Autumn Budget Deep Dive

On Wednesday (27 October) the Chancellor of the Exchequer, Rishi Sunak MP, delivered his Autumn 2021 Budget, setting out the Government’s plan to build back better by investing in public services, driving economic growth, leading the transition to net zero, and supporting people and businesses at a time of ongoing economic recovery. 

Opening his statement in the House of Commons, Rishi Sunak MP noted that “employment is up, investment is growing, public services are improving, the public finances are stabilising and wages are rising”. This set the tone for an optimistic budget that allocated large sums of money to government departments and schemes all with the backdrop of the OBR forecasting that it is now expected that UK recovery from the Covid-19 pandemic’s economic impacts will be quicker, returning to pre-Covid levels by the turn of 2021, earlier than was predicted at the March budget. Alongside this, overall economic growth has been revised up from 4 per cent to 6.5 per cent, then 6 per cent in 2022.  

Alike the March budget, this Autumn budget announces multiple measures intended to support businesses, stimulate the economy and deliver the Government’s ‘build back better’ agenda. Below, the CIOB policy team looks at what these measures will mean for the construction industry. 

Levelling Up

The term ‘levelling up’ played a central role in the budget announcement with much of the public sector spending focussing on bringing all parts of the UK to a level playing field. Amongst many announcements on increased public spending for youth services, community facilities and allocation of funding for 21 projects, the Government committed over £2.6 billion to the previously announced UK Shared Prosperity Fund to create new jobs and encourage investment in the devolved administrations. 

The budget also provided further clarity on the first round of bidding for the UK-wide Levelling Up Fund which includes an investment of £1.7 billion to be used to redevelop key local areas. Alongside this there also seemed to be a focus on levelling up transport infrastructure with £2.6 billion allocated to improve local roads and £5 billion invested in continued road maintenance funds which is a positive sign for communities that are not well served by existing transport infrastructure. 

However, much of the spending announced in the budget is not new funding but instead is repackaged from existing allocated pots. Whilst more money to encourage an infrastructure revolution is welcomed, the reality is that the combined funding will not be enough to bridge the regional gaps and inequalities in the UK. Alike much of the budget, this funding represents piecemeal opportunities to access desperately needed new infrastructure and not a joined-up approach that will be easy for local government and private sector bodies to access. 

Building Back Better

Government had 38 pages on building back better which covered how they intend to improve local communities with a strong emphasis on public services. 

We were disappointed to see no mention of retrofitting in the Autumn Budget. The CLC, supported by CIOB and other professional bodies have been calling for a national retrofit strategy to address the quality and energy efficiency of homes while simultaneously providing a stable pipeline of sustainable skills and workload for the industry. It is a massive missed opportunity for Government if they wish to meet net zero targets and improve existing housing stock. Without this key piece, the heat and building strategy which was released on Wednesday 20 October 2021, and the budget combined will not reach the legally binding net zero targets by 2050. 

In terms of improving education, we welcome investment in skills with an increase of £3.8 billion by 2024-25 which will equate to a cash increase of £1,500 per pupil compared to 2019-20. However, industries such as construction who are facing a large skills shortage need that support for skills and education now. There are currently many barriers for new talent to enter the construction industry and if we are to truly build back better with quality and competency at the forefront then larger and immediate support is needed from Government. 

Over the last decade Government has prioritised investment to boost housing supply. We welcome the announcement of further investment to unlock over 1 million new homes, in addition to confirming £5 billion funding for the remediation of the highest risk buildings with unsafe cladding. The £5 billion cladding replacement, which was announced back in February 2021 will go some way but is well short of the £15 billion needed to fix every building. 

Elsewhere in the Autumn Budget document, it was mentioned that Government will continue with their commitment to make buildings and homes warmer and environmentally friendly by providing £3.9 billion to decarbonise buildings and £1.8 billion to support low-income households to reduce their energy bills. This investment is welcomed but lessons must be learned from failed initiatives like the Green Homes Grant in order for households to transition to net zero.

It was confirmed within the budget that local authorities will see a 3 per cent increase in core spending power in addition to the Levelling Up Fund which sees its first bidding round of £4.8 billion. However, we feel that further local government investment is needed to build a more efficient planning system and to ensure greater quality in the built environment.  The Levelling Up White Paper will be published later this year to set out further details on government’s plans for allowing local authorities to level up. 

Sustainability and Net Zero

Many believed that in the build up to COP26 in November 2021, the budget would have a strong root in sustainability and investment in green infrastructure, especially in light of the publication of the Heat and Buildings Strategy in late October 2021. However, there was a noticeable lack of initiatives centred around sustainability. In fact, the Autumn Budget introduced some measures, such as cutting air passenger duty for domestic flights and freezing the fuel duty that seem counterproductive to the aims of being a leading figure in meeting carbon neutral targets. 

CIOB welcomed the publication of the Heat and Buildings Strategy as a means of addressing some of the key issues surrounding sustainability in the built environment. However, we’re concerned that the Chancellor did not release further information on how the new funding announced will link in with the UK’s ambitions to meet net zero targets by 2050. Especially concerning was the omission of any mention of a national retrofit strategy to help ensure that all homes are futureproofed as a means of reducing carbon emissions. Whilst we accept that the £3.9 billion pledge for air or ground source heat pumps is a good starting point, this will fall someway short of the Government’s manifesto pledge of £9.2 billion for domestic energy efficiency improvements. 

In our response to the March Budget 2021 we called for an ambitious national retrofit strategy to provide a clear direction of travel for the construction industry and the certainty that businesses need to create stable, green jobs beyond 2022. We again encourage Government to look into this strategy and support the Construction Leadership Council (CLC) in their efforts to tackle this issue in the wake of COP26.

Business and Skills

One of the key messages that was contained within both the Autumn and March budgets was that of maintaining a consistent level of recovery from the Covid-19 pandemic. To support businesses during this period of economic growth the Government has committed to a total cut in business rates worth £7 billion. We welcome this move as a way to further stimulate the economy to reach pre-pandemic levels as well as other measures such as the move to make property improvements and pay no extra business rates for 12 months, allowing private companies to invest in ensuring their properties meet the highest efficiency standards. 

The Chancellor also confirmed that the national living wage for people over 23-years old would rise to £9.50 an hour in April 2022, following recommendations from the Low Pay Commission. These measures will help those currently, or on the brink of fuel poverty, during the energy crisis to account for the rising cost of living in the UK. 

However, we are concerned to see that the Stamp Duty Land Tax (SDLT) holiday has not been extended.  Previously we joined voices with the CLC to call for the extension of SDLT holiday and we encourage Government to consider this as a way to ensure that house prices, and therefore demand, remains steady. 

Spending Review

CIOB welcomes the £150 billion increase in overall departmental spending. Crucially we are pleased to see that the Department for Levelling Up, Housing and Communities (DLUHC) will see its budget increased by £2.6 billion over the current Parliament to a total of £8.9 billion in 2024-25, which represents an increase of 4.7 per cent in overall spending. 

Included within this spending is the nearly £24 billion invested in housing which is a welcome opportunity for the Government to meet its manifesto commitments to build, back, better. However, we would be keen to see a more detailed breakdown of how each aspect of the new spending settlement for DLUHC will be allocated within each fund. For example, as mentioned above, we are pleased to see that over £5 billion has been allocated to remove unsafe cladding from the highest-risk buildings, however, we would be keen to understand how this fund will work alongside existing schemes such as the Building Safety Fund in practice, which has already allocated £578 million to fix dangerous cladding. Greater clarity on whether the additional funding will be incorporated into the existing pot of money or if it becomes a separate pot for building owners and management agents to access will be necessary.