pay for the rebate.
Empty property rate exemptions are set to be dropped in England from buildings with a rateable value of up to £18,000 to £2,600 or less.
Jim Ruthven, senior director of rating at BNP Paribas Real Estate, criticised the reduction in rate exemption, which he says will hit “small businesses already struggling to cope in these difficult times”.
He adds: “It seems like a strange decision from the Conservatives, who were originally strongly opposed to the changes made to the empty rate regulations implemented by the last government back in 2008.”
The British Property Federation has meanwhile submitted a number of suggestions for the Budget, including prioritising deregulation.
Chief executive Liz Peace says one example of deregulation would be reducing the barriers to entry to the UK REIT regime. She argues there are a number of areas in which the rules could be easily refined to remove inconsistencies and unwanted disincentives.
“Property income distributions are treated differently for tax purposes when they are received by a REIT than by a PAIF (property authorised investment fund),” says Peace. “Given the parallel aims of the two regimes, such inconsistencies should not exist.”
Elliot Weston, a real estate tax partner at law firm Lawrence Graham, agrees. He says: “Removing unnecessary restrictions in the tax rules can cost the Exchequer nothing but provide a vital stimulus to investment. Simplifying the REIT regime to encourage the formation of new REITs and to relax REIT ownership rules would encourage investment in the property sector.”
Weston adds: “A more dramatic measure would be allowing REIT investment in property-backed debt, which would provide an opportunity for banks to offload real estate exposure to investors and so free them to begin new lending.”
Peace also wants to see a further commitment to introducing tax increment financing after “a serious loss of momentum”.
£5bn savings
The RICS is hoping for a commitment to the government’s outlined plans to achieve £5bn savings in public sector property running costs, as well as a further £20bn in disposals.
Mark Goodwin, RICS director of external affairs, says: “This Budget provides the government with a chance to encourage growth and innovation in construction and property, providing much needed jobs, tackling the housing shortage and ensuring that businesses have a continuing supply of high-quality premises.”
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nick.whitten@estatesgazette.com
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