RICS Autumn Statement 2022 response

Chancellor Jeremy Hunt has delivered his first Autumn Statement as part of Prime Minister Rishi Sunak's new government. Set against the backdrop of a summer of political change and turmoil, as well as a cost-of-living crisis and the ongoing war in Ukraine, the Chancellor has the challenge of plugging the £55 billion shortfall in UK finances.

RICS member insight over the last few months has highlighted the increasing challenges facing consumers and businesses in the UK, with rising supply chain costs, energy bills and labour shortages fuelling difficulties. To this end, the Chancellor’s Autumn Statement needed to strike a delicate balance between support for the public and businesses and the need to reduce the UK’s fiscal deficit.

A number of significant announcements have been made including:

• £6 billion between 2025 – 2028, in addition to the existing £6.6 billion already announced for energy efficiency works, with the creation of an Energy Efficiency Taskforce.
  

• The threshold reduction to £125,000 at which point the higher level of income tax will be charged.
  

• The ability for councils to further increase Council Tax by raising the referendum limit – with up to 5% rises proposed.
  

Despite concerns that major infrastructure projects would be hit hard in this statement, the Chancellor committed to funding for existing projects including HS2 and confirmed that Sizewell C will progress.  

The Prime Minister, in his initial leadership election, bid earlier this summer already stepped back from the Conservative Party 2019 manifesto aim of building 300,000 new homes a year – a target that has yet to be reached. With central and local government funding reduced and developers being hit hard by inflation and labour challenges, it is realistic to assume this target will not be reached for many years to come.  

Energy support  

RICS welcomes the announcement that support for businesses with their energy costs will continue post-April 2023, although the detail on the targeted approach is still to be finalised. Commercial property occupiers and investors are telling RICS how the six-month wholesale energy price cap is not extensive enough and limits their ability to plan for the future.  

Businesses are also calling for more support to become energy efficient, helping to reduce the cause of high energy usage and cost, and ultimately improve the sustainability of our high streets. With the significant upfront cost of energy improvements a challenge for many SMEs, more should have been announced about incentives to support businesses in energy efficiency improvements – which would deliver economic and environmental benefits to the UK.

Sustainability  

RICS is pleased that the UK Government announced its commitment to energy efficiency and decarbonisation in the Autumn Statement keeping to its promise to reduce final energy consumption from buildings and industry by 15% by 2030. RICS welcomes the announced £6.6 billion investment in energy efficiency for this parliament and a further £6 billion annually committed from 2025.

Energy costs greatly impact prices throughout the economy, particularly the building sector. Establishing efficient use and low-cost energy production is vital for economic recovery, and this recognition is clear in the statement.

Responding to the Autumn Statement, Sam Rees, RICS Senior Public Affairs Officer said:

“This Autumn Statement was never going to be easy for consumers and businesses. The new government have made it clear a priority needs to be reducing the UK’s financial shortfall, and while this is necessary, it comes at a period when many are worried about how they will heat their homes and keep their businesses open.

The continuation of energy cost support post-April 2023 for businesses and consumers is welcomed, as is the commitment to further funding for energy efficiency works. RICS looks forward to working in partnership with the new Energy Efficiency Taskforce (EETF) and advising it on our recommendations which include radical reforms to the EPC system and the means to track carbon output throughout the built environment."

RICS Senior Economist Tarrant Parsons added:

“The measures announced this afternoon, on top of already scrapping many of the plans revealed by Kwasi Kwarteng in September, therefore represents a significant shift in policy approach. At the headline level, the net tax rises included in the Autumn Statement increase the tax burden (the ratio of taxes to GDP) by 1.1% and this is now expected to peak at 37.5% in 2024-25.  

“As such, this would represent the highest burden since the end of the second world war. This is achieved mainly by lowering the threshold for the highest rate of income tax, extending the freeze on the income tax personal allowance threshold, reversing the previously announced 1p cut to the basic rate of income tax and allowing local authorities to deliver larger rises in council tax.  

“That said, over the nearer term, there are some net giveaways, with measures to support households and businesses equating to £64.2 billion this year and £39.8 billion next year which, in the OBR’s view, should limit the scale of the forthcoming recession.”