10 things to know about the Autumn Statement

1. Update to the National Infrastructure Plan

On Wednesday, the government announced its update to the National Infrastructure Plan, now in its fourth iteration. According to Construction News, the overall value of the pipeline has increased from over £309bn to over £375bn of investment, most of which is in the energy and transport sectors, worth over £340bn combined. But £260bn (71%) of the capital value of the pipeline is due to be delivered only in the next parliament or beyond.

Mat Riley, head of infrastructure, industry and utilities at EC Harris, said: “The revised National Infrastructure Plan is strong on headlines, but unclear on delivery. The government is working hard to attract investors such as the insurance funds, but the UK still does not have the right policy environment for these funds to be put to good use and make a real difference, which is compounding the problem.

“£115bn of the £375bn infrastructure pipeline is due to be delivered in this parliament, with a further £150bn delivered in the second half of the decade, and the rest after 2020. This, in itself, is a significant delay to the previous National Infrastructure Plan in 2011 that promised all of this by 2020.”

Head of infrastructure at consultant WSP Duncan Symonds said: “The continued focus on infrastructure is a great confidence boost to the industry but the proof is all in the pudding. We had the promise of the pensions investment fund last year which hasn’t yet made a tangible difference to delivery, so it will be interesting to see if this new scheme [promising £25bn over five years] will have the desired effect.

“Also, we believe there needs to be much more done to get regionally significant projects progressed, both by providing more funding locally and more responsibility for the funding at the local level. This includes, critically, funding plans for local connections to HS2, without which the scheme will not realise its full benefits.”

2. 20,000 new higher apprenticeships

The chancellor announced funding for an additional 20 000 higher apprenticeships over the next two years, as part of a package of measures aimed at reducing youth unemployment.

Sheila Hoile, project manager of the Technician Apprenticeship Consortium (TAC), said: “Today’s announcement in the Autumn Statement of an extra £40m that will provide up to 20,000 additional higher apprenticeships, as well as funding to enable Jobcentre Plus to support 16- and 17-year-olds who want help to find apprenticeships is welcome news. We will be interested to see, however, how closely the implementation of this links up with existing programmes offering apprenticeships such as the Technician Apprenticeship Consortium, an aspect that has often let announcements like this down in the past.”

3. Plans to re-route funding for apprenticeships to employers confirmed

The government announced that it would use the tax system and HMRC as the intermediary to re-route funding for apprenticeships to employers, following its consultation on the proposal. According to the Education Investor website, it said it would carry out a consultation in the New Year to nail down a “simple and accessible” system, whereby employers would pay for the cost of an apprentice upfront, then reclaim the money through their tax return. 

Acknowledging fears the reforms could put off smaller businesses, it also promises to consult on an “alternative funding system” for SMEs – an option that many SME construction employers might choose to pursue. 

Skills minister Matthew Hancock said the reforms would encourage employers to take on more apprentices by giving them greater control over training. 

But Chris Jones, chief executive of the City & Guilds Group, said the reforms were “risky”. “It’s the assumption that employers have the time – and indeed the will – to cope with the additional bureaucracy these reforms will entail,” he said. “Rather than incentivising employers, I fear they’ll be put off by what’s been announced.”

The TAC’s Sheila Hoyle said: “We will wait and see what the detail says regarding changes to how employers receive funding for apprenticeships and how this will affect existing schemes such as the TAC. Our concern is that all the good work that we have carried out with employers over the past few years will be undermined as we are forced to rebuild our schemes around these new rules. We will seek to work with government to ensure this is not the case and the TAC can continue to be able to support its apprentices.”

4. No Employers NI for 18-21s…

The government announced a package of measures to help address youth unemployment, including waiving National Insurance Contributions for under 21 year olds. The cost for small businesses of employing a young person on £16,000 per year will fall by £1,000, said Construction News.

Katerina Rüdiger, head of skills and policy campaigns at the CIPD, said: “Waiving employers’ National Insurance Contributions for job seekers under the age of 21 needs to be done carefully – to avoid putting other age groups at a disadvantage in the labour market. However, if handled in the right way it could help some organisations, particularly SMEs, overcome the negative perceptions they may have held about hiring young people. We’ve found that when young people are employed, nine out of 10 employers are satisfied with the results. This tax break should encourage more employers to hire young people, so they can see firsthand the value they bring to their organisations.”

5. … But anyone born after 1990 will draw their state pension at 70

In his Autumn Statement, the Chancellor, George Osborne, announced that the state pension age threshold would now go up to 68 sometime in the mid-2030s, rather than between 2044 and 2046 as originally planned. A Treasury spokesman told www.bbc.co.uk that the bulk of people who will be affected would currently be in their mid to late 40s.

Commenting on the news that the pension age will eventually increase to 70, UCATT’s general secretary Steve Murphy said: “This is a kick in the teeth to construction workers, many of whom are forced to retire before they reach pension age due to ill health and injury. More construction workers will find themselves in limbo, too old to work but too young to retire and will be forced into poverty relying on benefits to survive.”

6. Capital Gains Tax for non-UK citizens selling property in the UK 

From April 2015 the government will introduce CGT on future gains by non UK residents disposing of UK residential property and will consult early next year on how best to introduce this charge. The property industry has expressed concern over the plans, fearing that the tax hike would raise little money and risked undermining the UK’s status as a country that was “open for business”.

Liz Peace, chief executive of the British Property Federation, said: “We do, however, remain concerned, and somewhat bemused, by government’s decision to make overseas investors liable for capital gains tax given that it risks so much to raise such relatively paltry sums. If the chancellor really does wish to address fairness in the tax system, then committing to a root-and-branch review of business rates would be a much more sensible place to start.”

7. Crackdown on bogus self-employment 

Construction union UCATT has given a cautious welcome to the announcement in today’s Autumn Statement that the government, “will amend existing legislation to prevent employment intermediaries being used to avoid employment taxes by disguising employment as self-employment”.

Steve Murphy, general secretary of UCATT, said: “Hundreds of thousands of workers are having their lives blighted by being forced to work through payroll companies and other forms of false self-employment. Workers are denied holiday pay, sick pay and pension rights and can be sacked without warning. If the government is serious about removing payroll companies this is to be welcomed. However, it is only by ending false self-employment that the government will increase revenues and ensure workers are not denied even the most basic employment rights.”

8. £1bn of loans to unlock major housing developments

AS2013 included a new £1bn housing fund to unlock development sites in the north of England, particularly Manchester and Leeds. The chancellor did not announce any alterations or dilution of the Help to Buy scheme, but confirmed that the Bank of England will be charged with monitoring the housing market and spotting signs of a housing bubble.

Michael Dall, lead economist at construction intelligence specialist, Barbour ABI, said: “Today’s Autumn Statement gave some cause for cautious optimism for housing but we feel the announcements made are largely just tinkering around the edges. Plans such as £1bn investment in infrastructure over six years to unlock large housing sites only scratch the surface in tackling the UK’s housing shortfall. With Help to Buy only set to run until 2015, it’s possible that the £1bn loan plan announced today will help create a legacy for housing beyond the year after next, but we’re yet to see the detail in George Osborne’s plans for this extra cash.”

9. Freeing up of borrowing caps

A relaxation of the borrowing caps applied to local authorities (limiting how much they can borrow against their Housing Revenue Account) were confirmed with a £300m increase in caps to allow councils to fund housing stock repairs and new build programmes.

According to Inside Housing, £150m will be made available from 2015/16, and an additional £150m in 2016/17, fund the building of 10,000 new homes. Councils will compete for the extra borrowing, which will part of the local growth fund run by local enterprise partnerships, with bids prioritised on value for money.

Local authorities are also being given the freedom  to sell more of their most expensive social housing and redivert receipts into more volume through new build delivery.

RIBA president Stephen Hodder said: “I’m concerned the package of announcements on housing in today’s Autumn Statement don’t go far enough. Radical action is needed if we are going to address the housing crisis. So instead of merely raising the amount councils can borrow to invest in new housing, the chancellor should have scrapped the borrowing cap on Housing Revenue Account proceeds.”

“We would also like to see government provide greater incentives for councils to bring forward development forward themselves on public land and change rules on the disposal of public land to the private sector.”

10. But no additional money for schools

The chancellor could only find £150m earmarked for a programme of upgrade to school kitchens to add to the current schools building programme.

Stephen Beechey, managing director education sector & investment solutions for Wates Construction, said: “Recent research has shown that the well-documented shortfall in primary school places is projected to reach critical mass by 2015, as rising birth rates increase the strain on the ability of local authorities to provide enough places for each child. Now is the time to recognise that to avoid hitting a crunch point over the next few years, urgent and concerted action will need to be taken now in order to address the school places crisis.

“A greater degree of joined-up thinking is needed across government in addressing these issues, as well as an increased emphasis on how PF2 can be harnessed and expanded to more effectively encourage private investment in school building.”

Marcus Fagent, head of education at EC Harris, added: “The…. underfunded crisis for schools is the requirement for growth in school places. £2.6bn has been allocated so far for this against the £20bn required to expand schools to accommodate the 700,000 new places that are required and there is not yet any sign that this will be forthcoming. Added to this, the growth in the construction industry is likely to push up delivery prices.”

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