Spring Budget reaction round-up

Education dominated the Spring Budget. But what does the industry think?

The Chancellor’s first Budget was a jaunty affair with a self-depreacting Phillip Hammond wisecracking his way through his speech, which saw funding given to the creation of another 110 new free schools on top of the current commitment of 500 and £500m a year of additional funding given to technical education.

Construction industry leaders have welcomed the funding given to education, but feel more money will be needed to achieve the goals set, while others feel an opportunity has been missed to address the effects of stamp duty on housebuilding.

 

Reaction round-up

Marcus Fagent, head of education at Arcadis

“The Budget announcement of an additional £500m per annum funding for the new ‘T levels’ represents an essential investment in developing technical skills in the UK. The aim is to grow the number of teaching hours received by the 600,000 post-16 students currently on technical courses by 50%.

“However, this will require significant capital investment on top of the additional £500m revenue investment. Having had access to very limited capital funding over the last four years, FE Colleges have been through a phase of rationalising their estates, amalgamating and reducing any unused space to maximise their operational efficiency. They now have limited spare space in which to expand.

“Schools have received no funding for space other than that needed to deliver the academic curriculum in recent years, as capital spending has been driven down by efficient space models and standardised design and specification. By comparison in the Netherlands, where there is a better technical training provision, every Secondary school is built with an additional 650m2 of non-academic training space; an investment of more than £1.5m per school.

“The government FE College Investment Strategy estimates that £1m of capital investment could create facilities for 75 new learners. On this basis, it would cost an additional £4bn to increase the number of post 16 students on technical courses by 50%; a very similar figure to that needed to emulate the Dutch provision in schools. Creative minds will find solutions that reduce these costs but we estimate that the government may need to inject £500m of capital investment every year to match the planned revenue investment to make T-Levels deliverable.”

Howard Cox, founder of the FairFuelUK Campaign

“A Conservative Chancellor has missed yet again, a huge opportunity not announcing a significant UK wide roads investment plan that’s independently proven will increase GDP four times more than the billions of tax payers cash irrevocably cast in stone for HS2.

“Why, capitalising in roads benefiting the economy, jobs, inflation, businesses, hugely reducing the next decade’s £300bn cost of congestion and improving air quality, is repeatedly ignored by the Treasury is mystifying and a huge derogation in economic common sense.”

Henry Smith, chief executive of Aitch Group

“Another golden opportunity to address the ‘elephant in the room’ has gone amiss. The government has yet again chosen to ignore the effects of a stamp duty levy which is damaging the UK property market, as well as reducing the government’s own tax takings.

“Lower receipts, reduced transaction volumes and a slower rate of housebuilding have come to define a policy that prevents the housing industry from performing its role effectively.

“We are already seeing the 3% surcharge on additional homes impacting the Build to Rent sector and investor confidence, and the effects are being disproportionately felt in the capital where prices are much higher than the UK average.

“Whether it’s developers, agents, architects, contractors or investors, the negative impact of stamp duty is having an impact across the industry and it is no surprise that leading figures and bodies are demanding a change.”

Will Waller, market intelligence lead at Arcadis

“Today’s budget is a function of the geopolitical ‘tight rope’ that Britain is about to walk for the next two years at least. Buoyed by the UK’s short term economic outperformance, the Chancellor’s budget has set a self-assured and positive tone for the future, whilst at the same time making staid plans for the turbulence that many believe the UK will encounter.

“Investment in education and skills, consumer protection, PHD research, robotics and tech, devolved administrations, congestion and working families are all clearly aimed at making the UK a better and more competitive place to be for the longer term. Lower forecast public borrowing, an intensified clampdown on tax evasion, previously planned reductions to corporate tax rates and robust economic growth forecasts will naturally underpin this. The construction industry will inevitably be a beneficiary of a number of these initiatives.

“However, the biggest losers today are the self-employed. The quid pro quo has come predominantly in the form of national insurance rises and loss of tax relief on dividend payments, which will leave the self-employed worst off.

“For an industry like construction where 40% of the workforce are self-employed (15% across the whole economy), this could be disproportionately felt and comes at a time when other measures, such as April’s changes to the IR35 regulations governing some self-employed workers, could have significant impacts on labour market dynamics in the construction industry.

“Many are calling this budget a ‘damp squib’ and no doubt there will be some disappointment in certain quarters, but could it actually have been a more subtle overall proclamation? The UK has taken stock and is poised and ready to positively face imminent challenges on the global stage.”

Richard Steer, chairman of Gleeds Worldwide

“This was a budget which included measures designed to paper over the cracks of our industry’s skills shortage, and while it is good to see this recognised as a priority issue, whether it will help with immediate shortages seems unlikely.

“The changes in NI and dividend allowances will not be welcomed by the plethora of self-employed tradespeople but new money announced for schools is to be welcomed. Overall, a budget shaped by Brexit worries - fiscally and politically conservative as was expected.”

Brian Berry, chief executive of the Federation of Master Builders

“The Chancellor clearly understands that the UK won’t address the productivity challenge unless we rethink our approach to technical and vocational education.

“T-Levels could be the answer if they genuinely rival A-Levels in the eyes of parents, teachers and young people. UK society as a whole has been guilty of putting too much emphasis on the academic route – this has made it more difficult for vital sectors like construction and house building to attract the talented people we need.

“In construction, we are suffering from a severe skills shortage and this is likely to worsen once we leave the EU and no longer have easy access to European labour. This £500m funding announced today for T-Levels is therefore a welcome and much-needed boost.”

 

Tom Willows, managing associate at Bond Dickinson

“From the Autumn Statement via the Housing White Paper and supplementary planning guidance the government has made all the right noises about the importance of institutional investment into new build residential property as part of the solution to the housing crisis but again the government has missed the opportunity to make an exception for institutional investors in relation to the 3% SDLT surcharge on additional residential properties, a change which would have undoubtedly accelerated investment and delivery”.

Richard Laudy, global head of infrastructure at Pinsent Masons

“The government’s announcement regarding technical education reforms is to be welcomed, but it is a drop in the ocean and will not meet the skills crisis facing the UK infrastructure sector.

“The sector is still yet to recover fully from the 400,000 construction jobs lost in the recession and has an ageing workforce, 30% being over the age 50 and around 700,000 set to retire in the next ten years.  And yet demand is only increasing. The UK needs to bring in an additional 36,000 workers every year to meet the demands created by our infrastructure programme. 

“Government and industry should collaborate, map the skills required to deliver our infrastructure  and prioritize them within any post-Brexit immigration system. So whilst the Chancellor’s announcement is to be welcomed, the government needs to go further. ”

Howard Bassford, partner at DLA Piper

“In an age of giga-projects delivered by the government, this Budget reminds local authorities, city regions and developers that progress on infrastructure is in their hands, and puts tools in place for delivery.

“Notably, the Budget coincides with a memorandum of understanding between the Conservative Chancellor, Philip Hammond, and London’s Labour mayor, Sadiq Kahn. This paves the way for “DRAMs” (the Development Rights Auction Model). A DRAM would be used where high density development is possible.

“Landowners and the public sector would pool land for development, which would be auctioned to developers with the increase in value being split between participants - holdout landowners would suffer compulsory acquisition or increased planning obligation contributions. In contrast, the DRAM development should not be subject to s106 contributions or CIL charges. Doubtless underpinning this would be a need for a statutory mayoral transport strategy.

“London is not alone: a competition for £690m of funding for local transport network improvements is proposed and a £300m proposed business rate retention gives local authorities more control over finances in their areas. Swansea and Edinburgh are also in line for city deals. And there’s more to come: the Chancellor publishes his Midlands Engine strategy tomorrow.”

Jane Duncan, preident of Royal Institute of British Architects (RIBA)

“I welcome the Chancellor’s moves to increase the prestige and prominence of technical education with the T-Level. These combined with new apprenticeships should encourage a much broader range of people to consider a career in architecture and the built environment.

“While there was some additional funding for new schools and infrastructure, the blunt truth is that we won’t tackle these problems without a more effective use of resources and a greater role for architects and other experts in establishing quality and sustainability in the design and delivery of projects.

“With Brexit on the horizon, I want to see more action from the government to address some of the biggest barriers to making our society more prosperous - including lacking infrastructure and the inequities of the housing crisis.”

John Hicks, director and head of government and public at Aecom

“Brexit clearly influenced many of the measures outlined by the Chancellor today, which were peppered with announcements designed to offset any potential consequences of a hard exit from the EU.

“One such measure is the focus on technical education and the introduction of T-Levels to address the productivity gap between the UK and our international competitors. This may help to insure against potential difficulties in accessing skilled labour from within Europe in the future. The private sector will have a vital role to play in the successful development of these qualifications and ensuring they reflect industry need. Funding for 1,000 extra PhDs in STEM subjects are welcomed by Aecom and should help tackle the deficit of STEM skills in the market.

“New money to tackle traffic pinch-points in the North and Midlands is a step in the right direction, with the £690m competition to address urban congestion especially welcome as it puts power in the hands of local authorities who are better placed to invest capital of this kind. However, funds will only be available over time and its impact may be lost if the idea is not expedited once local institutions make the call.

“Additional money for schools maintenance reflects the growing need to deal with the UK’s decaying schools physical environment. Similarly, immediate funds to advance some NHS Sustainability and Transformation Plans prior to the Autumn Statement should have some short-term impact. But close commentators of the NHS will note that the existing capital fund has been significantly raided to support revenue spending.

“Knowing that today’s Spring Budget will be the last and that it falls a week or so before the Prime Minister is expected to trigger Article 50, expectations were not high. Nobody should, therefore, be too disappointed with a slightly less ambitious Budget compared to recent years. An Autumn Statement will require more scrutiny.”

 

Adrian Hames, UK head of infrastructure planning at WSP Parsons Brinckerhoff

“Productivity and prudence as expected. With uncertainty over Brexit we were never expecting a spending splurge but we did get some quick wins in technology and local transport improvements.

“However, we can’t afford to lose sight of infrastructure’s longer term importance in boosting productivity by connecting to new schools, to the digital economy and crucially to spurring the housing market in a period of increased uncertainty.

“The pressure has been put back on the industry to make this case in the Housing and Industrial Strategy papers.

“Whilst the introduction of T-levels is very much welcome for building upcoming major infrastructure projects with more young and skilled workers, these changes will take years to have an impact. The industry wants to get spades in the ground now. We have to be relentless in securing a stable pipeline of nationally significant projects that catalyse economic growth.”

Karen Jones, HR director at Redrow

“The Chancellor has hit the nail on the head: technical educational routes are not second-rate options. We therefore welcome the introduction of T-levels and the additional investment in technical students, which will enhance and bolster the construction sector workforce.

“The skills gap represents a significant challenge, and today’s announcement should be just one part of a better and more collaborative strategy between industry, government and the education system.

“I am particularly interested to see how this change will be embedded in schools. We have found that schools are not currently delivering the breadth and depth of careers advice necessary for young people to make informed choices.

“Only 17% of 2,000 young people we surveyed earlier this year feel they received high quality information and proper guidance on a wide variety of careers at school and 38% said careers advice was not useful or non-existent.

“Schools are vital to encouraging students to pursue technical careers and giving them accurate information on their career options, so I look forward to seeing how the government will join the dots on this and equip schools with the necessary resources and knowledge.”

Henry Moss, partner at Ashurst

“The government’s support for a pilot Development Rights Auction Model (DRAM) in London is a welcome first step towards funding the infrastructure schemes such as Crossrail 2 that London desperately needs.  

“DRAMs provide a way for TfL to benefit from a share of the dramatic increases in land value that they create by bringing new infrastructure to an area, as other countries such as Hong Kong have done very successfully.  However DRAMs are only the first step – in order to crack the problem the government will need to be much bolder.

“Despite the government’s strong support for new build-to-rent housing in last month’s Housing White Paper, the government has retained the 3% surcharge levied on second homes, which penalises institutional rental landlords. 

“The proposals to introduce smoother and more frequent revaluations for business rates are welcome, as is the £300m fund to alleviate some of the immediate pressure on those hardest hit by the forthcoming business rate rises.  But it is not clear exactly how that fund is going to be distributed, and there will inevitably still be many businesses facing major hikes in their rates bills.”

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