On Friday 23 September, Chancellor Kwasi Kwarteng issued what has variously been labelled an emergency budget, mini-budget, fiscal event, fiscal statement and latterly the ‘Growth Plan 2022’. We know it was not a full Budget, as it evaded the Office of Budget Responsibility’s scrutiny. Some have ventured the view that this was actually a new industrial strategy. But let’s not quibble over definitions.
So what was, in fact, in this fiscal… call-it-what-you-will? It’s essentially a two-pronged offensive to steer the economy away from recession, towards ‘2.5% trend rate’ growth in the ‘medium term’. The first prong is a list of promised cuts and freezes to personal, consumer and business taxes. The second is that Holy Grail of Tory manifestos: ‘deregulation’, via the ritual burning of red tape.
As for what’s in it for the built environment specifically, several tax cuts will directly affect the sector. Reducing Stamp Duty will in theory be a boon to house-builders, sellers and buyers. Similarly, freezing Corporation Tax should be beneficial to all businesses. Introducing a new VAT-free shopping scheme for overseas visitor will be a Godsend for retail property, especially in Central London. Still, fiddling with tax rates may not have the desired effect and will not fix structural issues, as a deeper review of VAT and business rates would have.
The Growth Plan’s deregulation drive also has a direct bearing on the built environment, especially through promised ‘Investment Zones’ wherein taxes will be even lower and some planning regulations stripped back away. Close examination of the Growth Plan and subsequent “guidance” from the Department for Levelling Up, Housing and Communities exposes these as, at best, half-baked. That is not to say Investment Zones are a bad idea, but relevant proposals – outlined below in brief – have clearly been rushed out at an early stage.
- The list of planning policies to be stripped back in these zones is only partly-formed. Hints that “burdensome EU requirements” in relation to the environment will be “removed” and that consultation with statutory bodies will be “reduced” are not accompanied by any detail.
- Similarly, promises to cut or reduce Business Rates, Capital Allowance, Structures and Buildings Allowance, employer National Insurance Contributions and Stamp duty for 10 years are still “under consideration”.
- Individual Investment Zones may differ widely in what they ultimately offer. Relevant ‘discussions’ with regional and local authorities have yet to begin in earnest and the requisite application process has not been fully formulated (let alone launched).
- The new Zones will require unspecified legislation. The impact on the draft Levelling Up and Regeneration Bill is unclear – even as the Growth Plan mentions a “new” Planning and Infrastructure Bill.
For all the brave talk of ‘ripping up Treasury orthodoxy’ and daring to go where few if any governments have gone before, the reactions of stock and money markets to the Growth Plan suggest that growth remains a distant dream. For their vision to take hold, ministers need to deliver on the detail, urgently. To say the Investment Zones policy needs fleshing out is a gross understatement. We’ve barely been given a bone to chew on.