BIFM’s Budget Briefing- what did the Budget deliver for the FM sector?

24-11-17 12:49 BIFM

This Wednesday, the Chancellor of the Exchequer, Philip Hammond, presented his long anticipated first Autumn Budget. Much was made of it being the ‘make or break’ budget for the Chancellor.  If he got it wrong, he was likely to lose his post in a re-shuffle.  Feedback on the speech indicates however that Mr Hammond managed to keep everybody within his party happy.  Even some of his most ardent critics came out cautiously positive as he managed to placate them by allocating money for Brexit preparations, some for the NHS and some for managing the housing crisis.

Not so positive were the Office for Budget Responsibility’s (OBR) forecasts.  While the OBR did project that another 600,000 people will be in work by 2020, they revised down the outlook for productivity growth, business investment, and GDP growth across the forecast period.  The OBR now expects to see GDP grow 1.5% in 2017, 1.4% in 2018 and 1.3% in both 2019 and 2020, before picking back up to 1.5%, and finally reaching 1.6% in 2022.

In the run up to Wednesday’s announcement; productivity, the fourth industrial revolution and Artificial Intelligence (AI), housing crisis and skills gap were all big buzz words on which announcements were expected and which resonate with the FM sector.  So, what did the budget deliver for the FM sector in the end?

Skills, apprenticeships and lifelong learning
Much was made of these key topics in advance of Mr Hammond’s speech.  He certainly acknowledged that: “The world is on the brink of a technical revolution, one that will change the way we work and live and transform our living standards for generations to come.” He also said that the government would be: “Continuing to invest in the skills and infrastructure that will support the jobs of the future”.   He added that he passionately believed that the ‘best way to improve the lives of people across the length and breadth of this country is to help them get into work‘. 

“Rapid technological change means we also need to help people retrain during their working lives.”  Hammond reconfirmed the government’s commitment to deliver 3 million apprenticeship starts by 2020 through the apprenticeship levy.  He was not able to announce however that levy payers would have more flexibility to use their money.  Rather this flexibility is kept under review for now.

The concrete proposals accompanying these sentiments were:

  • The government will expand the Teaching for Mastery of Maths programme, provide £40 million to train maths teachers across the country and introduce a 3600 Maths Premium for schools
  • The launch of a partnership between the government, the CBI and the TUC- to set the strategic direction for a National Retraining Scheme. This scheme’s new priority will be to boost digital skills and support expansion of the construction sector
  • An investment of £30 million in the development of digital skills (including AI) distance learning courses so that people can learn wherever they are, and whenever they want
  • An extra £20m to support Further Education colleges to prepare for the introduction of T-levels

While a little bit of money was put towards upskilling digital skills, some more was made available for investment in technology related initiatives and R&D. 

Relevant announcements are:

  • £500m will be invested in a range of high-tech initiatives including AI, 5G and full fibre broadband
  • “Our future vehicles will be driverless, but they’ll be electric first”.  For this reason, the government is establishing a new £400m charging infrastructure fund, investing an extra £100m in Plug-In-Car Grant, and £40 m in charging R&D
  • A new Centre for Data Ethics and Innovation will be established and will then set standards for the use and ethics of AI and data. This will allow the UK to lead the world in developing practical uses for the technology (this initiative was not mentioned in the actual speech, it came out of the supporting documentation)

The speech included several references to increasing the nation’s pay, with the government accepting the Low Pay Commission’s recommendations for next year’s increases. 

Particular references were:

  • A “Peace of mind of regular wage, good quality and well-paid”
  • From April, the National Living Wage will rise from £7.50 to £7.83 per hour.  This is meant to translate into a £600 pay rise for full time workers, affecting over 2 million people across the country

Industrial Strategy
The long-awaited band-aid for the national economy will be announced imminently (likely on Monday), with Greg Clarke, the Business Secretary due to present a White Paper to the House in the next few days.  The Industrial Strategy will aim to raise productivity and wages in all parts of the country.  According to the Chancellor: “The key to raising the wages of British workers is raising investment - public and private.” Devolution will play an important role in upgrading the country’s infrastructure, as can be seen from the last bullet in this section.

Relevant announcements in the Budget were:

  • The national Productivity Investment Fund will be expanded to over £31billion, to upgrade Britain’s economic infrastructure for the 21st Century
  • Further £2.3 billion for investment in R&D, steps toward driving up R&D investment towards 2.4% of GDP (Germany’s 2015 R&D investment as a %GDP was at 2.87% GDP according to data from the WorldBank)
  • The government will increase the main R&D Tax credit to 12%
  • The government stands ready to: ’step in to replace European Investment Fund lending if needed’
  • They want all parts of the country to be engaged with the Industrial Strategy, which is why the government is investing in a new £1.7 billion Transforming Cities Fund.  Half of the fund will be shared by the six areas with elected Mayors, the other half will be open to competition by other cities in England
  • The Chancellor stated it is only “by supporting our regions and nations – dealing with our debts and investing in skills and infrastructure for the long term - that we can build an economy fit for the future”

Infrastructure and housing
A wide variety of measures have been proposed to try and deliver a better infrastructure and more homes:

  • The government will use New Town Development corporations to kick-start 5 new locally agreed Garden Towns in areas of demand pressure, delivered through public-private partnerships designed to attract long term capital investment from around the world
  • Over the next five years the government will commit a total of at least £44 billion of capital funding, loans and guarantees to support the UK housing market
  • Financial incentives will be provided to deliver 300,000 net additional homes a year on average by the mid-2020s
  • New money for the Home Builders Fund will be provided to get SME housebuilders building again
  • £630 million is provided for the small sites fund to unstick the delivery of 40,000 homes
  • A further £2.7 billion is provided to the Housing Infrastructure Fund
  • £400 million for estate regeneration
  • A £1.1 billion fund to unlock strategic sites, including new settlements and urban regeneration schemes
  • Housing Revenue Account (HRA) caps will be lifted for councils in high demand areas to get them building again
  • £8 billion will be provided for new financial guarantees to support private housebuilding and the purpose-built private rented sector
  • To ensure there is a skilled construction workforce, the government is also providing an additional £34m to develop construction skills across the country
  • With immediately effect, stamp duty is abolished for all first-time buyer purchases up to £300,000

The Chancellor outlined the government’s vision to bring the corporate system into line with personal capital gains tax.  He proposed:

  • To remove the anomaly of the indexation allowance for corporate capital gains - this allowance will still provide relief for inflation up to January 2018, but not thereafter
  • Not to reduce the VAT threshold for registration of £85,000, at least for now.  The government will consult on whether its design could better incentivised growth
  • To bring the business rates changes from RPI to CPI forward by two years to April 2018
  • The Treasury and the Department for Environment Food and Rural Affairs will work together to investigate how the tax system and charges on single-use plastic items can reduce waste

BIFM next steps
The next step for BIFM is to encourage government to improve and speed up its decision-making process.  Having supported employer driven initiative of the trailblazer apprenticeships, companies are now being prevented from accessing FM apprenticeships due to bureaucracy and lack of understanding of the importance and significance of the FM industry to society, businesses and the economy.  We will also continue to promote flexibility for levy payers to be able to spend the levy on programmes of learning not just on apprenticeships.  It will also seek to engage with several other proposals, such as the National Retraining Scheme and the Centre for Data Ethics and Innovation amongst others. 

BIFM will also review which of the various consultations announced to engage in and it will call upon the membership for input as appropriate.

Following next Monday’s Industrial Strategy announcement, BIFM will review the Industrial Strategy White Paper and will consider how to further engage with it.

More information about the budget and the different supporting documents can be found here.

The full speech can be found here.

BIFM’s budget statement can be found here.

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