Affordable housing provision in wider building projects could be ditched

The provision of affordable housing as part of wider construction projects could be ditched under plans being considered by ministers to deregulate the planning system in about a dozen “investment zones”.

Developers will be delighted. – Owl

Aubrey Allegretti www.theguardian.com 

Sources said the controversial move was being contemplated ahead of a mini-budget by the chancellor, Kwasi Kwarteng, on Friday outlining the government’s growth strategy and promised tax cuts.

Swathes of environmental and planning regulations are expected to be ditched to “drive growth and speed up development” in the first batch of roughly 12 investment zones.

The zones are modelled on freeports, and are meant to encourage more business investment by granting firms tax relief and cutting red tape.

The prime minister, Liz Truss, mooted the idea during her leadership campaign, saying it would help with her plans to “unleash investment and boost economic growth right across the country”.

Councils began expressing interest in applying to become investment zones this week and Kwarteng hopes to be able to point to the uptake as proof of the policy’s popularity in his speech to the House of Commons later this week, insiders said.

A letter from the levelling up department sent to local authorities and seen by the Guardian said that one of the main benefits of becoming an investment zone would be “designated planning sites to build for growth and housing”.

It added: “Where planning applications remain necessary, they will be radically streamlined. Planning sites may be co-located with, or separate to, tax sites, depending on what makes most sense for the local economy.”

While each deal will be bespoke, local authorities granted investment zone status may be able to let developers circumvent requirements for affordable housing to be built alongside any proposed new property, according to government sources.

And planning obligations like section 106 agreements, which require developers to mitigate pressure on the local area by building or paying for additional infrastructure projects in exchange for planning permission, could also be scaled back in the first batch of investment zones.

It is also believed that plans were drawn up for a ban on development in the green belt to include an exemption for investment zones. However, the idea was not taken forward.

Simon Clarke, the levelling up secretary, is said to be wary of the last Tory rebellion over planning reforms, which Boris Johnson’s government was eventually forced to abandon.

The levelling up department declined to comment on speculation about the upcoming fiscal event.

Jacob Rees-Mogg fails to use imperial measures in business energy cap announcement

The government said those on default, deemed or variable tariffs will receive a per-unit discount on energy costs, up to a maximum of the difference between the supported price and the average expected wholesale price over the period of the scheme. The amount of this discount is likely to be about £405 a MWh for electricity and £115 a MWh for gas. Repeated by Rees-Mogg in interviews.

What’s all this nonsense about Megawatt hours?

Surely, with his convictions, he should have insisted on British thermal units!

To refresh his memory, a British thermal unit is the quantity of heat required to raise the temperature of one pound of liquid water by 1 degree Fahrenheit at the temperature that water has its greatest density (approximately 39 degrees Fahrenheit). 

[1 megawatt hour = 3,412,956.34070 British thermal units so had the discounts been announced as £ per Btu they would have looked rather small, vanishingly small.]

He must really try harder to be consistent. – Owl

Truss tax cuts will hand big banks and insurers £6.3bn, study says

Liz Truss’s government has been criticised for lining up tax cuts that will help big banks and insurers save more than £6bn over the next two years.

Kalyeena Makortoff www.theguardian.com 

The figures, compiled by the House of Commons Library, come as the chancellor, Kwasi Kwarteng, prepares to freeze corporation tax as part of the government’s mini-budget on Friday.

That move alone, which will hold corporation tax at 19% rather than hiking it to 25% next year as originally planned, is expected to save City firms up to £4.5bn between 2023 and 2025.

It will deliver further savings for big banks, which are already expected to benefit from a cut in the banking surcharge from 8% to 3%, as announced last year by the then chancellor Rishi Sunak.

Together, the policies are expected to deliver tax cuts of £6.3bn over the next two years, the House of Commons analysis suggested.

It comes as Kwarteng plans to ditch EU rules that cap bankers’ bonuses at two times their salaries, in another attempt to woo City firms.

The figures will fuel further criticism of the government’s alleged promotion of trickle-down economics, in which tax cuts for the rich and businesses are believed to spur jobs creation and investment that benefits the wider population.

The Liberal Democrats, who commissioned the research, are now calling on the government to cancel the cuts and corporation tax freeze, and instead hand the money raised to households struggling to pay their energy bills.

“It is shameful that the Conservatives are choosing to cut taxes for the big banks, while leaving families and pensioners still struggling to pay their bills this winter,” said Ed Davey, the Lib Dem leader.

While Truss’s government has also revealed plans to freeze energy prices for consumers, capping the cost for a typical household at £2,500, Davey noted that the figure is still more than double the level last year.

“Meanwhile, big banks will be celebrating a bumper payday under the Conservatives as families have to choose between going cold or hungry,” he said.

“It is time Liz Truss put the British people first by scrapping this bankers’ tax cut and helping hard-pressed families instead.”

A spokesperson for City lobby group UK Finance said: “The banking and finance sector is a major source of revenue for the government, delivering investment across the country and employing hundreds of thousands of people, the majority of which are outside of London.”

The Treasury was contacted for comment.

Reversing NICs and corporation tax rises would leave debt on an unsustainable path .

Another damning verdict from the Institute for Fiscal Studies  ifs.org.uk

Whatever happened to the party of “sound money”? – Owl

In the ‘mini-Budget’ on Friday 23 September, the government is expected to confirm substantial tax-cutting measures reflecting the new Prime Minister Liz Truss’s commitments during the leadership campaign. Despite this – and despite the fact that the outlook for the economy is now much weaker than forecast by the Office for Budget Responsibility (OBR) in March – this statement will not be accompanied by new official forecasts for the economy and the public finances. This is disappointing.

Key findings

(Full report can be found here)

  1. The OBR last made a forecast of the public finances back in March. Since then, energy prices and inflation have risen well beyond what was expected, and growth forecasts have slumped. We are forecasting the public finances here based on Citi’s latest forecast for growth, inflation and interest rates. This implies a shorter and shallower recession than the Bank of England forecast in August, owing to the substantial support provided to household and business finances by the Energy Price Guarantee. In addition, the rise in the outlook for inflation since March cushions some of the hit to the cash size of the economy – which matters more than its real size for government receipts. Nevertheless, Citi forecasts that the cash economy will be 2% smaller in 2026–27 than the OBR forecast in March.
  1. The fiscal cost of the Energy Price Guarantee is highly uncertain not least because the eventual cost will depend on the path of energy prices and, relatedly, whether the scheme is extended in some form. We assume the Energy Price Guarantee will cost well over £100 billion over the next two years, but that it will then be removed as per the government’s stated plan. It could be much more expensive and end up running for more than two years – or much cheaper than we assume.
  1. The cost of reversing the recent rise in rates of National Insurance contributions, and cancelling next April’s planned large rise in the rate of corporation tax, is far more certain. Together Ms Truss’s tax commitments, if carried out in full, would lead to revenues being about £30 billion a year lower than they would otherwise have been. Since these are large and permanent measures, they also matter more for the long-run health of the public finances than the eventual cost of the Energy Price Guarantee.
  1. Higher inflation will also push up spending on debt interest, state pensions and most working-age benefits. In contrast, spending on public services is set in cash terms, and therefore does not automatically adjust in the light of increased inflation. Previous IFS research has suggested that an additional £18 billion would need to be found in each of the next two years to restore public service spending plans to the real-terms generosity that was intended when the plans were set. In addition, Ms Truss has committed to increasing defence spending to 3% of national income by the end of the decade. Our forecasts do not include any top-up to public service spending plans that were set a year ago; hence there is considerable risk that borrowing will end up higher than our headline estimates suggest.
  1. The combination of higher spending and substantial tax cuts leaves borrowing running at a much higher level than forecast in March. Importantly, even once the Energy Price Guarantee is assumed to have expired in October 2024, our forecast has borrowing running at about £100 billion a year, over £60 billion a year higher than forecast in March. Almost half of this increase in borrowing would be due to the new tax cuts. At around 3.5% of national income, borrowing would be not far off double the 1.9% of national income that it averaged over the 60 years prior to the global financial crisis, when growth prospects were considerably higher. With investment spending running at about 2½% of national income, this would leave a persistent forecast current budget deficit of around 1% of national income. Without new tax cuts, the current budget would have been forecast to remain in balance.
  1. On our forecasts, debt would increase, not just while the Energy Price Guarantee was in place, but also thereafter. Persistent current budget deficits and rising debt as a share of national income means that two main fiscal targets legislated only in January would be missed and that debt would be left on an ever-increasing path. Allowing debt to rise temporarily to finance one-off packages of support, such as the Energy Price Guarantee or the furlough scheme, in exceptional circumstances is justifiable and can be sustainable, but the same case cannot be made for allowing debt to rise indefinitely in order to enjoy lower taxes now.
  1. Finding a way to somehow boost the UK’s rate of economic growth would undoubtedly help. But we should not underestimate the scale of the challenge: an increase in annual growth of more than 0.7% of national income – the increase required just to stabilise debt as a share of GDP at the very end of our forecasts – would be equivalent to the difference between the growth the UK experienced between 1983 and 2008 and that experienced in the 2010s. There is no miracle cure, and setting plans underpinned by the idea that headline tax cuts will deliver a sustained boost to growth is a gamble, at best.

 

Experts warn stamp duty cut will raise house prices and benefit the wealthy

Verdict on this element of Trussonomics is delivered before the policy is formally announced! – Owl

The rumoured move comes as average UK house price leapt by 15.5% annually in July. 

Suruchi Sharma Diwan www.inyourarea.co.uk 

In an attempt to drive growth, Liz Truss is reportedly poised to slash stamp duty in her first mini-Budget this week. In an effort to kickstart economic growth, the government could axe plans to raise corporation tax, reverse the hike in national insurance and end a cap on bankers’ bonuses.

The economic blueprint, set to be unveiled by chancellor Kwasi Kwarteng on Friday this week, aims to stimulate further growth in the property market and help more people buy their first home. The Bank of England is expected to announce a rise in interest rates on Thursday as it battles to curb spiralling inflation.

Under the current rules, no stamp duty is paid on the first £125,000 of any property purchase, before rising to 2% between £125,001 and £250,000, 5% between £250,001 and £925,000, 10% between £925,001 and £1.5 million and 12% above £1.5 million. For first-time buyers, the threshold is higher at £300,000 – but only if the property costs less than £500,000. The stamp duty threshold was temporarily raised to £500,000 during the Covid pandemic to fire up the property market.

Whilst Downing Street declined to comment ahead of the fiscal event on Friday, industry reactions have started pouring in with critics warning that the rumoured move would make the housing crisis “even worse”.

“Doing more harm than good”

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, feels potential cuts to stamp duty may risk “doing more harm than good”. She said: “No buyer will ever complain about a tax cut, but if the Government was to cut stamp duty it would mean ignoring the fact that the real brake on the property market is a severe shortage of supply.

“Stimulating demand without addressing supply problems would risk more buyers chasing a tiny number of properties, which would push prices up. It’s what we saw during the coronavirus-inspired stamp duty holiday.”

“We need green homes, not another buying frenzy”

Gregory Dewerpe, founder and chief investment officer at A/O PropTech, Europe’s largest proptech VC fund, said: “It’s clear the government has learned little from the housing market feeding frenzy during the pandemic, where a cut in stamp duty did little other than put extreme upward pressure on prices.

“As winter approaches, the world is facing a climate crisis, energy prices are at eye-watering levels, and the UK has the oldest housing stock in Europe. We shouldn’t be making it easier to buy a house, instead, we should be making our houses greener. Government should prioritise energy efficiency rather than needlessly stimulate demand for an already tight housing supply.”

“No single magic bullet will improve the situation”

Richard Dana, founder and CEO of Tembo, the family mortgage broker, said: “I do not believe that there is one single magic bullet that will improve the situation for first-time buyers.

“We badly need innovation right across the board, from government initiatives to new offerings from specialist mortgage lenders. I fear that without this holistic approach, cutting stamp duty carries a risk that it will further drive-up house prices and put home ownership beyond the means of more people.”

“Affordability crisis of runaway house prices”

Andy Sommerville, director at property data and insight firm Search Acumen said: “We saw what the stamp duty holiday did to the market during the pandemic, and I have no doubt such a move will stimulate demand again. But, without supply-side reforms to boost housing stock, stimulating demand will mean more buyers bidding for the same number of properties, which can only mean one thing for house prices – affordability crisis of runaway house prices.

“Interest rates historically have averaged more than 4% and we’re expecting another rate rise from the Bank of England tomorrow, so buyers do need to be aware that savings they make today through SDLT may be cancelled out through elevated mortgage repayments in years to come due to elevated house prices and borrowing rate rises.”

“Two-thirds of stamp duty comes from London and the South East”

Richard Donnell, executive director at Zoopla said: “While we welcome any changes to reform stamp duty, a major move is needed from the Government to offset the impact of mortgage rates which will more than double this year and will impact market activity in London and the South East.

“Two-thirds of stamp duty comes from London and the South East where house prices are higher and the £500k+ stamp duty rates significantly add to the cost of moving. Changing stamp duty to boost market activity means stamp duty cuts will need to be targeted at homes priced at £500,000 and above – which currently account for 76% of stamp duty receipts.”

There are some, however, who are in support of the rumoured announcement saying, SDLT was an unnecessary tax anyway. The experts who support feel that stamp duty is a pretty bad tax – especially at high levels – that impedes mobility.

“Liz Truss must ensure they are targeted in the right way”

Jonathan Rolande, Spokesman National Association of Property Buyers said: “First-time buyers are always in need of a helping hand. Currently, they pay nothing up to a purchase price of £300,000. With huge inflation in the property market, this threshold is now looking on the low side.

“Increasing it to £350,000 would allow buyers to purchase at today’s prices without the burden of tax. A small adjustment such as this will not lead to a stampede and the consequent price rises seen thanks to previous cuts.”

‘Unusual structure’ appears in sea off Straight Point, Exmouth 

From https://theriverstrust.org/sewage-map this looks to be the site of both the Exmouth treated sewage outlet into Lyme Bay and a sewer storm overflow.

In 2021, this sewer storm overflow spilled 49 times for a total of 628 hours, discharging into the Lyme Bay(c). – Owl

Anita Merritt www.devonlive.com

An unusual large structure has recently appeared in the sea by Devon Cliffs Holiday Park and will remain there for the next three weeks. The platform protruding out of the sea at Sandy Bay, believed to known as a Jack Up Barge, has been erected to enable South West Water to carry out ‘investigative work’ to upgrade the wastewater network in the area.

It is said to be part of a wider project to protect bathing water and the environment while reducing pollution. While the works are carried out people are still able to use the beach as normal.

This summer, some of Devon’s beaches have been closed for swimming following pollution concerns. In August and September, East Devon District Council issued a number of warning against visiting Exmouth beach due to pollution caused by heavy rain.

Such warnings have been issued multiple times since mid-August when the heat wave first gave way to heavy rain. Warnings have also been issued at Teignmouth Holcombe, Teignmouth Town, Sidmouth, Beer, and Wembury.

A spokesperson for South West Water said: “We are currently in the process of carrying out planned investigative work at Sandy Bay as part of a scheme to upgrade the wastewater network in the area. This initial work is expected to take around three weeks to complete and is part of a wider project to protect bathing water and the environment while reducing pollution.

“There should be no impact to customers as a result of this project and we will keep them fully updated on any further work.”

According to Exeter Port Authority, the Jack Up Barge ‘Mariner’ from Teignmouth moved to Sandy Bay last Saturday, September 17, during high water. It states the works will last approximately 20 days, ‘weather permitting’.